TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
November 10, 2000
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 "Partnership") the Partnership's Quarterly Report on Form 10-Q for the
Third Quarter ended September 30, 2000.
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 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 10-Q for the
Quarter Ended September 30, 2000
Table of Contents
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Page
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Item 1. Financial Statements
Balance Sheets - September 30, 2000 (unaudited) and
December 31, 1999....................................................................... 3
Statements of Earnings for the three and nine months
ended September 30, 2000 and 1999 (unaudited)........................................... 4
Statements of Partners' Capital for the nine months
ended September 30, 2000 and 1999 (unaudited)........................................... 5
Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 (unaudited)........................................... 6
Notes to Financial Statements (unaudited)............................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 11
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
September 30, 2000 and December 31, 1999
(Amounts in thousands)
------------------------------------------------------------------------------------------------------------
2000 1999
--------------- -------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $26,109 (1999: $22,819) (note 4) $ 53,491 $ 55,441
Cash 2,030 1,405
Accounts receivable, net of allowance
for doubtful accounts of $305 (1999: $481) 2,628 2,800
Due from affiliates, net (note 2) 405 565
Prepaid expenses - 13
--------------- -------------
$ 58,554 $ 60,224
=============== =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 337 $ 319
Accrued liabilities 290 218
Accrued recovery costs 190 172
Accrued damage protection plan costs 423 531
Container purchases payable 556 -
Deferred quarterly distributions 81 81
--------------- -------------
Total liabilities 1,877 1,321
--------------- -------------
Partners' capital:
General partners 36 38
Limited partners 56,641 58,865
--------------- -------------
Total partners' capital 56,677 58,903
--------------- -------------
$ 58,554 $ 60,224
=============== =============
See accompanying notes to financial statements
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
For the three and nine months ended September 30, 2000 and 1999
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
-------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Rental income $ 3,079 $ 3,037 $ 9,421 $ 8,829
-------------- ---------------- --------------- ---------------
Costs and expenses:
Direct container expenses 588 898 2,079 3,150
Bad debt expense (benefit) 8 37 (131) 127
Depreciation 1,198 1,180 3,540 3,554
Professional fees 19 36 63 57
Management fees to affiliates (note 2) 279 278 854 820
General and administrative costs to
affiliates (note 2) 170 128 482 497
Other general and administrative costs 24 29 78 124
-------------- ---------------- --------------- ---------------
2,286 2,586 6,965 8,329
-------------- ---------------- --------------- ---------------
Income from operations 793 451 2,456 500
-------------- ---------------- --------------- ---------------
Other income (expense):
Interest income 38 17 100 51
(Loss) gain on sale of containers (10) 3 (55) (132)
-------------- ---------------- --------------- ---------------
28 20 45 (81)
-------------- ---------------- --------------- ---------------
Net earnings $ 821 $ 471 $ 2,501 $ 419
============== ================ =============== ===============
Allocation of net earnings (note 2):
General partners $ 16 $ 14 $ 47 $ 46
Limited partners 805 457 2,454 373
-------------- ---------------- --------------- ---------------
$ 821 $ 471 $ 2,501 $ 419
============== ================ ============== ===============
Limited partners' per unit share
of net earnings $ 0.18 $ 0.10 $ 0.55 $ 0.08
============== ================ =============== ===============
Limited partners' per unit share
of distributions $ 0.35 $ 0.35 $ 1.05 $ 1.10
============== ================ =============== ===============
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 nine months ended September 30, 2000 and 1999
(Amounts in thousands)
(unaudited)
-------------------------------------------------------------------------------------------------------------------------
Partners' Capital
---------------------------------------------------------
General Limited Total
------------ -------------- --------------
<S> <C> <C> <C>
Balances at January 1, 1999 $ 44 $ 64,215 $ 64,259
Distributions (51) (4,900) (4,951)
Net earnings 46 373 419
------------ -------------- --------------
Balances at September 30, 1999 $ 39 $ 59,688 $ 59,727
============ ============== ==============
Balances at January 1, 2000 $ 38 $ 58,865 $ 58,903
Distributions (49) (4,678) (4,727)
Net earnings 47 2,454 2,501
------------ -------------- --------------
Balances at September 30, 2000 $ 36 $ 56,641 $ 56,677
============ ============== ==============
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 nine months ended September 30, 2000 and 1999
