TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 28, 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 Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
The financial statements included in the enclosed Annual Report on Form 10-K do
not reflect a change from the preceding year in any accounting principles or
practices, or in the method of applying any such principles or practices.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code:
(415) 434-0551
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS (THE "UNITS")
(Title of Class)
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.
[ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
Documents Incorporated by Reference
The Registrant's Prospectus as contained in Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement, as filed with the Commission on April 8,
1994, as supplemented by Post-Effective Amendment No. 2 as filed under Section
8(c) of the Securities Act of 1933 on May 5, 1995 and as supplemented by
Supplement No. 5 as filed under Rule 424(b) of the Securities Act of 1933 on
March 18, 1996.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
For more detailed information about the Registrant's business, see "Business of
the Partnership" in the Registrant's Prospectus as supplemented.
(a) General Development of Business
The Registrant is a California Limited Partnership formed on July 15,
1993 to purchase, own, operate, lease, and sell equipment used in the
containerized cargo shipping industry. The Registrant commenced
offering units representing limited partnership interests (Units) to
the public on May 1, 1994 in accordance with its Registration Statement
and ceased to offer such Units as of April 29, 1996. The Registrant
raised a total of $89,305,000 from the offering and invested a
substantial portion of the money raised in equipment. The Registrant
has since engaged in leasing this and other equipment in the
international shipping industry.
See Item 10 herein for a description of the Registrant's General
Partners. See Item 7 herein for a description of current market
conditions affecting the Registrant's business.
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A container leasing company generally, and the Registrant
specifically, is an operating business comparable to a rental
car business. A customer can lease a car from a bank leasing
department for a monthly charge which represents the cost of
the car, plus interest, amortized over the term of the lease;
or the customer can rent the same car from a rental car
company at a much higher daily lease rate. The customer is
willing to pay the higher daily rate for the convenience
and value-added features provided by the rental car company,
the most important of which is the ability to pick up the car
where it is most convenient, use it for the desired period
of time, and then drop it off at a location convenient to
the customer. Rental car companies compete with one another
on the basis of lease rates, availability of cars, and the
provision of additional services. They generate revenues by
maintaining the highest lease rates and the highest
utilization factors that market conditions will allow, and by
augmenting this income with proceeds from sales of insurance,
drop-off fees, and other special charges. A large percentage
of lease revenues earned by car rental companies are generated
under corporate rate agreements wherein, for a stated period
of time, employees of a participating corporation can rent
cars at specific terms, conditions and rental rates.
Container leasing companies and the Registrant operate in a
similar manner by owning a worldwide fleet of new and used
transportation containers and leasing these containers to
international shipping companies hauling various types of
goods among numerous trade routes. All lessees pay a daily
rental rate and in certain markets may pay special handling
fees and/or drop-off charges. In addition to these fees and
charges, a lessee must either provide physical damage and
liability insurance or purchase a damage waiver from the
Registrant, in which case the Registrant agrees to pay the
cost of repairing any physical damage to containers caused by
lessees. Container leasing companies compete with one another
on the basis of lease rates, availability of equipment and
services provided. To ensure the availability of equipment to
its customers, container leasing companies and the Registrant
may pay to reposition containers from low demand locations to
higher demand locations. By maintaining the highest lease
rates and the highest equipment utilization factors allowed by
market conditions, the Registrant attempts to generate revenue
and profit. The majority of the Registrant's equipment is
leased under master leases, which are comparable to the
corporate rate agreements used by rental car companies. The
master leases provide that the lessee, for a specified period
of time, may rent containers at specific terms, conditions and
rental rates. Although the terms of the master lease governing
each container under lease do not vary, the number of
containers in use can vary from time to time within the term
of the master lease. The terms and conditions of the master
lease provide that the lessee pays a daily rental rate for the
entire time the container is in his possession (whether or not
he is actively using it), is responsible for any damage, and
must insure the container against liabilities. For a more
detailed discussion of the leases for the Registrant's
equipment, see "Leasing Policy" under "Business of the
Partnership" in the Registrant's Prospectus as supplemented.
The Registrant also sells containers in the course of its
business as opportunities arise, at the end of the container's
useful life or if market and economic considerations indicate
that a sale would be beneficial. See "Business of the
Partnership" in Registrant's Prospectus, as supplemented.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) Inapplicable.
(c)(1)(vi) Inapplicable.
(c)(1)(vii) No single lessee generated lease revenue for the years ended
December 31, 1999, 1998 and 1997 which was 10% or more of the
total revenue of the Registrant.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) There are approximately 80 container leasing companies of
which the top ten control approximately 91% of the total
equipment held by all container leasing companies. The top
two container leasing companies combined control approximately
36% of the total equipment held by all container leasing
companies. Textainer Equipment Management Limited, an
Associate General Partner of the Registrant and the manager
of its marine container equipment, is the third largest
container leasing company and manages approximately 13% of
the equipment held by all container leasing companies. The
customers for leased containers are primarily international
shipping lines. The Registrant alone is not a material
participant in the worldwide container leasing market. The
principal methods of competition are price, availability and
the provision of worldwide service to the international
shipping community. Competition in the container leasing
market has increased over the past few years. Since 1996,
shipping alliances and other operational consolidations
among shipping lines have allowed shipping lines to begin
operating with fewer containers, thereby decreasing the
demand for leased containers. Furthermore, primarily as a
result of lower new container prices and low interest rates,
shipping lines now own, rather than lease, a higher percentage
of containers. The decrease in demand from shipping lines,
along with the entry of new leasing company competitors
offering low container rental rates, has increased competition
among container lessors such as the Registrant.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Capital Corporation
(TCC), the Managing General Partner of the Registrant, is
responsible for the overall management of the business of the
Registrant and at December 31, 1999 had 4 employees. Textainer
Equipment Management Limited (TEM), an Associate General
Partner, is responsible for the management of the leasing
operations of the Registrant and at December 31, 1999 had a
total of 164 employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant is involved in the leasing of shipping containers to
international shipping companies for use in world trade and
approximately 14%, 20% and 12% of the Registrant's rental revenue
during the years ended December 31, 1999, 1998 and 1997, respectively,
was derived from operations sourced or terminated domestically. These
percentages do not reflect the proportion of the Partnership's income
from operations generated domestically or in domestic waterways.
Substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations. See "Business of
the Partnership", and for a discussion of the risks of leasing
containers for use in world trade, "Risk Factors" in the Registrant's
Prospectus, as supplemented.
ITEM 2. PROPERTIES
As of December 31, 1999, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 9,921
40-foot standard dry freight containers 10,062
40-foot high cube dry freight containers 3,827
-------
23,810
======
During December 1999, approximately 82% of these containers were on lease to
international shipping companies, and the balance were being stored at a large
number of storage depots located worldwide.
For information about the Registrant's property, see "Business of the
Partnership" and "Risk Factors" in the Registrant's Prospectus, as supplemented.
See also Item 7, "Results of Operations" regarding possible future write-downs
of some of the Registrant's property.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not subject to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 201:
(a) Market Information.
(a)(1)(i) The Registrant's limited partnership Units are not publicly
traded and there is no established trading market for such
Units. The Registrant has a program whereby limited partners
may redeem Units for a specified redemption price. The program
operates only when the Managing General Partner determines,
among other matters, that payment for redeemed units will not
impair the capital or operations of the Registrant.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders.
(b)(1) As of January 1, 2000, there were 4,796 holders of record
of limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data".
ITEM 701: Inapplicable.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Amounts in thousands except for per unit amounts)
Year Ended December 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental income........................... $ 12,031 $ 14,265 $ 14,012 $ 13,588 $ 10,467
Net earnings............................ $ 1,171 $ 3,697 $ 3,961 $ 3,834 $ 3,116
Net earnings per unit of
limited partner interest.............. $ 0.25 $ 0.81 $ 0.86 $ 0.91 $ 1.71
Distributions per unit of
limited partner interest.............. $ 1.45 $ 1.72 $ 1.87 $ 1.99 $ 1.97
Distributions per unit of limited
partnership interest representing
a return of capital.................. $ 1.20 $ 0.91 $ 1.01 $ 1.08 $ 0.26
Total assets............................ $ 60,224 $ 65,390 $ 69,623 $ 73,927 $ 70,558
Outstanding balance on revolving
credit line.......................... $ - $ - $ - $ - $ 10,000
Intercompany borrowings for
container purchases.................. $ - $ - $ 318 $ - $ -
</TABLE>
ITEM 7. 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 that will assist in evaluating the
financial condition of the Partnership for the years ended December 31, 1999,
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 year ended December 31, 1999, 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 year ended December
31, 1999, the Partnership declared cash distributions to limited partners
pertaining to the period from December 1998 through November 1999, in the amount
of $6,459. On a cash basis, $6,228 of these distributions were from current year
operating activities and the remainder was from cash provided by previous years'
operations that had not been distributed or used to purchase containers or
redeem units. On a GAAP basis, $5,350 of these distributions was a return of
capital and the balance was from net earnings.
At December 31, 1999, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the years ended December 31, 1999
and 1998 was $6,228 and $8,999, respectively. The decrease of $2,771, or 31%,
was primarily attributable to the decrease in net earnings, adjusted for
non-cash transactions, and the fluctuation in accounts receivable, offset by the
fluctuation in due from affiliates, net. Net earnings, adjusted for non-cash
transactions, decreased primarily due to the decline in rental income and the
increase in direct container expenses. The reasons for these fluctuations are
discussed in "Results of Operations". The increase in accounts receivable of $94
for the year ended December 31, 1999 was primarily due to the increase in the
average collection period of accounts receivable, offset by the decrease in
rental income. The decrease in accounts receivable of $579 for the comparable
period in 1998 was primarily due to the decrease in the average collection
period of accounts receivable. The fluctuations in due from affiliate, net,
resulted from timing differences in the payment of expenses and fees and the
remittance of net rental revenues.
For the year ended December 31, 1999, net cash provided by investing activities
(the purchase and sale of containers) was $708, compared to net cash used in
investing activities of $18 for the comparable period ended 1998. The
fluctuation of $726 was due to the increase in proceeds from container sales and
the decrease in container purchases. Proceeds from container sales increased
primarily due to the Partnership selling more damaged containers located in low
demand locations during the year ended December 31, 1999 than the same period in
1998, as discussed below in "Results of Operations", offset by the lower average
sales prices received on container sales in 1999. The sales prices received on
these container sales decreased as a result of current market conditions, which
have adversely affected the value of used containers. 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. Until conditions
improve in these low demand locations, the Partnership plans to continue to sell
damaged containers there and may sell other containers as well. Proceeds from
container sales will fluctuate based on the number of containers sold and the
actual price received on the sale.
Consistent with its investment objectives, the Partnership intends to continue
to reinvest available cash from operations, after distributions and redemptions,
and all or a significant amount of the proceeds from container sales in
additional containers. However, during the year ended December 31, 1999, the
Partnership did not reinvest any cash from operations in new containers, after
making distributions, due to the effect of market conditions on the
Partnership's financial results. Market conditions have had and are expected to
continue to have an adverse effect on the amount of cash provided by operations
that is available for the purchase of additional containers, after making
distributions, which has resulted in lower than anticipated reinvestment in
containers. Additionally, these market conditions have had an adverse effect on
the average sales price recently realized from container sales. Furthermore, to
the extent new containers are purchased with sales proceeds, they are not likely
to equal the number of containers sold, as new container prices are likely to be
greater than the average sales price of containers sold. These factors have
contributed to a lower than anticipated rate of reinvestment. The rate of
reinvestment is also affected by distributions and redemptions, which are
determined by the General Partners in accordance with the Partnership
Aggreement. 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.
