TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13, 1998
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 10Q for the Second
Quarter ended June 30, 1998.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-25946
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
(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, CA 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 [ ]
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TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10Q for the
Quarter Ended June 30, 1998
Table of Contents
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Page
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Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997.................................. 3
Statements of Earnings for the three and six months
ended June 30, 1998 and 1997 (unaudited).......................................................... 4
Statements of Partners' Capital for the six months
ended June 30, 1998 and 1997 (unaudited).......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited).......................................................... 6
Notes to Financial Statements (unaudited)......................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................... 12
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1998 and December 31, 1997
(Amounts in thousands)
- -----------------------------------------------------------------------------------------------------------
1998 1997
-------------- ------------
(unaudited)
<S><C> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $16,189 (1997: $13,833) $ 63,524 $ 66,066
Cash 462 108
Accounts receivable, net of allowance
for doubtful accounts of $341 (1997: $387) 3,103 3,220
Due from affiliates, net (note 5) 124 -
Organization costs, net of accumulated
amortization of $201 (1997: $175) 61 87
Prepaid expenses 91 128
-------------- ------------
$ 67,365 $ 69,609
============== ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 251 $ 274
Accrued liabilities 66 90
Accrued recovery costs (note 2) 102 89
Accrued damage protection plan costs (note 3) 362 340
Due to affiliates, net (note 5) - 412
Deferred quarterly distribution 116 114
-------------- ------------
Total liabilities 897 1,319
-------------- ------------
Partners' capital:
General partners 48 48
Limited partners 66,420 68,242
-------------- ------------
Total partners' capital 66,468 68,290
-------------- ------------
$ 67,365 $ 69,609
============== ============
See accompanying notes to financial statements
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
For the three and six months ended June 30, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Six months Six months
Ended Ended Ended Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------- -------------- -------------- --------------
<S><C> <C> <C> <C> <C>
Rental income $ 3,546 $ 3,310 $ 7,265 $ 6,702
-------------- -------------- -------------- --------------
Costs and expenses:
Direct container expenses 638 786 1,488 1,486
Bad debt (benefit) expense (138) 103 (28) 118
Depreciation and amortization 1,210 1,197 2,421 2,404
Professional fees 12 12 20 21
Management fees to affiliates (note 5) 333 316 676 645
General and administrative costs to affiliates (note 5) 204 226 435 460
Other general and administrative costs 18 37 55 73
--------------- -------------- -------------- --------------
2,277 2,677 5,067 5,207
--------------- -------------- -------------- --------------
Income from operations 1,269 633 2,198 1,495
-------------- -------------- -------------- --------------
Other income:
Interest income, net 8 7 11 18
Gain on sale of containers 6 - 20 52
-------------- -------------- -------------- --------------
14 7 31 70
-------------- -------------- -------------- --------------
Net earnings $ 1,283 $ 640 $ 2,229 $ 1,565
============== ============== ============== ==============
Allocation of net earnings (note 5):
General partners $ 21 $ 22 $ 42 $ 46
Limited partners 1,262 618 2,187 1,519
-------------- -------------- -------------- ---------------
$ 1,283 $ 640 $ 2,229 $ 1,565
============== ============== ============== ==============
Limited partners' per unit share of net earnings $ 0.28 $ 0.14 $ 0.49 $ 0.34
============== ============== ============== ==============
Limited partners' per unit share of distributions $ 0.45 $ 0.47 $ 0.90 $ 0.97
============== ============== ============== ==============
Weighted average number of limited
partnership units outstanding 4,454,893 4,454,893 4,454,893 4,454,893
============== ============== ============== ==============
See accompanying notes to financial statements
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1998 and 1997
(Amounts in thousands)
(unaudited)
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Partners' Capital
--------------------------------------------------------
General Limited Total
----------- -------------- -------------
<S><C> <C> <C> <C>
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
=========== ============== =============
Balances at January 1, 1998 $ 48 $ 68,242 $ 68,290
Distributions (42) (4,009) (4,051)
Net earnings 42 2,187 2,229
----------- -------------- -------------
Balances at June 30, 1998 $ 48 $ 66,420 $ 66,468
=========== ============== =============
See accompanying notes to financial statements
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
(Amounts in thousands)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------
1998 1997
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<S><C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,229 $ 1,565
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 2,395 2,378
(Decrease) increase in allowance for doubtful accounts (46) 85