(Amounts in thousands)
(unaudited)
--------------------------------------------------------------------------------------------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,501 $ 419
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 3,540 3,554
(Decrease) increase in allowance for doubtful accounts (176) 104
Write-off of organization costs - 35
Loss on sale of containers 55 132
(Increase) decrease in assets:
Accounts receivable 455 145
Due from affiliates, net 130 (45)
Prepaid expenses 13 19
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 90 55
Accrued recovery costs 18 32
Damage protection plan costs (108) 112
---------------- ----------------
Net cash provided by operating activities 6,518 4,562
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of containers 383 585
Container purchases (1,548) (12)
---------------- ----------------
Net cash (used in) provided by investing activities (1,165) 573
---------------- ----------------
Cash flows from financing activities:
Distributions to partners (4,728) (4,964)
---------------- ----------------
Net cash used in financing activities (4,728) (4,964)
---------------- ----------------
Net increase in cash 625 171
Cash at beginning of period 1,405 1,009
---------------- ----------------
Cash at end of period $ 2,030 $ 1,180
================ ================
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--Continued
For the nine months ended September 30, 2000 and 1999
(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 September 30, 2000 and 1999, and December 31, 1999 and 1998,
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
nine-month periods ended September 30, 2000 and 1999.
Sept. 30 Dec. 31 Sept. 30 Dec. 31
2000 1999 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Container purchases included in:
Due to affiliates.............................. $ 32 $ - $ - $ -
Container purchases payable.................... 556 - - -
Distributions to partners included in:
Due to affiliates.............................. 5 6 6 6
Deferred quarterly distributions............... 81 81 81 94
Proceeds from sale of containers included in:
Due from affiliates............................ 87 86 89 167
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
nine-month periods ended September 30, 2000 and 1999.
2000 1999
---- ----
Container purchases recorded...................................................... $ 2,136 $ 12
Container purchases paid.......................................................... 1,548 12
Distributions to partners declared................................................ 4,727 4,951
Distributions to partners paid.................................................... 4,728 4,964
Proceeds from sale of containers recorded......................................... 384 507
Proceeds from sale of containers received......................................... 383 585
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying value of containers transferred during the nine-month periods ended
September 30, 2000 and 1999 was $107 and $134, respectively.
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 three and nine months ended September 30, 2000 and 1999
(Amounts in thousands except for unit and 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 a fleet of intermodal marine cargo containers which
are leased to international shipping lines.
The accompanying interim 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 September 30, 2000 and December 31, 1999 and the results
of its operations, changes in partners' capital, and cash flows for the
nine-month periods ended September 30, 2000 and 1999, 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, 1999, in the Annual Report filed on Form 10-K.
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. 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 the associate general partners are collectively
referred to as the General Partners and are commonly owned by Textainer
Group Holdings Limited (TGH). The General Partners also act in this
capacity for other limited partnerships. The General Partners manage and
control the affairs of the Partnership.
In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings and creates a deficit
in a General Partner's capital account, the Partnership Agreement provides
for a special allocation of gross income equal to the amount of the
deficit to be made to the General Partners.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an acquisition fee, an equipment management fee, an
incentive management fee and an equipment liquidation fee. These fees are
for various services provided in connection with the administration and
management of the Partnership. The Partnership capitalized $102 of
container acquisition fees as a component of container costs during the
nine-month period ended September 30, 2000. No acquisition fees were
incurred during the nine-month period ended September 30, 1999. The
Partnership incurred $65 and $197 of incentive management fees during the
three and nine-month periods ended September 30, 2000, respectively, and
$65 and $203, respectively, for the comparable periods in 1999. No
equipment liquidation fees were incurred during these periods.