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 years ended December 31, 1999, 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:
1999 1998 1997
---- ---- ----
Beginning container fleet............... 24,165 24,288 23,952
Ending container fleet.................. 23,810 24,165 24,288
Average container fleet................. 23,988 24,227 24,120
The decline in the average container fleet of 1% from the year ended December
31, 1998 to the comparable period in 1999 was due to the Partnership having sold
more containers than it purchased since December 31, 1998. Although some of the
sales proceeds were used to purchase additional containers, fewer containers
were bought than sold, resulting in a net decrease in the size of the container
fleet. As noted above, when containers are sold, 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 average
utilization of the container fleet, which was 76%, 83% and 84% during the years
ended December 31, 1999, 1998 and 1997, respectively. In addition, rental income
is affected by daily rental rates.
The following is a comparative analysis of the results of operations for the
years ended December 31, 1999, 1998 and 1997.
The Partnership's income from operations for the years ended December 31, 1999
and 1998 was $1,252 and $3,690, respectively, on rental income of $12,031 and
$14,265, respectively. The decrease in rental income of $2,234, or 16%, from the
year ended December 31, 1998 to the comparable period in 1999 was attributable
to decreases in income from container rentals and other rental income, which is
discussed below. Income from containers rentals, the major component of total
revenue, decreased $1,998, or 16%, primarily due to the decreases in the average
on-hire utilization of 8% and average rental rates of 5%.
The Partnership's income from operations for the years ended December 31, 1998
and 1997 was $3,690 and $3,853, respectively, on rental income of $14,265 and
$14,012, respectively. The increase in rental income of $253, or 2%, from the
year ended December 31, 1997 to the comparable period in 1998 was attributable
to an increase in other rental income, offset by a decrease in income from
container rentals. Income from containers rentals, decreased $282, or 2%,
primarily due to the decreases in the average rental rates of 4% and average
on-hire utilization of 1%.
Since 1996, the container leasing industry has been adversely affected by lower
demand for leased containers, increased competition and a trade imbalance, which
have resulted in declining utilization and rental rates and increased costs.
Demand for leased containers decreased due to changes in the business of
shipping line customers as a result of (i) over-capacity resulting from the
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 purchasing containers
to take advantage of low prices and favorable interest rates.
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. The decline in the purchase price of new containers during this
period and excess industry capacity have also caused additional downward
pressure on rental rates.
The weakening of many Asian currencies in 1998 resulted in a significant
increase in exports from Asia to North America and Europe and a corresponding
decrease in imports into Asia from North America and Europe. This trade
imbalance created a weak demand for containers in North America and Europe and a
strong demand for containers in Asia, which resulted in a decline in leasing
incentives in Asia, but contributed to a further decline in average utilization
and rental rates for the fleet managed by TEM. This imbalance has also resulted
in an unusually high build-up of containers in lower demand locations. To
alleviate the container build-up, the Partnership has repositioned newer
containers to higher demand locations. However, as a result of this effort, the
Partnership has incurred increased direct container expenses during 1998 and
1999. The Partnership has sold some containers located in lower demand
locations, but primarily only those containers that were damaged.
Current market conditions have also caused a decline in the economic value of
used containers, and the average sales price on container sales received by the
Partnership decreased. The decline in economic value of certain containers owned
by other owners resulted in write-downs and losses being recorded on certain
older containers. These containers, managed by TEM and located in lower demand
locations, were identified as being for sale as the expected economic benefit of
continuing to own these containers was significantly less than that of newer
containers, primarily due to their shorter remaining marine life, the cost to
reposition containers and shipping lines' preference for leasing newer
containers. 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.
Although average utilization during the year ended December 31, 1999 was lower
than the comparable period in 1998 for the reasons discussed above, utilization
has been steadily improving during the second half of 1999 and has remained
stable into the beginning of 2000. This improvement in utilization was due to
slight improvements in demand for leased containers and the trade imbalance
primarily as a result of the improvement in certain Asian economies and a
related increase in exports out of Europe. Although the General Partners do not
foresee material changes in existing market conditions for the near term, they
are cautiously optimistic that the current level of utilization might be
maintained during 2000. However, the General Partners caution that utilization,
lease rates and container sale prices could also decline, 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 lower
demand locations less credits granted to lessees for leasing containers from
lower demand locations (location income), income from charges to lessees for
handling related to leasing and returning containers (handling income) and
income from charges to lessees for a Damage Protection Plan (DPP). For the year
ended December 31, 1999, the total of these other rental income items was
$1,438, a decrease of $236 from the equivalent period in 1998. Other income
decreased primarily due to the decrease in location income of $260. Location
income decreased 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 certain locations. These decreases and increases
were in the lessees' favor and were driven by the market conditions discussed
above.
For the year ended December 31, 1998, the total of these other rental income
items was $1,674, an increase of $535 from the equivalent period in 1997. Other
income increased primarily due to an increase in location income of $728, offset
by a decrease in handling income of $168. Location income increased due to a
decrease in credits given to lessees for picking up containers from certain
locations. Handling income decreased primarily due to decreases in container
movement and the average handling price charged per container.
