TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13, 1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund V,
L.P. (the "Company") the Company's Quarterly Report on Form 10-Q for the Second
Quarter ended June 30, 1997.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
<PAGE>
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-25946
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(Exact name of Registrant as specified in its charter)
California 93-1122553
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 California Street, 16th Floor
San Francisco, California 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10Q for the
Quarter Ended June 30, 1997
TABLE OF CONTENTS
<TABLE>
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Page
Item 1. Financial Statements
<S> <C>
Balance Sheets - June 30, 1997 (unaudited) and December 31, 1996................................. 3
Statements of Earnings for the six and three months
ended June 30, 1997 and 1996 (unaudited)......................................................... 4
Statements of Partners' Capital for the six months
ended June 30, 1997 and 1996 (unaudited)......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 (unaudited)......................................................... 6
Notes to Financial Statements (unaudited)........................................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................ 12
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $11,462 (1996: $9,$18) 67604 69985
Cash 626 943
Accounts receivable, net of allowance
for doubtful accounts of $354 (1996: $269) 2889 2829
Organization costs, net of accumulated
amortization of $148 (1996: $122) 114 140
Prepaid expenses 14 30
------- -------
$ 71247 73927
======= =======
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued liabil$ties 547 333
Accrued recovery costs (note 2) 70 54
Accrued damage protection plan costs (note 3) 352 361
Due to affiliates (note 5) 59 154
Deferred quarterly distribution 112 124
Equipment purchases payable 162 169
------- -------
Total liabilities 1302 1195
------- -------
Partners' capital:
General partners 2 2
Limited partners 69943 72730
------- -------
Total partners' capital 69945 72732
------- -------
Commitments (note 9)
$ 71247 73927
======= =======
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
For six and three months ended June 30, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
Ended Ended Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Rental income $ 6,702 3,310 6,687 3,317
------------------ ------------------ ------------------ ------------------
Costs and expenses:
Direct container expenses 1,486 786 1,199 596
Bad debt expense 118 103 63 22
Depreciation and amortization 2,404 1,197 2,326 1,197
Professional fees 21 12 31 15
Management fees to affiliates (note 5) 645 316 635 324
General administrative costs 460 226 468 225
to affiliates (note 5)
Other general and administrative costs 73 37 26 13
------------------ ------------------ ------------------ ------------------
5,207 2,677 4,748 2,392
------------------ ------------------ ------------------ ------------------
Income from operations 1,495 633 1,939 925
------------------ ------------------ ------------------ ------------------
Other income (expense):
Interest income (expense), net 18 7 (155) (13)
Gain on sale of equipment 52 0 56 19
------------------ ------------------ ------------------ ------------------
70 7 (99) 6
------------------ ------------------ ------------------ ------------------
Net earnings $ 1,565 640 1,840 931
================== ================== ================== ==================
Allocation of net earnings (note 5):
General Partners $ 46 22 39 23
Limited Partners 1,519 618 1,801 908
------------------ ------------------ ------------------ ------------------
$ 1,565 640 1,840 931
================== ================== ================== ==================
Limited partners' per unit share
of net earnings $ 0.34 0.14 0.45 0.20
================== ================== ================== ==================
Limited partners' per unit share
of distributions $ 0.97 0.47 0.93 0.46
================== ================== ================== ==================
Weighted average number of limited
partnership units outstanding 4,454,893 4,454,893 3,984,542 4,463,915
================== ================== ================== ==================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
-------------------------------------------------------
General Limited Total
----------- --------------- --------------
<S> <C> <C> <C> <C>
Balances at January 1, 1996 $ 2 58,007 58,009
Proceeds from sale of limited partnership units - 21,848 21,848
Syndication and offering costs - (2,553) (2,553)
Distributions (39) (3,710) (3,749)
Net earnings 39 1,801 1,840
----------- --------------- --------------
Balances at June 30, 1996 $ 2 75,393 75,395
=========== =============== ==============
Balances at January 1, 1997 $ 2 72,730 72,732
Distributions (46) (4,306) (4,352)
Net earnings 46 1,519 1,565
----------- --------------- --------------
Balances at June 30, 1997 $ 2 69,943 69,945
=========== =============== ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,565 1,840
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 2,378 2,300
Increase in allowance for doubtful accounts 85 57