The Partnership's container fleet is managed by TEM. In its role as
manager, 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
leasing operations; such cash is included in due from affiliates, net at
September 30, 2000 and December 31, 1999.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. These fees
totaled $214 and $657 for the three and nine-month periods ended September
30, 2000, respectively, and $213 and $617, respectively, for the
comparable periods in 1999. The Partnership's container fleet is leased by
TEM to third party lessees on operating master leases, spot leases, term
leases and direct finance leases. The majority of the container fleet is
leased under operating master 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. General and
administrative costs allocated to the Partnership during the three and
nine-month periods ended September 30, 2000 and 1999 were as follows:
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
Salaries $ 83 $ 74 $247 $271
Other 87 54 235 226
--- --- --- ---
Total general and
administrative costs $170 $128 $482 $497
=== === === ===
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. The General
Partners allocated the following general and administrative costs to the
Partnership during the three and nine-month periods ended September 30,
2000 and 1999:
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
TEM $141 $113 $409 $443
TCC 29 15 73 54
--- --- --- ---
Total general and
administrative costs $170 $128 $482 $497
=== === === ===
The General Partners 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 are entitled to an acquisition fee for any containers resold to
the Partnership.
At September 30, 2000 and December 31, 1999, due from affiliates, net is
comprised of:
2000 1999
---- ----
Due from affiliates:
Due from TEM............................. $447 $581
--- ---
Due to affiliates:
Due to TCC............................... 38 12
Due to TL................................ 4 4
--- ---
42 16
--- ---
Due from affiliates, net $405 $565
=== ===
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 remittance of expenses
and fees described above and in the accrual and remittance of net rental
revenues and sales proceeds from TEM.
Note 3. Rentals Under Long-Term Operating Leases
The following are the future rent receivables under cancelable long-term
operating leases at September 30, 2000. Although the leases are generally
cancelable with a penalty at the end of each twelve-month period, the
following schedule assumes that the leases will not be terminated.
Year ending September 30:
2001............................................... $1,433
2002............................................... 1,030
2003............................................... 867
2004............................................... 775
2005............................................... 765
-----
Total future rentals receivable.................... $4,870
=====
Note 4. Container Rental Equipment
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, the cost of new containers at year-end
1998, during 1999 and the first three quarters of 2000 was significantly
less than the average cost of containers purchased in prior years. The
Partnership evaluated the recoverability of the recorded amount of
container rental equipment for containers to be held for continued use as
well as for containers identified for sale in the ordinary course of
business. Based on this evaluation, the Partnership determined that
reductions to the carrying value of these containers was not required
during the nine-month periods ended September 30, 2000 and 1999.
The Partnership will continue to evaluate the recoverability of recorded
amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may
be required in future periods for some or all of its container rental
equipment.
<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 as of and for the three and
nine-month periods ended September 30, 2000 and 1999. 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 nine-month period ended September 30,
2000, the Partnership did not redeem any units.
The Partnership invests working capital, cash flow from operations prior to its
distribution to the partners and proceeds from container sales that have not
been used to purchase containers 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.
Limited partners are currently receiving monthly distributions in an annualized
amount equal to 7% of their original investment. During the nine-month period
ended September 30, 2000, the Partnership declared cash distributions to limited
partners pertaining to the period from December 1999 through August 2000, in the
amount of $4,678. On a cash basis, all of these distributions were from current
year operating activities. On a GAAP basis, $2,224 of these distributions was a
return of capital and the balance was from net earnings.
At September 30, 2000, the Partnership had no commitments to purchase
containers.
Net cash provided by operating activities for the nine-month periods ended
September 30, 2000 and 1999 was $6,518 and $4,562, respectively. The increase of
$1,956, or 43%, was primarily attributable to the increase in net earnings,
adjusted for non-cash transactions, and to fluctuations in accounts receivable,
offset by fluctuations in accrued damage protection plan costs. Net earnings,
adjusted for non-cash transactions, increased primarily due to the decrease in
direct container expenses and the increase in rental income. These items are
discussed more fully in "Results of Operations". Accounts receivable decreased
$455 during the nine-month period ended September 30, 2000 primarily due to the
decrease in the average collection period of accounts receivable. The decrease
in accounts receivable of $145 in the comparable period in 1999 was primarily
due to the decrease in rental income. The decline in accrued damage protection
plan costs of $108 during the nine-month period ended September 30, 2000 was
primarily due to the decline in the number of containers covered under the
damage protection plan.