Direct container expenses increased $436, or 12%, from the year ended December
31, 1998 to the equivalent period in 1999. The increase was primarily due to
increases in storage and DPP expense of $379 and $251, offset by a decrease in
repositioning expense of $106. Storage expense increased primarily due to the
decline in utilization. DPP expense increased due to an increase in the average
repair cost per DPP container and an increase in the number of containers
covered under DPP. The decrease in repositioning expense was due to a lower
average repositioning cost per container, offset by an increase in the number of
containers repositioned.
Direct container expenses increased $652, or 23%, from the year ended December
31, 1997 to the equivalent period in 1998. The increase was primarily due to an
increase in repositioning expense of $770, offset by a decrease in handling
expense of $112. Repositioning expense increased primarily due to an increase in
the number of containers transported from low demand locations to higher demand
locations at a higher average cost per container. Handling expense decreased due
to decreases in container movement and the average handling cost per container
during the year ended December 31, 1998 compared to the year ended December 31,
1997.
Bad debt expense was $164, $5 and $116 for the years ended December 31, 1999,
1998 and 1997, respectively. The resolution of payment issues with one lessee
during 1998 and lower 1998 reserve requirements were primarily responsible for
the lower expense recorded in 1998 and, therefore, the fluctuation in bad debt
expense between the periods.
Depreciation and amortization expense was comparable at $4,728, $4,837 and
$4,825 for the years ended December 31, 1999, 1998 and 1997, respectively.
New container prices have been declining since 1995, and the cost of purchasing
new containers at year-end 1998 and during 1999, was significantly less than the
cost of containers purchased in prior years. The Partnership has evaluated the
recoverability of the recorded amount of container rental equipment and
determined that a reduction to the carrying value of the containers was not
required during the years ended December 31, 1999, 1998 and 1997. 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 decreased $206, or 16%, from the year ended
December 31, 1998 to the same period in 1999 due to decreases in equipment
management and incentive management fees. Equipment management fees, which are
based on rental income, decreased due to the decrease in rental income and were
approximately 7% of rental income for the years ended December 31, 1999 and
1998. Incentive management fees, which are based on the Partnership's limited
and general partner distribution percentage and partners' capital, decreased due
to the decrease in the limited partner distribution percentage from 8% to 7% of
partners' capital in March 1999 and from 9% to 8% of partners' capital in July
1998.
Management fees to affiliates decreased $13, or 1%, from the year ended December
31, 1997 to the equivalent period in 1998, due to a decrease in incentive
management fees, offset by the increase in equipment management fees. Incentive
management fees decreased due to the decrease in the limited partner
distribution percentage from 9% to 8% of partners' capital in July 1998.
Equipment management fees increased due to the increase in rental income and
were 7% of rental income for both periods.
General and administrative costs to affiliates decreased $145, or 19% from the
year ended December 31, 1998 to the comparable period in 1999. 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.
General and administrative costs to affiliates decreased $87, or 10% from the
year ended December 31, 1997 to the equivalent period in 1998, due to decreases
in the allocation of overhead costs from TEM and TCC.
Other income decreased $88 from income of $7 for the year ended December 31,
1998 to an expense of $81 for the comparable period in 1999. The decrease was
due to the increase in loss on sale of containers of $115, partially offset by
an increase in interest income, net of $27. The increase in loss on sale of
containers in 1999 was primarily due to the Partnership having sold more damaged
containers in lower demand locations and at lower average sales prices than in
the comparable period in 1998.
Other income decreased $101 from the year ended December 31, 1997 to the year
ended December 31, 1998. The decrease was primarily due to the fluctuation of
gain/loss on sale of containers from a gain of $74 for the year ended December
31, 1997 to a loss of $37 for the year ended December 31, 1998. The loss on sale
of containers was primarily due to the Partnership beginning to sell certain
damaged containers in low demand locations as a result of market conditions.
Net earnings per limited partnership unit decreased from $0.81 to $0.25, and
from $0.86 to $0.81 from the years ended December 31, 1998 to 1999 and from
December 31, 1997 to 1998, respectively. These decreases reflect the decreases
in net earnings allocated to limited partners from $3,620 to $1,109 from the
year ended December 31, 1998 to 1999 and from $3,828 to $3,620 from December 31,
1997 to 1998. The allocation of net earnings for the years ended December 31,
1999, 1998 and 1997 included a special allocation of gross income of $51, $39
and $93, respectively, to the General Partners 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 December 31, 1999, 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.
Effect of Date Crossing to Year 2000
There has been no material effect on the Partnership's financial condition and
results of operations as a result of problems arising from computer systems'
abilities to process dates beyond January 1, 2000. The General Partners do not
currently expect any such problems to arise within their own computer systems.
The likelihood that a failure in a third party's system would occur and have a
significant adverse effect on the Partnership's operations seems increasingly
remote, but no assurance can be given that, due to unforeseen circumstances,
such an event could not occur. Therefore, the Partnership's contingency plan
remains in place; that is, the General Partners continue to remain capable of
switching temporarily to manual operations in the event of a computer system's
failure. There can be no assurance, however, that switching to manual operations
would prevent all adverse effects of any future year 2000 problem.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached pages 13 to 24.