Amortization of organization costs 26 26
Gain on sale of containers (20) (52)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 163 (145)
Increase in due from affiliates, net (134) (74)
Decrease in prepaid expenses 37 16
(Decrease) increase in accounts payable and accrued liabilities (47) 214
Increase in accrued recovery costs 13 16
Increase (decrease) in accrued damage protection plan costs 22 (9)
------------- -------------
Net cash provided by operating activities 4,638 4,020
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Cash flows from investing activities:
Proceeds from sale of containers 135 303
Container purchases (40) (250)
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Net cash provided by investing activities 95 53
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Cash flows from financing activities:
Repayment of borrowings from affiliates (318) -
Distributions to partners (4,061) (4,390)
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Net cash used in financing activities (4,379) (4,390)
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Net increase (decrease) in cash 354 (317)
Cash at beginning of period 108 943
------------- -------------
Cash at end of period $ 462 $ 626
============= =============
Interest paid during the period $ 10 $ -
============= =============
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 1998 and 1997
(Amounts in thousands)
(unaudited)
- --------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners, and proceeds from sale of containers which had not been paid or
received as of June 30, 1998 and 1997, and December 31, 1997 and 1996, 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, 1998 and 1997.
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Jun. 30 Dec. 31 Jun. 30 Dec. 31
1998 1997 1997 1996
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Container purchases included in:
Due to affiliates.............................. $ - $ 40 $ - $ 4
Container purchases payable.................... - - 162 169
Distributions to partners included in:
Due to affiliates.............................. 8 20 6 32
Deferred quarterly distributions............... 116 114 112 124
Proceeds from sale of containers included in:
Due from affiliates............................ 84 52 49 58
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers 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, 1998 and 1997.
1998 1997
---- ----
Container purchases recorded...................................................... $ - $ 239
Container purchases paid.......................................................... 40 250
Distributions to partners declared................................................ 4,051 4,352
Distributions to partners paid.................................................... 4,061 4,390
Proceeds from sale of containers recorded......................................... 167 294
Proceeds from sale of containers received......................................... 135 303
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Notes To Financial Statements
For the six months ended June 30, 1998 and 1997
(Amounts in thousands except for per unit amounts)
(unaudited)
- --------------------------------------------------------------------------------
Note 1. General
Textainer Equipment Income Fund V, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1993.
The Partnership owns and leases a fleet of intermodal marine cargo
containers which are leased 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, 1998 and December 31, 1997, and the
results of its operations, changes in partners' capital, and cash flows
for the three- and six-month periods ended June 30, 1998 and 1997, have
been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and other accompanying notes
included in the Partnership's audited financial statements as of December
31, 1997, in the Annual Report filed on Form 10K.
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.
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, 1998 and December 31, 1997, the
amounts accrued were $102 and $89, respectively.
Note 3. Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
containers. Under the terms of DPP, 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 revenue when
earned and to provide a reserve sufficient to cover the Partnership's
obligation for estimated future repair costs. DPP expenses are included in
direct container expenses in the Statements of Earnings, and the related
reserve at June 30, 1998 and December 31, 1997, was $362 and $340,
respectively.
Note 4. Acquisition of Containers
The Partnership did not purchase containers during the six-month period
ended June 30, 1998. During the six-month period ended June 30, 1997, the
Partnership purchased containers with a cost of $239.
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 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 containers outside the United States on
behalf of the Partnership. TCC, TEM, TL and TAS are subsidiaries of
Textainer Group Holdings Limited (TGH). The General Partners manage and
control the affairs of the Partnership.
In accordance with the Partnership Agreement, net earnings or losses and
distributions are 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 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 incurred
$85 and $169 of incentive management fees during the three- and six-month
periods ended June 30, 1998 and $85 and $178 of incentive management fees
for the comparable periods in 1997. The Partnership did not incur
container acquisition fees during the six-month period ended June 30,
1998. The Partnership capitalized $13 of container acquisition fees as
part of container costs during the six-month period ended June 30, 1997.