Amortization of organization costs 26 26
Gain on sale of equipment (52) (56)
Changes in assets and liabilities:
Increase in accounts receivable (145) (38)
Decrease in due to affiliates (74) (476)
Increase (decrease) in accounts payable and accrued liabilities 214 (71)
Increase in accrued recovery costs 16 26
(Decrease) increase in accrued damage protection plan costs (9) 84
Decrease in prepaid expenses 16 17
--------------- ----------------
Net cash provided by operating activities 4,020 3,709
--------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 303 250
Equipment purchases (250) (9,365)
---------------- ----------------
Net cash provided by (used in) investing activities 53 (9,115)
---------------- ----------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units - 22,084
Distributions to partners (4,390) (3,367)
Syndication and offering costs - (2,644)
Repayments under revolving credit line - (10,000)
---------------- ----------------
Net cash (used in) provided by financing activities (4,390) 6,073
---------------- ----------------
Net (decrease) increase in cash (317) 667
Cash at beginning of period 943 1,372
---------------- ----------------
Cash at end of period $ 626 2,039
================ ================
Interest paid during the period $ - 282
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Statements of Cash Flows--Continued
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of Equipment purchases, distributions
to partners, proceeds from sale of limited partnership units, syndication and
offering costs, and proceeds from sale of Equipment which had not been paid or
received by the Partnership as of June 30, 1997 and 1996, and December 31, 1996
and 1995, resulting in differences in amounts recorded and amounts of cash
disbursed or received by the Partnership, as shown in the Statements of Cash
Flows for the six-month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30 Dec. 31
1997 1996 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates................................... $ - 4 306 454
Equipment purchases payable......................... 162 169 1,291 1,168
Distributions to partners included in:
Due to affiliates................................... 6 32 342 4
Deferred quarterly distribution..................... 112 124 124 80
Proceeds from sale of limited partnership units included in:
Due from affiliates................................. - - - 236
Syndication and offering costs included in:
Due to affiliates................................... - - - 91
Proceeds from sale of Equipment included in:
Due from affiliates................................. 49 58 16 53
</TABLE>
The following table summarizes the amounts of Equipment purchases, distributions
to partners, sale of limited partnership units, syndication and offering costs
and proceeds from sale of Equipment recorded by the Partnership and the amounts
paid or received as shown in the Statements of Cash Flows for the six-month
periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded......................................................... $ 239 9,340
Equipment purchases paid............................................................. 250 9,365
Distributions to partners declared................................................... 4,352 3,749
Distributions to partners paid....................................................... 4,390 3,367
Proceeds from sale of limited partnership units recorded............................. - 21,848
Proceeds from sale of limited partnership units received............................. - 22,084
Syndication and offering costs recorded.............................................. - 2,553
Syndication and offering costs paid.................................................. - 2,644
Proceeds from sale of Equipment recorded............................................. 294 213
Proceeds from sale of Equipment received............................................. 303 250
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Notes to Financial Statements
June 30, 1997
(Dollar amounts in thousands except for per unit amounts)
(unaudited)
Note 1. General
Textainer Equipment Income Fund V, L.P. (the Partnership) is a California
Limited Partnership formed in 1993. The Partnership owns and leases a
fleet of intermodal marine cargo container equipment (the Equipment) to
international shipping lines.
The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments), which are, in the
opinion of management, necessary to fairly present the financial
position of the Partnership as of June 30, 1997 and December 31, 1996,
and the results of its operations, changes in partners' capital, and
cash flows for the six-month periods ended June 30, 1997 and 1996, have
been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and the accompanying Notes
included in the Partnership's audited financial statements as of
December 31, 1996.
Certain estimates and assumptions were made by the Partnership's
management that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain reclassifications of prior year amounts have been made in order
to conform with the 1997 financial statement presentation.
Note 2. Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess
of estimated insurance proceeds. At June 30, 1997 and December 31, 1996,
the amounts accrued were $70 and $54, respectively.