<PAGE>
Independent Auditors' Report
The Partners
Textainer Equipment Income Fund V, L.P.:
We have audited the accompanying balance sheets of Textainer Equipment Income
Fund V, L.P. (a California limited partnership) as of December 31, 1999 and
1998, the related statements of earnings, partners' capital and cash flows for
each of the years in the three-year period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
V, L.P. as of December 31, 1999 and 1998, and the results of its operations, its
partners' capital and its cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
San Francisco, California
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
December 31, 1999 and 1998
(Amounts in thousands)
- -----------------------------------------------------------------------------------------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $22,819 (1998: $18,459) $ 55,441 $ 61,107
Cash 1,405 1,009
Accounts receivable, net of allowance
for doubtful accounts of $481 (1998: $353) 2,800 2,675
Due from affiliates, net (note 2) 565 545
Organization costs, net of accumulated
amortization of $227 in 1998 (note 1(i)) - 35
Prepaid expenses 13 19
-------------- -------------
$ 60,224 $ 65,390
============== =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 319 $ 399
Accrued liabilities 218 109
Accrued recovery costs (note 1(k)) 172 132
Accrued damage protection plan costs (note 1(l)) 531 397
Deferred quarterly distributions (note 1(g)) 81 94
-------------- -------------
Total liabilities 1,321 1,131
-------------- -------------
Partners' capital:
General partners 38 44
Limited partners 58,865 64,215
-------------- -------------
Total partners' capital 58,903 64,259
-------------- -------------
$ 60,224 $ 65,390
============== =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Rental income $ 12,031 $ 14,265 $ 14,012
---------------- ---------------- ----------------
Costs and expenses:
Direct container expenses 3,926 3,490 2,838
Bad debt expense 164 5 116
Depreciation and amortization 4,728 4,837 4,825
Professional fees 76 42 38
Management fees to affiliates (note 2) 1,109 1,315 1,328
General and administrative costs to affiliates (note 2) 628 773 860
Other general and administrative costs 148 113 154
---------------- ---------------- ----------------
10,779 10,575 10,159
---------------- ---------------- ----------------
Income from operations 1,252 3,690 3,853
---------------- ---------------- ----------------
Other (expense) income:
Interest income, net 71 44 34
(Loss) gain on sale of containers (152) (37) 74
---------------- ---------------- ----------------
(81) 7 108
---------------- ---------------- ----------------
Net earnings $ 1,171 $ 3,697 $ 3,961
================ ================ ================
Allocation of net earnings (note 1(g)):
General partners $ 62 $ 77 $ 133
Limited partners 1,109 3,620 3,828
---------------- ---------------- ----------------
$ 1,171 $ 3,697 $ 3,961
================ ================ ================
Limited partners' per unit share of net earnings $ 0.25 $ 0.81 $ 0.86
================ ================ ================
Limited partners' per unit share of distributions $ 1.45 $ 1.72 $ 1.87
================ ================ ================
Weighted average number of limited
partnership units outstanding (note 1(m)) 4,454,893 4,454,893 4,454,893
================ ================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- -----------------------------------------------------------------------------------------------------------------------
Partners' Capital
----------------------------------------------------------
General Limited Total
---------------- ----------------- ---------------
<S> <C> <C> <C>
Balances at December 31, 1996 $ 2 $ 72,730 $ 72,732
Distributions (87) (8,316) (8,403)
Net earnings 133 3,828 3,961
---------------- ----------------- ---------------
Balances at December 31, 1997 48 68,242 68,290
--------------- ----------------- ---------------
Distributions (81) (7,647) (7,728)
Net earnings 77 3,620 3,697
--------------- ----------------- ---------------
Balances at December 31, 1998 44 64,215 64,259
--------------- ----------------- ---------------
Distributions (68) (6,459) (6,527)
Net earnings 62 1,109 1,171
--------------- ----------------- ---------------
Balances at December 31, 1999 $ 38 $ 58,865 $ 58,903
================ ================= ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,171 $ 3,697 $ 3,961
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 4,728 4,785 4,772
Increase (decrease) in allowance for doubtful accounts 128 (34) 118
Amortization of organization costs - 52 53
Write-off of organization costs 35 - -
Loss (gain) on sale of containers 152 37 (74)
(Increase) decrease in assets:
Accounts receivable (94) 579 (509)
Due from affiliates, net (101) (470) (90)
Prepaid expenses 6 109 (98)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 29 144 31
Accrued recovery costs 40 43 35
Accrued damage protection plan costs 134 57 (21)
------------- ------------- -------------
Net cash provided by operating activities 6,228 8,999 8,178
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of containers 720 379 459
Container purchases (12) (397) (1,365)
------------- ------------- -------------
Net cash provided by (used in) investing activities 708 (18) (906)
------------- ------------- -------------
Cash flows from financing activities:
Distributions to partners (6,540) (7,762) (8,425)
(Repayment of) borrowings from affiliates - (318) 318
------------- ------------- -------------
Net cash used in financing activities (6,540) (8,080) (8,107)
------------- ------------- -------------
Net increase (decrease) in cash 396 901 (835)
Cash at beginning of period 1,009 108 943
------------- ------------- -------------
Cash at end of period $ 1,405 $ 1,009 $ 108
============= ============= =============
Interest paid during the period $ - $ 10 $ -
============= ============= =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Statements of Cash Flows - Continued
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- ----------------------------------------------------------------------------------------------------------
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 by the Partnership as of December 31, 1999, 1998, 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.
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Container purchases included in:
Due to affiliates..................................... $ - $ - $ 39 $ 4
Container purchases payable........................... - - - 169
Distributions to partners included in:
Due to affiliates..................................... 6 6 20 32
Deferred quarterly distributions...................... 81 94 114 124
Proceeds from sale of containers included in:
Due from affiliates................................... 86 167 51 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 on the Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997.
1999 1998 1997
---- ---- ----
Container purchases recorded......................................... $ 12 $ 358 $ 1,231
Container purchases paid............................................. 12 397 1,365
Distributions to partners declared................................... 6,527 7,728 8,403
Distributions to partners paid....................................... 6,540 7,762 8,425
Proceeds from sale of containers recorded............................ 639 495 452
Proceeds from sale of containers received............................ 720 379 459
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying values of containers transferred during the year ended December 31,
1999 was $159. The Partnership did not enter into direct finance leases in the
years ended December 31, 1998 and 1997.
