TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
May 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 Annual Report on Form 10-Q for the first
quarter ended March 31, 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 March 31, 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 March 31, 1997
TABLE OF CONTENTS
<TABLE>
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Page
Item 1. Financial Statements
<S> <C>
Balance Sheets - March 31, 1997 (unaudited) and December 31, 1996................................ 3
Statements of Earnings for the three months
ended March 31, 1997 and 1996 (unaudited)........................................................ 4
Statements of Partners' Capital for the three months
ended March 31, 1997 and 1996 (unaudited)........................................................ 5
Statements of Cash Flows for the three months
ended March 31, 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
March 31, 1997 and Decemeber 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $10,290 (1996: $9,118) $ 68,695 69,985
Cash 221 943
Accounts receivable, net of allowance
for doubtful accounts of $257 (1996: $269) 3,187 2,829
Due from affiliates (note 5) 38 -
Organization costs, net of accumulated
amortization of $135 (1996: $122) 127 140
Prepaid expenses 22 30
----------------- -----------------
$ 72,290 73,927
================= =================
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued liabilities $ 347 333
Accrued recovery costs (note 2) 61 54
Accrued damage protection plan costs (note 3) 350 361
Due to affiliates (note 5) - 154
Deferred quarterly distribution 126 124
Equipment purchases payable - 169
----------------- -----------------
Total liabilities 884 1,195
----------------- -----------------
Partners' capital:
General partners 2 2
Limited partners 71,404 72,730
----------------- -----------------
Total partners' capital 71,406 72,732
----------------- -----------------
$ 72,290 73,927
================= =================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California limited partnership)
Statements of Earnings
For three months ended March 31, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Rental Income $ 3,392 3,370
-------------- ---------------
Costs and expenses:
Direct container expenses 700 603
Bad debt expense 15 41
Depreciation and amortization 1,207 1,129
Professional fees 9 16
Management fees to affiliates (note 5) 329 311
General administrative costs to affiliates (note 5) 234 243
Other general and administrative costs 36 13
-------------- ---------------
2,530 2,356
-------------- ---------------
Income from operations 862 1,014
-------------- ---------------
Other income (expense):
Interest income (expense), net 11 (142)
Gain on sale of equipment 52 37
-------------- ---------------
63 (105)
-------------- ---------------
Net earnings $ 925 909
============== ===============
Allocation of net earnings (note 5):
General Partners $ 24 16
Limited Partners 901 893
-------------- ---------------
$ 925 909
============== ===============
Limited partners' per unit share of net earnings $ 0.20 0.24
============== ===============
Limited partners' per unit share of distributions $ 0.50 0.45
============== ===============
Weighted average number of limited
partnership units outstanding 4,454,893 3,731,354
============== ===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California limited partnership)
Statements of Partners' Capital
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
-------------------------------------------------------
General Limited Total
----------- --------------- --------------
<S> <C> <C> <C>
Balances at January 1, 1996 $ 2 58,007 58,009
Proceeds from sale of limited partnership units - 15,789 15,789
Syndication and offering costs - (1,819) (1,819)
Distributions (18) (1,672) (1,690)
Net earnings 16 893 909
----------- --------------- --------------
Balances at March 31, 1996 $ - 71,198 71,198
=========== =============== ==============
Balances at January 1, 1997 $ 2 72,730 72,732
Distributions (24) (2,227) (2,251)
Net earnings 24 901 925
----------- --------------- --------------
Balances at March 31, 1997 $ 2 71,404 71,406
=========== =============== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 925 909
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation 1,194 1,116
(Decrease) increase in allowance for doubtful accounts (12) 40
Amortization of organization costs 13 13
Gain on sale of equipment (52) (37)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (346) 95
Decrease in due to affiliates, net (6) (97)
Increase (decrease) in accounts payable and accrued liabilities 14 (41)
Increase in accrued contingency insurance costs 7 7
(Decrease) increase in accrued damage protection plan costs (11) 63
Decrease in prepaid expenses 8 9
--------------- ----------------
Net cash provided by operating activities 1,734 2,077
--------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 82 118
Equipment purchases (257) (3,782)
-----------------------------------
Net cash used in investing activities (175) (3,664)
--------------- ----------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units - 16,026
Distributions to partners (2,281) (1,643)
Syndication and offering costs - (1,797)
Repayments under revolving credit line - (7,500)
--------------- ----------------
Net cash (used in) provided by financing activities (2,281) 5,086
--------------- ----------------
Net (decrease) increase in cash (722) 3,499
Cash at beginning of period 943 1,372
--------------- ----------------
Cash at end of period $ 221 4,871
=============== ================
Interest paid during the period $ - 263
=============== ================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California limited partnership)
Statements of Cash Flows--Continued
For the three months ended March 31, 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 March 31, 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 three-month periods ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31 Dec. 31
1997 1996 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to (from) affiliates............................ $ (7) 4 190 453
Equipment purchases payable......................... - 169 2,598 1,168
Distributions to partners included in:
Due to affiliates................................... - 32 34 4
Deferred quarterly distribution..................... 126 124 97 80
Proceeds from sale of limited partnership units included in:
Due from affiliates................................. - - - 237
Syndication and offering costs included in:
Due to affiliates................................... - - 113 91
Proceeds from sale of Equipment included in:
Due from affiliates................................. 201 58 30 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 three-month
periods ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded......................................................... $ 77 4,949
Equipment purchases paid............................................................. 257 3,782
Distributions to partners declared................................................... 2,251 1,690
Distributions to partners paid....................................................... 2,281 1,643
Proceeds from sale of limited partnership units recorded............................. - 15,789
Proceeds from sale of limited partnership units received............................. - 16,026
Syndication and offering costs recorded.............................................. - 1,819
Syndication and offering costs paid.................................................. - 1,797
Proceeds from sale of Equipment recorded............................................. 225 95
Proceeds from sale of Equipment received............................................. 82 118
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California limited partnership)
Notes to Financial Statements
March 31, 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 March 31, 1997 and December 31, 1996,
and the results of its operations, changes in partners' capital, and
cash flows for the three-month periods ended March 31, 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 March 31, 1997 and December 31,1996,
the amount accrued was $61 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 March 31,
1997 and December 31, 1996, this reserve was equal to $350 and $361,
respectively.
Note 4. Acquisition of Equipment
During the three-month periods ended March 31, 1997 and 1996, the
Partnership purchased Equipment with a cost of $77 and $4,949,
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, is 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 $170 of equipment acquisition fees
as part of Equipment costs during the three-month periods ended March
31, 1997 and 1996, respectively and incurred $94 and $75 of incentive
management fees during the three-month periods ended March 31, 1997 and
1996, respectively. 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 from and due
to affiliate at March 31, 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 $235 and $236 for the three-month
periods ended March 31, 1997 and 1996, respectively. 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. During the three-month periods
ended March 31, 1997 and 1996, costs allocated to the Partnership for
salaries were $120 and $119, respectively, and other general and
administrative costs were $114 and $124, respectively. 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 $206 and $199 during the three-month periods ended March 31,
1997 and 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. TCC allocated $28
and $44 of these indirect costs to the Partnership during the
three-month periods ended March 31, 1997 and 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 March 31, 1997 and December 31, 1996, due from and to affiliates
are comprised of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Due from affiliates:
Due from TAS................................... $ 7 -
Due from TL.................................... 1 -
Due from TEM................................... 57 -
---- ----
$ 65 -
==== ====
Due to affiliates:
Due to TAS..................................... $ - 1
Due to TCC..................................... 27 28
Due to TEM..................................... - 125
---- ----
$ 27 154
==== ====
</TABLE>
These amounts receivable from and 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 three-month periods ended March
31, 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 March 31, 1997:
Year ended March 31:
1998....................................................... $ 1,050
1999....................................................... 177
2000....................................................... 65
----
Total minimum future rentals receivable.................... $ 1,292
=====
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 three-month period
ended March 31, 1997 or 1996. 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.
<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 three-month periods ended March
31, 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 three-months ended March 31, 1997.
The Partnership's 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 lessor of (i) 1% of aggregate
offering proceeds; or (ii) $100. At March 31, 1997, the Partnership's cash of
$221 was primarily invested in money market accounts.
During the three-month period ended March 31, 1997, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1996 through February 1997 in the amount of $2,227. These distributions
represent 10% of original capital (measured on an annualized basis) on each
unit. On a GAAP basis, $1,326 of these distributions were a return of capital
and the balance was from net earnings. On a cash basis, $1,734 of these
distributions was from operations and the balance was from reserves. Beginning
with the cash distribution to limited partners for the month of April 1997,
payable May 1997, the Partnership will make distributions at an annualized rate
of 9% on each Unit. This reduction in the Partnership's distribution rate is a
result of a decline in demand for leasing of the Partnership's container rental
fleet, which is discussed in detail below.
For the three-month period ended March 31, 1997, the Partnership had net cash
provided by operating activities of $1,734 compared with net cash provided by
operating activities of $2,077 for the same period in 1996. This decrease was
primarily attributable to an increase in accounts receivable from operations.