Note 3. Damage Protection Plan
The Partnership offers a Damage Protection Plan (the Plan) to lessees of
its Equipment. Under the terms of the Plan, the Partnership earns
additional revenues on a daily basis and, as a result, has agreed to
bear certain repair costs. It is the Partnership's policy to recognize
revenues when earned and provide a reserve sufficient to cover the
Partnership's obligation for estimated future repair costs. At June 30,
1997 and December 31, 1996, this reserve was equal to $352 and $361,
respectively.
Note 4. Acquisition of Equipment
During the six-month periods ended June 30, 1997 and 1996, the
Partnership purchased Equipment with a cost of $239 and $9,340,
respectively.
Note 5. Transactions with Affiliates
Textainer Capital Corporation (TCC) is the managing general partner, and
Textainer Equipment Management Limited (TEM) and Textainer Limited (TL)
are the associate general partners of the Partnership. The managing
general partner and associate general partners are collectively referred
to as the General Partners. The General Partners manage and control the
affairs of the Partnership. The General Partners also act in this
capacity for other limited partnerships. Textainer Acquisition Services
Limited (TAS) is an affiliate of the General Partners which performs
services relative to the acquisition of Equipment outside the United
States on behalf of the Partnership. TCC, TEM, TL and TAS are
subsidiaries of Textainer Group Holdings Limited (TGH). TCC Securities
Corporation (TSC), a licensed broker and dealer in securities and an
affiliate of the General Partners, was the Managing Sales agent for the
offering of Units for sale.
In accordance with the Partnership Agreement, and subject to the special
allocations described therein, net earnings or losses and distributions
are generally allocated 1% to the general partners and 99% to the
limited partners. Gross income is specially allocated to the General
Partners to the extent that their partners' capital accounts' deficits
exceed the portion of syndication and offering costs allocated to them.
Notwithstanding the above, the special allocation of gross income and
restoration of deficit general partner capital accounts was deferred by
Partnership Agreement amendment until the partnership's complete
syndication which occurred during the year ended December 31, 1996. On
termination of the Partnership, the General Partners shall be allocated
gross income equal to their allocations of syndication and offering
costs.
As part of the operation of the Partnership, the Partnership is to pay
to the General Partners, or TAS, an incentive management fee, an
acquisition fee, an equipment management fee and an equipment
liquidation fee, as well as reimburse the General Partners for certain
administrative costs. These fees are for various services provided in
connection with the administration and management of the Partnership.
The Partnership capitalized $13 and $440 of equipment acquisition fees
as part of Equipment costs during the six-month periods ended June 30,
1997 and 1996, respectively. The Partnership had incurred $178 and $85
of incentive management fees during the six- and three-month periods
ended June 30, 1997 and $167 and $92 for the comparable periods in 1996.
No equipment liquidation fees were incurred in either period.
The Equipment of the Partnership is managed by TEM. TEM has authority to
acquire, hold, manage, lease, sell and dispose of the Partnership's
Equipment. Additionally, TEM holds, for the payment of direct operating
expenses, a reserve of cash that has been collected from container
leasing operations; such cash is included in the amount due to affiliate
at June 30, 1997 and December 31, 1996.
Subject to certain reductions, TEM receives a monthly equipment
management fee equal to 7% of gross lease revenues attributable to
operating leases and 2% of gross lease revenues attributable to full
payout net leases. These fees totaled $467 and $231 for the six- and
three-month periods ended June 30, 1997 and $468 and $232 for the
comparable periods in 1996. The Partnership's Equipment is leased by TEM
to third-party lessees on operating master leases, spot leases and term
leases. The majority are operating leases with limited terms and no
purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance, are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are borne by TCC and TEM. Costs allocated to the Partnership
for salaries were $251 and $128 during the six- and three-month periods
ended June 30, 1997 and $230 and $111 for the comparable periods in 1996.
Other general and administrative costs were $209 and $98 for the six- and
three-month periods ended June 30, 1997 and $238 and $114 for the
comparable periods in 1996. TEM allocates these costs based on the ratio
of the Partnership's interest in managed Equipment to the total Equipment
managed by TEM during the period. Indirect general and administrative
costs allocated to the Partnership by TEM were $399 and $193 during the
six- and three-month periods ended June 30, 1997 and $407 and $208 for
the comparable periods in 1996, respectively.