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
(a) Nature of Operations
Textainer Equipment Income Fund V, L.P. (TEIF V or the Partnership), a
California limited partnership, with a maximum life of 20 years, was
formed on July 15, 1993. The Partnership was formed to engage in the
business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, trailers and other
container-related equipment. TEIF V offered units representing limited
partnership interests (Units) to the public from May 1, 1994 until April
29, 1996, the close of the offering period, when a total of 4,465,263
Units had been purchased for a total of $89,305.
Textainer Capital Corporation (TCC) is the managing general partner of the
Partnership. Textainer Equipment Management Limited (TEM) and Textainer
Limited (TL) are 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. Prior to its liquidation in
October 1998, Textainer Acquisition Services Limited (TAS), a former
affiliate of the General Partners, performed services related to the
acquisition of containers outside the United States on behalf of the
Partnership. Effective November 1998, these services are being performed
by TEM. The General Partners manage and control the affairs of the
Partnership.
(b) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned according to the terms of the container rental
contracts. These contracts are classified as operating leases or direct
finance leases if they so qualify under Statement of Financial Accounting
Standards No. 13: "Accounting for Leases". Substantially all of the
Partnership's rental income was generated from the leasing of the
Partnership's containers under short-term operating leases.
(c) Use of Estimates
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.
(d) Fair Value of Financial Instruments
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the Partnership
calculates the fair value of financial instruments and includes this
additional information in the notes to the financial statements when the
fair value is different than the book value of those financial
instruments. At December 31, 1999 and 1998, the fair value of the
Partnership's financial instruments approximates the related book value of
such instruments.
(e) Container Rental Equipment
Container rental equipment is recorded at the cost of the assets
purchased, which includes acquisition fees, less depreciation charged.
Depreciation of new containers is computed using the straight-line method
over an estimated useful life of 12 years to a 28% salvage value. Used
containers are depreciated based upon their estimated remaining useful
life at the date of acquisition (from 2 to 11 years). When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the equipment accounts and any resulting
gain or loss is recognized in income for the period.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" (SFAS 121), the Partnership periodically compares the
carrying value of its containers to expected future cash flows for the
purpose of assessing the recoverability of the recorded amounts. If the
carrying value exceeds expected future cash flows, the assets are written
down to estimated fair value. In addition, containers identified for
disposal are recorded at the lower of carrying amount or fair value less
cost to sell.
New container prices have been declining since 1995, and the cost of
purchasing new containers at year-end 1998 and during 1999, was
significantly less than the cost of containers purchased in prior years.
The Partnership has evaluated the recoverability of the recorded amount of
container rental equipment and determined that a reduction to the carrying
value of the containers was not required during the years ended December
31, 1999, 1998 and 1997. 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.
(f) Nature of Income from Operations
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 that 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 rather than the geographic location of the containers or the
domicile of the lessees.
No single lessee accounted for more than 10% of the Partnership's revenues
for the years ended December 31, 1999, 1998 and 1997.
(g) Allocation of Net Earnings and Partnership Distributions
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.
Actual cash distributions to the Limited Partners differ from the
allocated net earnings as presented in these financial statements because
cash distributions are based on cash available for distribution. Cash
distributions are paid to the general and limited partners on a monthly
basis in accordance with the provisions of the Partnership Agreement. Some
limited partners have elected to have their distributions paid quarterly.
The Partnership has recorded deferred distributions of $81 and $94 at
December 31, 1999 and 1998, respectively.
(h) Income Taxes
The Partnership is not subject to income taxes. Accordingly, no provision
for income taxes has been made. The Partnership files federal and state
information returns only. Taxable income or loss is reportable by the
individual partners.
(i) Organization Costs
Organization costs which resulted from the formation of the Partnership
were capitalized and amortized on a straight-line basis over five years.
During 1999, the Partnership adopted Statement of Position (SOP) 98-5
"Reporting on Costs of Start-up Activities", which prescribes that
organization costs be expensed. In accordance with SOP 98-5, the
Partnership wrote-off $35 of unamortized organization costs during the
year ended December 31, 1999.
(j) Acquisition Fees
In accordance with the Partnership Agreement, acquisition fees equal to 5%
of the container purchase price were paid to TEM beginning in November
1998 and TAS through October 1998. These fees are capitalized as part of
the cost of the containers.
(k) 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 December 31, 1999 and 1998, the amounts
accrued were $172 and $132, respectively.
(l) 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, in return, has agreed to bear certain
repair costs. It is the Partnership's policy to recognize revenue when
earned and 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 December 31, 1999 and 1998 was $531 and $397, respectively.
(m) Limited Partners' Per Unit Share of Net Earnings and Distributions
Limited partners' per unit share of both net earnings and distributions
were computed using the weighted average number of units outstanding which
was 4,454,893 during each of the years ended December 31, 1999, 1998 and
1997.
(n) Reclassifications
Certain reclassifications, not affecting net earnings, have been made to
prior year amounts in order to conform with the 1999 financial statement
presentation.
Note 2. Transactions with Affiliates
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners, or TAS prior to its liquidation, 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 $17 and $68 of equipment acquisition fees as part
of container rental equipment costs during the years ended December 31,
1998 and 1997, respectively. The Partnership did not capitalize any
equipment acquisition fees during 1999. The Partnership incurred $269,
$319, and $347 of incentive management fees during each of the three years
ended December 31, 1999, 1998 and 1997, respectively. No equipment
liquidation fees were incurred during these periods.
The Partnership's containers are managed by TEM. In its role as manager,
TEM has authority to acquire, hold, manage, lease, sell and dispose of the
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 December 31, 1999 and 1998.