For the nine-month period ended September 30, 2000 net cash used in investing
activities (the purchase and sale of containers) was $1,165, compared to net
cash provided by investing activities of $573, for the comparable period in
1999. The fluctuation of $1,738 was primarily due to the increase in container
purchases and the decrease in proceeds from container sales. Container purchases
increased primarily due to the increase in cash available for container
purchases. The decrease in proceeds from container sales was primarily due to
the Partnership selling fewer damaged containers located in low demand locations
during the nine-month period ended September 30, 2000 than the same period in
1999. The sales prices received on container sales was comparable for both
periods, however, these sales proceeds are lower than sales prices received in
previous years as a result of current market conditions, which have adversely
affected the value of used containers. Until conditions improve in these low
demand locations, the Partnership plans to continue to sell some of its
containers in these locations. The amount of these sales proceeds will affect
how much the Partnership can reinvest in new containers.
The rate of reinvestment is also affected by cash from operations available for
reinvestment which, like sales proceeds, has been adversely affected by market
conditions. These market conditions have resulted in a slower than anticipated
rate of reinvestment. Market conditions are discussed more fully under "Results
of Operations." A slower rate of reinvestment will, over time, affect the size
of the Partnership's container fleet. Furthermore, even with reinvestment, the
Partnership is not likely to be able to replace all the containers it sells,
since new container prices are usually higher than the average sales price for a
used container.
Consistent with its investment objectives and subject to its distribution
policy, the Partnership intends to continue to reinvest both cash from
operations available for reinvestment and all, or a significant amount of, the
proceeds from container sales in additional containers. Cash from operations
available for reinvestment is generally equal to cash provided by operating
activities, less distributions and redemptions paid, subject to the General
Partners' authority to set all of these amounts (and modify reserves and working
capital) as provided in the Partnership Agreement. The amount of sales proceeds
available for reinvestment will fluctuate based on the number of containers sold
and the sales price received. The Partnership sells containers when (i) a
container reaches the end of its useful life or (ii) an analysis indicates that
the sale is warranted based on existing market conditions and the container's
age, location and condition.
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 nine-month periods ended September 30, 2000 and 1999,
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:
2000 1999
---- ----
Beginning container fleet............... 23,810 24,165
Ending container fleet.................. 24,416 23,879
Average container fleet................. 24,113 24,022
As noted above, when containers are sold in the future, sales proceeds are not
likely to be sufficient to replace all of the containers sold. This trend, which
is expected to continue, has contributed to a slower rate of reinvestment than
had been expected by the General Partners. Other factors related to this trend
are discussed above in "Liquidity and Capital Resources".
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 82% and 75% during the nine-month periods
ended September 30, 2000 and 1999, respectively. In addition, rental income is
affected by daily rental rates which were comparable for both periods.
The following is a comparative analysis of the results of operations for the
nine-month periods ended September 30, 2000 and 1999.
The Partnership's income from operations for the nine-month periods ending
September 30, 2000 and 1999 was $2,456 and $500, respectively, on rental income
of $9,421 and $8,829, respectively. The increase in rental income of $592, or
7%, from the nine-month period ended September 30, 1999 to the comparable period
in 2000 was attributable to the increase in container rental income, offset by
the decrease in other rental income. Income from container rentals, the major
component of total revenue, increased $876, or 11%, primarily due to the
increase in the average on-hire utilization of 9%.
The improvement in utilization was due to improvements in demand for leased
containers and in the trade balance, primarily as a result of the improvement in
certain Asian economies and a related increase in exports out of Europe. This
improvement in demand, coupled with container lessors' efforts to sell older
containers in low demand locations, has also reduced the container surplus.
However, the trade imbalance between Asia and North America still exists, and as
a consequence, the build-up of containers, primarily on the East Coast of the
United States, persists. The Partnership has been unable to reposition a large
number of newer containers to higher demand locations in Asia, due to lack of
available vessel capacity from the United States East Coast ports.
As a result, the Partnership continues to sell some containers located in low
demand locations, but primarily only those containers with significant damage.
The average sales price for used containers has decreased, partly due to the
trade imbalance and the accompanying build up of containers in low demand
locations. Due in part to this decrease, other Partnerships managed by the
General Partners have recorded write-downs and losses on certain older
containers, many of which were located in these low demand locations. There have
been no such losses or write-downs recorded by the Partnership primarily due to
the young age of the Partnership's container fleet. Sales by the Partnership in
these low demand locations have been generally limited to damaged containers.