No equipment liquidation fees were incurred during either period.
The container fleet of the Partnership is managed by TEM. TEM has
authority to acquire, hold, manage, lease, sell and dispose of the
Partnership's containers. 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 affiliates, net
at June 30, 1998 and due to affiliates, net at December 31, 1997.
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. For
the three- and six-month periods ended June 30, 1998, these fees totaled
$248 and $507, respectively, and for the comparable periods ended June 30,
1997 these fees totaled $231 and $467, respectively. The Partnership's
container fleet 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 incurred and paid by TCC and TEM. For the three- and
six-month periods ended June 30, 1998, total general and administrative
costs allocated to the Partnership were $204 and $435 of which $87 and
$182, respectively, were for salaries. Total general and administrative
costs allocated to the Partnership were $226 and $460 for the three- and
six-month periods ended June 30, 1997, of which $128 and $251,
respectively, were for salaries.
TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed containers to the total
container fleet managed by TEM during the period. TCC allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TCC. General and
administrative costs allocated to the Partnership by TEM were $184 and
$394 for the three- and six-month periods ended June 30, 1998 and were
$193 and $399 for the comparable periods in 1997. TCC allocated $20 and
$41 of general and administrative costs to the Partnership for the three-
and six-month periods ended June 30, 1998 and allocated $33 and $61 for
the comparable periods in 1997.
The General Partners or TAS may acquire containers in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such containers for the Partnership. The containers 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
containers resold to the Partnership.
At June 30, 1998 and December 31, 1997, due from (to) affiliates, net is
comprised of:
1998 1997
---- ----
Due from affiliates:
Due from TEM................................ $ 156 $ 14
----- -----
Due to affiliates:
Due to TAS.................................. - 39
Due to TCC.................................. 26 49
Due to TL................................... 6 338
----- -----
32 426
----- -----
Due from (to) affiliates, net $ 124 $ (412)
===== =====
Included in the amounts due to TL at December 31, 1997 is $318 in loans
used to facilitate container purchases. This loan was repaid in full on
March 31, 1998. There were no borrowings from affiliates outstanding at
June 30, 1998. All other 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 amounts due to the General Partners which are outstanding for
more than one month, to the extent such balances relate to loans for
container purchases. Interest is charged at a rate not greater than the
General Partners' or affiliates' own cost of funds. The Partnership
incurred $7 of interest expense on amounts due to the General Partners for
the three- and six-month periods ended June 30, 1998. There was no
interest expense incurred on amounts due to the General Partners for the
three- and six-month periods ended June 30, 1997.
Note 6. Rentals Under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at June 30, 1998. Although the leases are
generally cancelable at the end of each twelve-month period with a
penalty, the following schedule assumes that the leases will not be
terminated.
Year ended June 30:
1999............................................. $ 826
2000............................................. 129
2001............................................. 17
2002............................................. 10
2003............................................. 10
----
Total minimum future rentals receivable.......... $ 992
====
Note 7. Redemptions
No redemption offerings were consummated during the six-month periods
ended June 30, 1998 or 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.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the three- and six-month periods
ended June 30, 1998 and 1997. Please refer to the Financial Statements and Notes
thereto in connection with the following discussion.
Liquidity and Capital Resources
From May 1, 1994 until April 29, 1996, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $5,000 on August 23, 1994, and on April 29, 1996, the
Partnership's offering of limited partnership interests was closed at $89,305.
From time to time, the Partnership redeems units from limited partners for a
specified redemption value which is set by formula. 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. During the six-month period ended June 30, 1998,
the Partnership did not redeem any units.
The Partnership invests working capital and cash flow from operations prior to
its distribution to the partners in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
During the six-month period ended June 30, 1998, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1997
through May 1998, in the amount of $4,009. These distributions represent a
return of 9% on original capital (measured on an annualized basis) on each unit.