TCC allocates indirect general and administrative costs to the
Partnership based on the ratio of the Partnership's Equipment to total
Equipment of all limited partnerships managed by TCC. Indirect general
and administrative costs allocated to the Partnership by TCC were $61
and $33 during the six- and three-month periods ended June 30, 1997 and
$61 and $17 for the comparable periods in 1996.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may
then be resold to the Partnership on an all-cash basis at a price equal
to the actual cost as defined in the Partnership Agreement. In addition,
the General Partners or TAS are entitled to an acquisition fee for any
Equipment resold to the Partnership.
The Partnership paid a managing sales agent fee to TSC of up to 9% of
the gross proceeds from the sale of limited partnership units, from
which TSC paid commissions to independent participating broker/dealers
who participated in the offering. The amount of the managing sales agent
fee and the broker/dealers' commissions were determined by the volume of
Units sold to each investor by the broker/dealers. Additionally, the
General Partners and TSC were entitled to be reimbursed by the
Partnership for certain organizational and offering costs, incurred in
connection with the organization of the Partnership, up to a maximum of
6% of gross proceeds raised as allowed by the Partnership Agreement.
As of June 30, 1997 and December 31, 1996, due to affiliates are
comprised of:
1997 1996
---- ----
Due to affiliates:
Due to TAS..................................... $ - 1
Due to TL...................................... 5 -
Due to TCC..................................... 24 28
Due to TEM..................................... 30 125
---- ----
$ 59 154
==== ====
These amounts payable to affiliates were incurred in the ordinary course
of business between the Partnership and its affiliates and represent
timing differences in the accrual and payment of expenses and fees
described above or the accrual and remittance of net rental revenues by
TEM.
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances which are outstanding for more than
one month, to the extent such balances relate to loans for Equipment
purchases. Interest is charged at a rate not greater than the General
Partners' or affiliates' own cost of funds. There was no interest
charged on intercompany balances for the six- and three-month periods
ended June 30, 1997 or 1996.
Note 6. Rentals under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of June 30, 1997:
Year ended June 30:
1998....................................................... $ 1,215
1999....................................................... 132
2000....................................................... 56
---
Total minimum future rentals receivable.................... $ 1,403
=====
Note 7. Revolving Credit Line
On October 12, 1993, the Partnership was granted a revolving credit line
with an available limit of $15,000 which was used for Equipment
purchases. On April 8, 1996 the credit line was paid in full and it
expired on May 31, 1996.
Note 8. Redemptions
No redemption offerings were consummated during the six-month period
ended June 30, 1997. The total number of units redeemed since inception
of the redemption program is 8,451, at a total cost of $152,
representing an average redemption price of $17.97 per unit. The
redemption price is fixed by formula and varies depending on the length
of time the units are outstanding.
Note 9. Commitments
At June 30, 1997, the Partnership has committed to purchase 154 new
containers at an approximate total purchase price of $366 which includes
$17 of acquisition fees. These commitments were made to TAS which, as the
contracting party, has in turn committed to purchase this Equipment on
behalf of the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands except for per unit amounts)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the six- and three-month periods
ended June 30, 1997 and 1996. Please refer to the Financial Statements and Notes
thereto in connection with the following discussion.
Liquidity and Capital Resources
The Partnership began its offering of limited partnership interests to the
public on May 1, 1994. On April 29, 1996 the offering of limited partnership
interests was closed at $89,305.
The Partnership has set up a program whereby limited partners may redeem units
for a specified redemption value. The redemption price is set by formula and
varies depending on length of time the units are outstanding. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. The Partnership did not redeem any units during
the six-months ended June 30, 1997.
The Partnership invests working capital and cash flows from operations in
short-term, highly liquid investments prior to distribution or reinvestment in
additional Equipment. It is the policy of the Partnership to maintain a minimum
working capital reserve in an amount which is the lesser of (i) 1% of aggregate
offering proceeds; or (ii) $100. At June 30, 1997, the Partnership's cash of
$626 was invested in money market accounts.