However, as the container fleet ages, the Partnership may incur losses and/or
write-downs on the sale of its older containers located in low demand locations
if existing market conditions continue. Additionally, should the decline in
economic value of continuing to own such containers turn out to be permanent,
the Partnership may be required to increase its depreciation rate or write-down
the value for some or all of its container rental equipment.
The decline in the purchase price of new containers and the container surplus
mentioned above have resulted in the decline in rental rates in recent years.
However, as a result of the improvement in demand and increases in the purchase
price of new containers, rental rates have stabilized during the first three
quarters of 2000.
The General Partners are cautiously optimistic that rental rates will remain
stable and the current level of utilization will be maintained during 2000 and
may improve if demand for leased containers and the trade balance continue to
improve. However, the General Partners caution that utilization, lease rates and
container sale prices could also decline, adversely affecting the Partnership's
operating results.
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
(handling income) and income from charges to lessees for a Damage Protection
Plan (DPP). For the nine-month period ended September 30, 2000, the total of
these other rental income items was $749, a decrease of $284 from the equivalent
period in 1999. The decrease was primarily due to the decreases in DPP and
location income of $137 and $133, respectively. DPP income decreased primarily
due to the decrease in the number of containers covered under DPP. Location
income decreased primarily due to a decrease in charges to lessees for dropping
off containers in certain locations and an increase in credits granted to
lessees for picking up containers from surplus locations.
Direct container expenses decreased $1,071, or 34%, from the nine-month period
ending September 30, 1999 to the equivalent period in 2000, primarily due to the
decreases in storage, DPP and repositioning expenses of $435, $289 and $263,
respectively. Storage expense decreased due to the increase in average
utilization and a decrease in the average storage cost per container. DPP
expense decreased primarily due to the decrease in the number of containers
covered under DPP. Repositioning expense decreased primarily due to the decline
in the number of containers repositioned, offset by an increase in the average
cost of repositioning containers due to the high demand for limited vessel
capacity noted above.
Bad debt expense decreased from an expense of $127 for the nine-month period
ended September 30, 1999, to a benefit of $131 for the comparable period in
2000. The benefit recorded for the nine-month period ended September 30, 2000
was primarily due to an overall lower required reserve at September 30, 2000
than at December 31, 1999.
Depreciation expense was comparable for both the nine-month periods ended
September 30, 2000 and 1999.
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, the cost of new containers at year-end 1998,
during 1999 and the first three quarters of 2000 was significantly less than the
average cost of containers purchased in prior years. The Partnership evaluated
the recoverability of the recorded amount of container rental equipment for
containers to be held for continued use as well as for containers identified for
sale in the ordinary course of business. Based on this evaluation, the
Partnership determined that reductions to the carrying value of these containers
was not required during the nine-month periods ended September 30, 2000 and
1999. The Partnership will continue to evaluate the recoverability of recorded
amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may be
required in future periods for some or all of its container rental equipment.
Management fees to affiliates increased $34, or 4%, from the nine-month period
ended September 30, 1999 to the comparable period in 2000, due to the increase
in equipment management fees of $40, offset by the decrease in incentive
management fees of $6. Equipment management fees, which are based on gross
revenue, increased due to the increase in rental income and were approximately
7% of rental income for both periods. Incentive management fees, which are based
on the Partnership's limited and general partner distributions and initial
partners' capital decreased due to the decrease in the limited partner
distribution percentage from 8% to 7% of partners' capital in March 1999.
General and administrative costs to affiliates decreased $15, or 3%, from the
nine-month period ended September 30, 1999 to the comparable period in 2000. The
decrease was primarily due to a decrease in the allocation of overhead costs
from TEM, as the Partnership represented a smaller portion of the total fleet
managed by TEM.
Other income increased $126 from an expense of $81 for the nine-month period
ended September 30, 1999 to income of $45 for the comparable period in 2000. The
increase was due to the decrease in loss on sale of containers of $77 and an
increase in interest income of $49.