On a cash basis, all of these distributions were from operations. On a GAAP
basis, $1,822 of these distributions was a return of capital and the balance was
from net earnings. Beginning with cash distributions to limited partners for the
month of July 1998, payable August 1998, the Partnership will make distributions
at an annualized rate of 8% on each unit. This reduction in the Partnership
distribution rate is a result of the current market conditions, which are
discussed in detail below.
At June 30, 1998, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the six-month periods ending June
30, 1998 and 1997, was $4,638 and $4,020, respectively. This increase of $618 is
primarily attributable to an increase in net earnings of $664, resulting
primarily from an increase in other rental revenue which is discussed more fully
in "Results of Operations."
For the six-month period ending June 30, 1998, net cash provided by investing
activities (the purchase and sale of containers) was $95 compared to $53 for the
equivalent period in 1997. The fluctuation of $42 is due to the Partnership
having purchased more containers during the six-month period ended June 30, 1997
than in the comparable period in 1998 and having sold more containers during the
six-month period ended June 30, 1997 than in the comparable period in 1998. The
General Partners believe that these differences reflect normal fluctuations in
container sales and purchases. However, recent container purchases
(reinvestment) are currently lower than anticipated due to the adverse effect of
market conditions on cash available for reinvestment. Market conditions are
discussed more fully in "Results of Operations". Consistent with its investment
objectives, the Partnership intends to reinvest all or a significant amount of
proceeds from future container sales in additional containers. However, due to
the difference between sales proceeds and new container prices, the number of
additional containers purchased may not equal the number of containers sold.
During 1997 the Partnership borrowed $318 from a General Partner to purchase
containers. It is the policy of the Partnership and the General Partners to
charge interest on borrowings from affiliates arising from the Partnership's
acquisition of containers which are outstanding for more than one month.
Interest is charged to the Partnership at a rate not greater than the General
Partners' own cost of funds. The Partnership paid $10 of interest during the
six-month period ended June 30, 1998. The interest rate in effect at March 31,
1998 was 8.5%. The Partnership repaid the loan on March 31, 1998 with cash
provided by operations and proceeds from the sale of containers.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during the six-month periods ended June 30, 1998 and 1997, as
well as certain other factors as discussed below. The following is a summary of
the container fleet (in units) available for lease during those periods:
1998 1997
Opening container fleet................. 24,288 23,952
Closing container fleet................. 24,226 23,863
Average container fleet................. 24,257 23,908
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 85% and 82% on average during the six-month
periods ended June 30, 1998 and 1997, respectively. In addition, rental income
is affected by daily rental rates and leasing incentives.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 1998 and 1997.
The Partnership's income from operations for the six-month periods ending June
30, 1998 and 1997 was $2,198 and $1,495, respectively, on rental income of
$7,265 and $6,702, respectively. The increase in rental income of $563, or 8%,
from the six-month period ended June 30, 1997 to the comparable period in 1998
was primarily attributable to an increase in other rental income which is
discussed below. Income from container rentals, the major component of total
revenue, increased $175, or 3%. This increase was primarily due to an increase
in average on-hire (utilization) percentage of 4%, an increase in containers
available for lease (average fleet) of 1% and a decrease in leasing incentives
of 50%, and was offset by a decrease in average rental rates of 5%.
Container utilization and rental rates declined during 1996 and 1997 primarily
due to decreased demand for leased containers and increased competition. The
decrease in demand for leased containers resulted from changes in the business
of shipping line customers consisting primarily of (i) over-capacity resulting
from the 1995 and 1996 additions of new, larger ships to the existing container
ship fleet at a rate in excess of the growth rate in containerized cargo trade;
(ii) shipping line alliances and other operational consolidations that have
allowed shipping lines to operate with fewer containers; and (iii) shipping
lines reducing their ratio of leased versus owned containers by purchasing
containers. This decreased demand, along with the entry of new leasing company
competitors offering low container rental rates to shipping lines, resulted in
downward pressure on rental rates, and caused leasing companies to offer higher
leasing incentives and other discounts to shipping lines. Rental rates were also
adversely affected by a drop in the purchase price of new containers which
resulted in additional downward pressure on rental rates.