During the six-month period ended June 30, 1997, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1996
through May 1997 in the amount of $4,306. These distributions represent a return
of 10% of original capital (measured on an annualized basis) on each unit for
December 1996 through March 1997 and 9% of original capital (measured on an
annualized basis) on each unit for April 1997 through June 1997. On a GAAP
basis, $2,787 of these distributions was a return of capital and the balance was
from net earnings. On a cash basis, $4,020 of these distributions was from
operations and the balance was from reserves.
At June 30, 1997, the Partnership has committed to purchase 154 new containers
at an approximate total purchase price of $366 which includes acquisition fees
of $17 At June 30, 1997, the Partnership had sufficient cash on hand to meet
these commitments. In the event the Partnership decides not to purchase the
Equipment, one of the General Partners or an affiliate of the General Partners
will acquire the Equipment for its own account.
For the six-month period ended June 30, 1997, the Partnership had net cash
provided by operating activities of $4,020 compared with net cash provided by
operating activities of $3,709 for the same period in 1996. This increase of
$311, or 8%, was primarily attributable to a decrease in due to affiliates of
$74 and the increase in accounts payable and accrued liabilities of $214, offset
by a decrease in net earnings of $275. The decrease in due to affiliates and the
increase in accounts payable and accrued liabilities was due to timing
differences in the accrual and payment of expenses and fees or in the accrual
and remittance of net rental revenues. The decrease in net earnings of 15% was
primarily due to an increase of $287, or 24%, in direct container expenses. The
increase was primarily due to an increase in the average container fleet from
the six-month period ended June 30, 1996 to the equivalent period in 1997 and a
lower demand for leased containers . As explained below under "Results of
Operations", demand for leased containers has declined compared to the prior
period, and this decline has affected the Partnership's financial condition.
Net cash provided by investing activities (the purchase and sale of rental
equipment) for the six-month period ended June 30, 1997 was $53 compared to net
cash used in investing activities of $9,115 for the same period in 1996,
although the Partnership has not yet sold any significant amount of Equipment.
The Partnership purchased more Equipment in the six-month period ended June 30,
1996 than in the comparable period in 1997 primarily due to cash available from
on-going fund raising activity during January through April of 1996. The
Partnership sold a small amount of Equipment in the period ended June 30, 1996
resulting in net cash provided by investing activities of $53. Consistent with
its investment objectives and the General Partners' determination that Equipment
can be profitably sold or bought at any time, the Partnership intends to
reinvest all or a significant amount of proceeds from future Equipment sales in
additional Equipment. Such additional Equipment purchases may not, however,
equal the number of units sold.
Results of Operations
The Partnership's operations, which consist of rental income, container
depreciation, direct container expenses, management fees, and reimbursement of
administrative expenses were directly related to the size of the container fleet
("inventory") during the six-month periods ended June 30, 1997 and 1996, as well
as certain other factors as discussed below. The following is a summary of the
size of the container fleet (in units) available for lease during those periods:
1997 1996
---- ----
Opening inventory................... 23,952 21,345
Closing inventory................... 23,863 24,033
Average............................. 23,908 22,689
The growth in the average container fleet between 1996 and 1997 is due to the
buildup of the Partnership's portfolio as the initial gross proceeds raised in
the Partnership's Offering were invested in Equipment.
Rental income and direct container expenses are also affected by the lease
utilization percentages for the Equipment which were 82% on average during the
six-month periods ended June 30, 1997 and 1996. In addition, rental income is
affected by daily rental rates, which declined.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 1997 and 1996.
The Partnership's income from operations for the six-month period ended June 30,
1997 was $1,495 on gross rental income of $6,702, compared to $1,939 on gross
rental income for $6,687 for the same period in 1996. The largest component of
total rental income is income from container rentals, which was $6,210 and
$6,234 for the six-month periods ended June 30, 1997 and 1996, respectively.
Income from container rentals is largely dependent upon three factors: equipment
available for lease (average inventory), average on-hire (utilization)
percentage and average daily rental rates. Average utilization was constant at
82%, average daily rental rates decreased 4% and average inventory increased 5%.