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 years ended December 31, 1999, 1998 and 1997, equipment management
fees totaled $840, $996, and $981, respectively. 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 TEM and TCC. Total general and
administrative costs allocated to the Partnership were as follows:
1999 1998 1997
---- ---- ----
Salaries $349 $419 $468
Other 279 354 392
--- --- ---
Total general and
administrative costs $628 $773 $860
=== === ===
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:
1999 1998 1997
---- ---- ----
TEM $561 $700 $761
TCC 67 73 99
--- --- ---
Total general and
administrative costs $628 $773 $860
=== === ===
The General Partners, or TAS through October 1998, 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 and, prior to its liquidation, TAS are
entitled to an acquisition fee for any containers resold to the
Partnership.
At December 31, 1999 and 1998, due from affiliates, net, is comprised of:
1999 1998
---- ----
Due from affiliates:
Due from TEM........................... $581 $558
--- ---
Due to affiliates:
Due to TL.............................. 4 5
Due to TCC............................. 12 8
--- ---
16 13
--- ---
Due from affiliates, net $565 $545
=== ===
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 from 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 and $3 of interest expense on amounts due to the General
Partners for the years ended December 31, 1998 and 1997, respectively. The
Partnership did not incur any interest expense during the year ended
December 31, 1999.
Note 3. Rentals under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at December 31, 1999. 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 ending December 31,
2000.......................................... $1,330
2001.......................................... 313
2002.......................................... 246
2003.......................................... 21
2004.......................................... 2
-----
Total minimum future rentals receivable....... $1,912
=====
Note 4. Income Taxes
During 1999, 1998 and 1997, there were temporary differences of $37,311,
$30,110, and $21,904, respectively, between the financial statement
carrying value of certain assets and liabilities and the federal income
tax basis of such assets and liabilities. The reconciliation of net income
for financial statement purposes to net loss for federal income tax
purposes for the years ended December 31, 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements......................... $ 1,171 $ 3,697 $ 3,961
Increase (decrease) in provision for bad debt............... 128 (34) 118
Depreciation for federal income tax purposes in excess
of depreciation for financial statement purposes.......... (8,125) (8,494) (8,480)
Gain on sale of fixed assets for federal income tax
purposes in excess of gain/loss recognized for
financial statement purposes.............................. 662 265 104
Increase (decrease) in damage protection plan reserve....... 134 57 (21)
------ ------ -----
Net loss for federal income tax purposes.................... $(6,030) $ (4,509) $(4,318)
====== ====== =====
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no officers or directors.
As described in the Prospectus, the Registrant's three general partners are TCC,
TEM and TL. TCC is the Managing General Partner of the Partnership and TEM and
TL are Associate General Partners. The Managing General Partner and Associate
General Partners are collectively referred to as the General Partners. TCC, TEM
and TL are wholly-owned or substantially-owned subsidiaries of Textainer Group
Holdings Limited (TGH). The General Partners act in this capacity for other
limited partnerships. Prior to its liquidation in October 1998, Textainer
Acquisition Services Limited (TAS) was an affiliate of the General Partners and
performed services related to the acquisition of equipment outside the United
States on behalf of the Partnership. Effective November 1998, these services are
performed by TEM.
TCC, as the Managing General Partner, is responsible for managing the
administration and operation of the Registrant, and for the formulation and
administration of investment policies.
TEM, an Associate General Partner, manages all aspects of the operation of the
Registrant's equipment.
TL, an Associate General Partner, owns a fleet of container rental equipment,
which is managed by TEM. TL provides advice to the Partnership regarding
negotiations with financial institutions, manufacturers and equipment owners,
and regarding the terms upon which particular items of equipment are acquired.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires the Partnership's
General Partners, policy-making officials and persons who beneficially own more
than ten percent of the Units to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of these reports
must also be furnished to the Partnership.
Based solely on a review of the copies of such forms furnished to the
Partnership or on written representations that no forms were required to be
filed, the Partnership believes that with respect to its most recent fiscal year
ended December 31, 1999, all Section 16(a) filing requirements were complied
with. No member of management, or beneficial owner owned more than 10 percent of
any interest in the Partnership. None of the individuals subject to section
16(a) failed to file or filed late any reports of transactions in the Units.
The directors and executive officers of the General Partners are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Neil I. Jowell 66 Director and Chairman of TGH, TEM, TL, TCC and TFS
John A. Maccarone 55 President, CEO and Director of TGH, TEM, TL, TCC and TFS
James E. Hoelter 60 Director of TGH, TEM, TL, TCC and TFS
Alex M. Brown 61 Director of TGH, TEM, TL, TCC and TFS
Harold J. Samson 78 Director of TGH and TL
Philip K. Brewer 43 Senior Vice President - Asset Management Group
Robert D. Pedersen 41 Senior Vice President - Leasing Group, Director of TEM
Ernest J. Furtado 44 Senior Vice President , CFO and Secretary of TGH, TEM, TL, TCC and TFS,
Director of TCC and TFS
Wolfgang Geyer 46 Regional Vice President - Europe
Mak Wing Sing 42 Regional Vice President - South Asia
Masanori Sagara 44 Regional Vice President - North Asia
John. A. Lore 46 Regional Vice President - Americas
Stefan Mackula 47 Vice President - Equipment Resale
Anthony C. Sowry 47 Vice President - Corporate Operations and Acquisitions
Richard G. Murphy 47 Vice President - Risk Management
Janet S. Ruggero 51 Vice President - Administration and Marketing Services
Jens W. Palludan 49 Regional Vice President - Logistics Division
Isam K. Kabbani 65 Director of TGH and TL
James A. C. Owens 60 Director of TGH and TL
S. Arthur Morris 66 Director of TGH, TEM and TL
Dudley R. Cottingham 48 Assistant Secretary, Vice President and Director of TGH, TEM and TL
Nadine Forsman 32 Controller of TCC and TFS
</TABLE>
Neil I. Jowell is Director and Chairman of TGH, TEM, TL, TCC and TFS
and a member of the Investment Advisory Committee (see "Committees" below). He
has served on the Board of Trencor Ltd. since 1966 and as Chairman since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an affiliate
of Trencor, and a non-executive director of Forward Corporation Ltd. (1993 to
present). Trencor is a publicly traded diversified industrial group listed on
the Johannesburg Stock Exchange. Its business is the leasing, owning, managing
and financing of marine cargo containers worldwide and the manufacture and
export of containers for international markets. In South Africa, it is engaged
in manufacturing, trading and exports of general commodities. Trencor also has
an interest in Forward Corporation Ltd., a publicly traded holding company
listed on the Johannesburg Stock Exchange. It has interests in industrial and
consumer businesses operating in South Africa and abroad. Mr. Jowell became
affiliated with the General Partners and its affiliates when Trencor became,
through its beneficial ownership in two controlled companies, a major
shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience in the transportation industry. He holds an M.B.A. degree from
Columbia University and Bachelor of Commerce and L.L.B. degrees from the
University of Cape Town.