Average utilization for the three- and six-month periods ended June 30, 1998 was
greater than the average utilization for the comparable periods in 1997. Despite
the improvement in average utilization from the prior year, utilization has been
slowly declining over the last six months. Rental rates have also been declining
and average rental rates for the six-month period ended June 30, 1998 are lower
than average rental rates for the same period in 1997. These decreases were
offset by decreased leasing incentives during the six-month period ended June
30, 1998 compared to the same period in 1997. The improvement in utilization
over the prior year and overall improvement in leasing incentives is primarily
due to increased demand in Asia. The weakening of many Asian currencies resulted
in a significant increase in exports from Asia which has created a strong demand
for containers in certain locations. However, the weakening of these currencies
has also lowered demand in Asia for imports from North America and Europe
resulting in a lower demand for containers in these areas. For the near term,
the General Partners do not foresee material changes in existing market
conditions and caution that both utilization and rental rates could continue
declining, adversely affecting the Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's containers under short-term operating leases.
The balance of other rental income consists of other lease-related items,
primarily income from charges to lessees for dropping off containers in surplus
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income from charges to lessees 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, 1998, the total of these
other rental income items was $880, an increase of $388 from the equivalent
period in 1997. The primary component of this increase was an increase in
location income of $466 offset by decreases in handling and DPP income of $53
and $25, respectively. Location income increased due to a decrease in credits
given to lessees for picking up containers from certain locations and due to the
inclusion of certain credits received during 1997 and 1998 which had been
previously applied against repositioning expense. Handling income decreased due
to a decrease in container movement and a lower average handling price charged
per container. The decrease in DPP income resulted from a lower average DPP
price charged per container offset by a larger number of containers leased under
DPP.
Direct container expenses were comparable from the six-month period ended June
30, 1997 to the equivalent period in 1998 primarily due to an increase in
repositioning expense of $171 offset by a decrease in storage expense of $157.
Repositioning expense increased due to the removal of certain credits from
repositioning costs to other rental income as discussed above. Storage expense
decreased primarily due to the increase in average utilization from 82% during
the six-month period ended June 30, 1997 to 85% for the comparable period in
1998.
Bad debt expense decreased from an expense of $118 for the six-month period
ended June 30, 1997 to a benefit of $28 for the comparable period ending June
30, 1998. The benefit recorded in 1998 was primarily due to the resolution of
payment issues with one lessee.
Depreciation expense increased $17, or 1%, from the six-month period ended June
30, 1997 to the same period in 1998 primarily due to the 1% increase in average
fleet size.
Management fees to affiliates increased $31, or 5%, from the six-month period
ended June 30, 1997 to the equivalent period in 1998, due to an increase in
equipment management fees, offset by a decrease in incentive management fees.
Subject to certain reductions, equipment management fees are based on gross
revenue and were approximately 7% of gross revenue for both periods. Incentive
management fees, which are based on the Partnership's limited and general
partner distributions, decreased due to the decrease in the limited partner
distribution percentage from 10% to 9% in April 1997.
General and administrative costs to affiliates decreased $25, or 5%, from the
six-month period ended June 30, 1997 to the comparable period ending in 1998 due
to a decrease in overhead costs allocated by TCC and TEM.
Other income provided $31 of additional income for the six-month period ending
June 30, 1998, a decrease of $39 compared to the equivalent period in 1997. The
decrease was due to decreases in gain on sale of containers and interest income
of $32 and $7, respectively.
Net earnings per limited partnership unit increased from $0.34 to $0.49 from the
six-month period ending June 30, 1997 to the equivalent period in 1998,
reflecting the increase in net earnings allocated to limited partners from
$1,519 to $2,187, for the same periods.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1998 and 1997.
The Partnership's income from operations for the three-month periods ending June
30, 1998 and 1997 was $1,269 and $633, respectively, on rental income of $3,546
and $3,310, respectively. The increase in rental income of $236, or 7%, from the
three-month period ended June 30, 1997 to the comparable period in 1998 was
attributable to increases in income from container rentals and in other rental
income. Income from container rentals increased $130, or 4%, primarily due to an
increase in average fleet size of 1%, an increase in average utilization
percentage of 2% and a decrease in leasing incentives of 60%, offset by a
decrease in average rental rates of 4%.