Accounts receivable from operations increased primarily due to the increase in
the average collection period from 77 days for the three-month period ended
March 31, 1996 to 91 days for the same period in 1997. The increase in the
average collection period is primarily due to the collection period being low
during the three months ended 1996 primarily due to the smaller size of the
Partnership portfolio during the three-months ended 1996.
As explained below under "Results of Operations", demand for leased containers
has declined, and this decline has affected the Partnership's financial
condition.
Net cash used in investing activities (the purchase and sale of rental
equipment) for the three-month period ended March 31, 1997 was $175 compared
with $3,664 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 three-month period ended March 31, 1996 than in the comparable
period in 1997 primarily due to cash available from on-going fund raising
activity during 1996. 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 consists 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 three-month periods ended March 31, 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................... 23,886 22,919
Average............................. 23,919 22,132
The growth in 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 81% on average during the
three months ended March 31, 1997 compared to 84% during the three months ended
March 31, 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
three-month periods ended March 31, 1997 and 1996.
The Partnership's income from operations for the three-month period ended March
31, 1997 was $862 on gross rental income of $3,392, compared to $1,014 on gross
rental income for $3,370 for the same period in 1996. The largest component of
total rental income is income from container rentals, which decreased by $24 or
1%, from 1996 to 1997. 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 decreased 4%, average daily rental rates decreased 3% and average
inventory increased 8%.
Container utilization began to decline in late 1995 and that decline persisted
throughout 1996 and into 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. For the near
term, the General Partners do not foresee any changes in current market
conditions and caution that both utilization and lease rates could continue to
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 less
desirable locations (location income), income for handling and returning
containers and income from charges to lessees for a damage protection plan
(DPP). For the three-month period ended March 31, 1997, the total of these other
revenue items was $269, an increase of $47 compared to the equivalent period in
1996. The primary components of this net increase were increases in handling
income and DPP of $37 and $15, respectively. The increase in handling income is
primarily due to the increase in the average container fleet and the increase in
DPP is primarily due to the increase in the number of lessees under the plan.
Direct container expenses, excluding bad debt expense, increased by $97, or 16%,
from the three-month period ended March 31, 1996, to the same period in 1997.
The primary component of this increase was an increase in storage expense of
$146, offset in part by a decrease in DPP expense of $66 between periods. The
increase in storage expense was primarily due to the increase in average fleet
size and the decline in utilization. The decrease in DPP expense was primarily
due to a decrease in the average number of units requiring repairs from March
31, 1996 to the same period in 1997, coupled with a slight decrease in the
average repair costs per unit between the two periods.
Bad debt expense decreased from $41 in the three-month period ended March 31,
1996 to $15 in the same period of 1997 and is primarily due to a lower reserve
requirement in 1997 resulting from a write-off of a receivable from one lessee
during 1997.
Depreciation and amortization expense increased by $78, or 7%, from the
three-month period ended March 31, 1996 to the same period in 1997, reflecting
the increase in the Partnership's average fleet size between periods.
Management fees increased by $18 or 6%, from the three months ended March 31,
1996 to the equivalent period in 1997 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 $19
or 25% primarily due to an increase in partners' capital from the three-month
period ended March 31, 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 4%, or $9, from the
three-month period ended March 31, 1996 to the same period in 1997, primarily
due to a decline in overhead costs allocated from TEM during these periods.
Other income (expense) provided $63 of additional income for the three-month
period ended March 31, 1997, representing an increase of $168, over the
equivalent period in 1996. The increase was attributable to a $153 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 $0.24 for the
three-month period ended March 31, 1996 to $0.20 for the three-month period
ended March 31, 1997. Despite the slight increase in net earnings, which
increased from $909 for the three-month period ended March 31, 1996 to $925 for
the same period in 1997, the average outstanding units increased at a greater
rate, resulting in a decrease in earnings on a per unit basis.
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, 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 March 31, 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: May 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, May 13, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
- ------------------------- President (Principal Executive May 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: May 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, May 13, 1997
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 221
<SECURITIES> 0
<RECEIVABLES> 3,482
<ALLOWANCES> 257
<INVENTORY> 0
<CURRENT-ASSETS> 149
<PP&E> 78,985
<DEPRECIATION> 10,290
<TOTAL-ASSETS> 72,290
<CURRENT-LIABILITIES> 884
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 71,406
<TOTAL-LIABILITY-AND-EQUITY> 72,290
<SALES> 0
<TOTAL-REVENUES> 3,392
<CGS> 0
<TOTAL-COSTS> 2,530
<OTHER-EXPENSES> (63)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 925
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