Container utilization began to decline in late 1995 and that decline persisted
throughout 1996 and into the first quarter of 1997. The General Partners believe
that this decrease in demand for leased containers is the result of adverse
changes in the business of its shipping line customers. These changes consist
principally of: (i) a general slowdown in the growth of world containerized
cargo trade, particularly in the Asia-North America and Asia-Europe trade
routes; (ii) over-capacity resulting from the 1996 and 1997 additions of new,
larger ships to the existing container ship fleet at a rate in excess of the
growth rate in containerized cargo trade; and (iii) shipping line alliances and
other operational consolidations that have allowed shipping lines to operate
with fewer containers, thereby decreasing the demand for leased containers. The
container ship over-capacity in particular led to lower shipping rates,
resulting in shipping lines' need to reduce operating costs. The drive to reduce
costs, coupled with the availability of inexpensive financing and lower
container prices, encouraged shipping lines to purchase, rather than lease, a
greater number of new containers in 1996 than in previous years. All of these
factors have led to downward pressure on container lease rates, a decline in
utilization of leased containers, and an increase in leasing incentives and
other discounts being granted to shipping lines by container lessors, further
eroding Partnership profitability. The decline in demand for leased containers
has been accompanied by a drop in the purchase price of new containers.
During the second quarter of 1997, there was a slight improvement in market
conditions as utilization improved and continues to improve into the third
quarter of 1997. Despite the improving utilization, for the near term, the
General Partners do not foresee material changes in current market conditions
and caution that both utilization and lease rates could decline, adversely
affecting the Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of the Equipment under short-term operating leases.
The balance of rental income consists of other lease-related items, primarily
income from charges to the lessees for pick-up of containers from prime
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income for handling and returning containers and
income from charges to lessees for a damage protection plan (DPP). For the
six-month period ended June 30, 1997, the total of these other revenue items was
$492, an increase of $39 compared to the equivalent period in 1996. The primary
components of this increase were increases in handling and DPP income of $84 and
$38, respectively, offset by a decrease in location income of $84. The increase
in handling income is primarily due to the increased container movement and the
increase in the average container fleet. The increase in DPP is primarily due to
the increase in the number of lessees under the plan. The decline in location
income is mainly due to lower demand, which increased credits given to lessees
for picking up units from surplus locations.
Direct container expenses, excluding bad debt expense, increased by $287, or
24%, from the six-month period ended June 30, 1996, to the same period in 1997.
The primary components of this increase were increases in storage and
repositioning expenses of $222 and $120, offset in part by a decrease in DPP
expense of $95 between periods. The increase in storage expense was primarily
due to the increase in average fleet size. Repositioning expense increased due
to a greater number of units being transported to higher demand locations. The
decrease in DPP expense was primarily due to a decrease in the average repair
costs per unit between the two periods.
Bad debt expense increased from $63 in the six-month period ended June 30, 1996
to $118 in the same period in 1997. The increase is primarily due to increased
reserve requirements in 1997.
Depreciation and amortization expense increased by $78, or 3%, from the
six-month period ended June 30, 1996 to the same period in 1997, reflecting the
increase in the Partnership's average fleet size between periods.
Management fees increased by $10 or 2%, from the six-month periods ended June
30, 1996 to the equivalent period in 1997. The increase is primarily due to an
increase in incentive management fees. Incentive management fees, which are
based on the Partnership's limited and general partner distribution percentage
and partners' capital, increased $11 or 7% primarily due to an increase in
average outstanding partners' capital and the accompanying larger base for
distributions from the six-month period ended June 30, 1996 the equivalent
period in 1997. Equipment management fees were 7% of gross revenue for both
periods.
General and administrative costs to affiliates decreased by 2%, or $8, from the
six-month period ended June 30, 1996 to the same period in 1997, due to a
decline in overhead costs allocated from TEM and TCC during these periods.
Other income (expense) provided $70 of additional income for the six-month
period ended June 30, 1997, representing an increase of $169, over the
equivalent period in 1996. The increase was attributable to a $173 decline in
interest expense, which was due to the repayment of the credit facility in
April, 1996.
Net earnings per limited partnership unit decreased from $0.45 for the six-month
period ended June 30, 1996 to $0.34 for the six-month period ended June 30, 1997
reflecting the decrease in net earnings from $1,801 to $1,519, respectively, and
the increase in the average outstanding units.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1997 and 1996.