The balance of other rental income for the three-month period ended June 30,
1998 was $330, an increase of $106 from the comparable period in 1997. The
primary component of this increase was an increase in location income of $169,
offset by a decrease in handling income of $51. Location income increased due to
a decrease in credits given to lessees for picking up containers from certain
locations. Handling income decreased to due to a decrease in the average
handling price charged per container and a decrease in container movement during
the three-month period ending June 30, 1998 when compared to the same period in
1997.
Direct container expenses decreased $148, or 19%, from the three-month period
ending June 30, 1997 to the equivalent period in 1998. The decrease was
primarily due to decreases in storage and handling expenses of $66 and $47,
respectively. Storage expense decreased primarily due to the increase in average
utilization. Handling expense decreased primarily due to the decrease in
container movement.
Bad debt expense decreased from an expense of $103 for the three-month period
ended June 30, 1997 to a benefit of $138 for the comparable period in 1998. The
benefit recorded in 1998 was primarily due to the resolution of payment issues
with one lessee.
Depreciation expense increased $13, or 1%, from the three-month period ended
June 30, 1997 to the same period in 1998 due to the 1% increase in average fleet
size.
Management fees to affiliates increased $17, or 5%, from the three-month period
ended June 30, 1997 to the comparable period in 1998, due to an increase in
equipment management fees resulting from the increase in gross revenue.
General and administrative costs to affiliates decreased $22, or 10%, from the
three-month period ended June 30, 1997 to the comparable period in 1998 due to a
decrease in overhead costs allocated by TCC and TEM.
Other income increased $7 primarily due to an increase in gain on sale of
containers of $6 from the three-month period ending June 30, 1997 to the
equivalent period in 1998.
Net earnings per limited partnership unit increased from $0.14 to $0.28 from the
three-month period ending June 30, 1997 to the same period in 1998, reflecting
the increase in net earnings allocated to limited partners from $618 to $1,262,
respectively.
Many computer systems may experience difficulty processing dates beyond the year
1999 and, as such, some computer hardware and software will need to be modified
prior to the year 2000 to remain functional. Certain of the General Partners and
Partnership's core internal systems where Year 2000 issues have been identified
are currently being revised. Based on its initial evaluation, the Partnership
and the General Partners do not believe that the cost of remedial actions
relating to these systems will have a material adverse effect on the
Partnership's results of operations and financial condition. Additionally, the
Partnership and the General Partners are continuing their assessment of Year
2000 issues not related to their core systems, including issues surrounding
systems that interface with external third parties. If external third party
systems are not Year 2000 compliant, those external third parties may have
difficulty conducting ordinary operations, which could adversely affect the
General Partners and the Partnership.
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 containers. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep its containers under lease, rather than the geographic location
of the containers or the domicile of the lessees. The containers are generally
operated on the international high seas rather than on domestic waterways. The
containers are subject to the risk of war or other political, economic or social
occurrence where the containers are used, which may result in the loss of
containers, 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, 1998 which would result in such a risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the containers, 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, 1998
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> <C>
________________________ Executive Vice President, August 13, 1998
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive August 13, 1998
Philip K. Brewer Officer)
</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, 1998
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> <C>
/s/John R. Rhodes Executive Vice President, August 13, 1998
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/Philip K. Brewer President (Principal Executive August 13, 1998
- ------------------------- Officer)
Philip K. Brewer
</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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 462
<SECURITIES> 0
<RECEIVABLES> 3,568
<ALLOWANCES> 341
<INVENTORY> 0
<CURRENT-ASSETS> 152
<PP&E> 79,713
<DEPRECIATION> 16,189
<TOTAL-ASSETS> 67,365
<CURRENT-LIABILITIES> 897
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 66,468
<TOTAL-LIABILITY-AND-EQUITY> 67,365
<SALES> 0
<TOTAL-REVENUES> 7,265
<CGS> 0
<TOTAL-COSTS> 5,067
<OTHER-EXPENSES> (31)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,229
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,229
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