Net earnings per limited partnership unit increased from $0.08 to $0.55 from the
nine-month period ended September 30, 1999 to the same period in 2000,
reflecting the increase in net earnings allocated to limited partners from $373
to $2,454, respectively. The allocation of net earnings included a special
allocation of gross income to the General Partners made in accordance with the
Partnership Agreement.
The following is a comparative analysis of the results of operations for the
three-month periods ended September 30, 2000 and 1999.
The Partnership's income from operations for the three-month periods ending
September 30, 2000 and 1999 was $793 and $451, on rental income of $3,079 and
$3,037, respectively. The increase in rental income of $42, or 1%, from the
three-month period ended September 30, 1999 to the comparable period in 2000 was
primarily attributable to the increase in container rental income, offset by the
decrease in other rental income. Income from container rentals increased $325,
or 12%, primarily due to the increase in the average on-hire utilization of 11%,
offset by the decline in average rental rates of 2%.
Other rental income was $118 for the three-month period ended September 30,
2000, a decrease of $283 from the equivalent period in 1999. The decrease was
primarily due to decreases in DPP and location income of $185 and $77,
respectively. DPP income declined primarily due to a refund of $137 to one
lessee as a result of the lessee canceling their DPP coverage in July, 2000. The
Partnership also recorded a decrease in previously accrued damage protection
plan cost related to units on lease to this lessee as a result of this
cancellation, resulting in decrease to DPP expense of $187. Location income
decreased primarily due to an increase in credits granted to lessees for picking
up containers from surplus locations and a decrease in charges to lessees for
dropping off containers in certain locations.
Direct container expenses decreased $310, or 35%, from the three-month period
ending September 30, 1999 to the equivalent period in 2000, primarily due to
decreases in DPP and storage expenses of $241 and $134, respectively, offset by
an increase in repositioning expense of $89. DPP expense declined primarily due
to the reduction in the DPP reserve as a result of a lessee canceling their DPP
coverage as described above. Storage expense decreased due to the increase in
average utilization and a decrease in the average storage cost per container.
Repositioning expense increased primarily due to the increase in the average
cost of repositioning containers due to the high demand for limited vessel
capacity noted above.
Bad debt expense decreased $29, or 78% from the three-month period ended
September 30, 1999 to the comparable period in 2000. The decrease was primarily
due to a smaller required increase to the bad debt reserve during the
three-month period September 30, 2000 than in the same period in 1999.
Depreciation expense increased $18, or 2%, from the three-month period ended
September 30, 1999 to the comparable period in 2000, due to the increase in
average fleet size between the periods.
Management fees to affiliates were comparable for both the three-month periods
ended September 30, 2000 and 1999 as both the equipment and incentive management
fees were comparable.
General and administrative costs to affiliates increased $42, or 33%, from the
three-month period ended September 30, 1999 to the comparable period in 2000.
The increase was primarily due to an increase in the allocation of overhead
costs from TEM and TCC resulting from the increase in allocable costs.
Other income increased $8 from the three-month period ended September 30, 1999
to the comparable period in 2000. The increase was due to the increase in
interest income of $21, offset by gain (loss) on sale of containers fluctuating
from a gain of $3 for the three-month period ended September 30, 1999 to a loss
of $10 for the same period in 2000.
Net earnings per limited partnership unit increased from $0.10 to $0.18 from the
three-month period ended September 30, 1999 to the same period in 2000,
reflecting the increase in net earnings allocated to limited partners from $457
to $805, respectively. The allocation of net earnings included a special
allocation of gross income to the General Partners made in accordance with the
Partnership Agreement.
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 September 30, 2000, 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.
Forward Looking Statements
The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.
<PAGE>
<TABLE>
<CAPTION>
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 _______________________________
Ernest J. Furtado
Senior Vice President
Date: November 10, 2000
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:
Signature Title Date
<S> <C> <C>
________________________ Senior Vice President, November 10, 2000
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive November 10, 2000
John A. Maccarone Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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/Ernest J. Furtado
___________________________________
Ernest J. Furtado
Senior Vice President
Date: November 10, 2000
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:
Signature Title Date
<S> <C> <C>
/s/Ernest J. Furtado
_____________________________ Senior Vice President, November 10, 2000
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
/s/John A. Maccarone
_____________________________ President (Principal Executive November 10, 2000
John A. Maccarone Officer)
</TABLE>