The Partnership's income from operations for the three-month periods ended June
30, 1997 and 1996 was $633 and $925, respectively, on rental income of $3,310
and $3,317, respectively. Rental income, including income from container rentals
was comparable between periods. Average inventory increased 2%, while average
on-hire utilization decreased 3% and average daily rental rates decreased 5%
from the three-month period ended June 30, 1996 to the comparable period in
1997.
The balance of other revenue items comprising total revenue for the three-month
period ending June 30, 1997 was $223, a decrease of $8 compared to the
equivalent period in 1996. Other rental revenue decreased primarily due to
a decrease in location income of $78 offset by increases in handling and DPP
income of $47 and $23 respectively. The decline in location income is mainly
due to lower demand, which increased credits given to lessees for picking up
units from surplus locations. Increased container movement resulted in
increased handling income, and an increase in the number of lessees under the
DPP plan resulted in increased DPP income.
Direct container expenses increased $190, or 32% from the three-month period
ended June 30, 1996 to the same period in 1997. The primary components of this
increase were increases in repositioning and storage expenses of $108 and $76,
respectively. The increase in repositioning expense was due to an increase in
the number of units transported to higher demand locations. Storage costs
increased due to lower utilization rates in the three-month period ended June
30, 1997 as compared to the same period in 1996.
Bad debt expense increased $81 for the three-month period ended June 30, 1997
from the same period in 1996 primarily due to higher reserve requirements.
Depreciation and amortization expense was equivalent at $1,197 for the three-
month period ended June 30, 1997 and 1996.
Management fees decreased by $8 or 2%, from the three-month period ended June
30, 1996 to the comparable period in 1997 primarily due to a decrease in
incentive management fees. The decrease was primarily due to the decrease in the
limited partners distribution percentage from 10% for the three-month period
ended June 30, 1996 to 9% for the equivalent period in 1997.
General and administrative costs to affiliates remained fairly constant between
the three-month period ending June 30, 1997 and 1996.
Other income is comprised of interest income of $7 for the three-month period
ended June 30, 1997 as compared to other income of $6, for the equivalent period
in 1996, which is comprised of interest expense of $13 and gain on sale of
equipment of $19.
Net earnings per limited partnership unit decreased from $0.20 to $0.14 from the
three-month period ended June 30, 1996 to the same period in 1997, reflecting
the decrease in net earnings from $908 to $618 for the respective periods.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the Equipment. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep the Equipment under lease at profitable rates, rather than the
geographic location of the Equipment or the domicile of the lessees. The
Equipment is generally operated on the international high seas rather than on
the domestic waterways. The Equipment is subject to the risk of war or other
political, economic or social occurrence where the Equipment is used, which may
result in the loss of Equipment, which, in turn, may have a material impact on
the Partnership's results of operations and financial condition. The General
Partners are not aware of any conditions as of June 30, 1997 which would result
in such risk materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning Equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Equipment, and the effect of world trade, industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented, for additional information on
risks of the Partnership's business.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
By Textainer Capital Corporation
The Managing General Partner
By
-------------------------
John R. Rhodes
Executive Vice President
Date: August 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Executive Vice President, August 13, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
President (Principal Executive August 13, 1997
James E. Hoelter Officer) and Director
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
By Textainer Capital Corporation
The Managing General Partner
By /s/John R. Rhodes
-------------------------
John R. Rhodes
Executive Vice President
Date: August 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/John R. Rhodes Executive Vice President, August 13, 1997
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive August 13, 1997
- ----------------------- Officer) and Director
James E. Hoelter
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund V, LP
</LEGEND>
<CIK> 0000915194
<NAME> Textainer Equipment Income Fund V, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 626
<SECURITIES> 0
<RECEIVABLES> 3,243
<ALLOWANCES> 354
<INVENTORY> 0
<CURRENT-ASSETS> 128
<PP&E> 79,066
<DEPRECIATION> 11,462
<TOTAL-ASSETS> 71,247
<CURRENT-LIABILITIES> 1,302
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 69,945
<TOTAL-LIABILITY-AND-EQUITY> 71,247
<SALES> 0
<TOTAL-REVENUES> 6,702
<CGS> 0
<TOTAL-COSTS> 5,207
<OTHER-EXPENSES> (70)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,565
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,565
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