John A. Maccarone is President, CEO and Director of TGH, TEM, TL, TCC
and TFS. In this capacity he is responsible for overseeing the management of and
coordinating the activities of Textainer's worldwide fleet of marine cargo
containers and the activities of TCC and TFS. Additionally, he is Chairman of
the Equipment Investment Committee, the Credit Committee and the Investment
Advisory Committee (see "Committees", below). Mr. Maccarone was instrumental in
co-founding Intermodal Equipment Associates (IEA), a marine container leasing
company based in San Francisco, and held a variety of executive positions with
IEA from 1979 until 1987, when he joined the Textainer Group. Mr. Maccarone was
previously a Director of Marketing for Trans Ocean Leasing Corporation in Hong
Kong with responsibility for all leasing activities in Southeast Asia. From 1969
to 1977, Mr. Maccarone was a marketing representative for IBM Corporation. He
holds a Bachelor of Science degree in Engineering Management from Boston
University and an M.B.A. from Loyola University of Chicago.
James E. Hoelter is a director of TGH, TEM, TL, TCC and TFS. In
addition, Mr. Hoelter is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Mr. Hoelter was the
President and Chief Executive Officer of TGH and TL from 1993 to 1998 and
currently serves as a consultant to Trencor (1999 to present). Prior to joining
the Textainer Group in 1987, Mr. Hoelter was president of IEA. Mr. Hoelter
co-founded IEA in 1978 with Mr. Maccarone and was president from inception until
1987. From 1976 to 1978, Mr. Hoelter was vice president for Trans Ocean Ltd.,
San Francisco, a marine container leasing company, where he was responsible for
North America. From 1971 to 1976, he worked for Itel Corporation, San Francisco,
where he was director of financial leasing for the container division. Mr.
Hoelter received his B.B.A. in finance from the University of Wisconsin, where
he is an emeritus member of its Business School's Dean's Advisory Board, and his
M.B.A. from the Harvard Graduate School of Business Administration.
Alex M. Brown is a director of TGH, TEM, TL, TCC and TFS.
Additionally, he is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Among other
directorships, Mr. Brown is a director of Trencor Ltd. (1996 to present) and
Forward Corporation (1997 to present). Both companies are publicly traded
and listed on the Johannesburg Stock Exchange. Mr. Brown became affiliated
with the Textainer Group in April 1986. From 1987 until 1993, he was
President and Chief Executive Officer of Textainer, Inc. and the Chairman of
the Textainer Group. Mr. Brown was the managing director of Cross County
Leasing in England from 1984 until it was acquired by Textainer in 1986. From
1993 to 1997, Mr. Brown was Chief Executive Officer of AAF, a company
affiliated with Trencor Ltd. Mr. Brown was also Chairman of WACO International
Corporation, based in Cleveland, Ohio until 1997.
Harold J. Samson is a director of TGH and TL and is a member of the
Investment Advisory Committee (see "Committees", below). Mr. Samson served
as a consultant to various securities firms from 1981 to 1989. From 1974 to 1981
he was Executive Vice President of Foster & Marshall, Inc., a New York Stock
Exchange member firm based in Seattle. Mr. Samson was a director of IEA from
1979 to 1981. From 1957 to 1984 he served as Chief Financial Officer in several
New York Stock Exchange member firms. Mr. Samson holds a B.S. in Business
Administration from the University of California, Berkeley and is a
California Certified Public Accountant.
Philip K. Brewer was President of TCC and TFS from January 1, 1998 to
December 31, 1998 until his appointment as Senior Vice President - Asset
Management Group. As President of TCC, Mr. Brewer was responsible for overseeing
the management of, and coordinating the activities of TCC and TFS. As Senior
Vice President, he is responsible for optimizing the capital structure of and
identifying new sources of finance for Textainer, as well as overseeing the
management of and coordinating the activities of Textainer's risk management,
logistics and the resale divisions. Mr. Brewer is a member of the Equipment
Investment Committee, the Credit Committee and was a member of the Investment
Advisory Committee through December 31, 1998 (see "Committees" below). Prior to
joining Textainer in 1996, as Senior Vice President - Capital Markets for TGH
and TL, Mr. Brewer worked at Bankers Trust from 1990 to 1996, starting as a Vice
President in Corporate Finance and ending as Managing Director and Country
Manager for Indonesia; from 1989 to 1990, he was Vice President in Corporate
Finance at Jarding Fleming; from 1987 to 1989, he was Capital Markets Advisor to
the United States Agency for International Development; and from 1984 to 1987 he
was an Associate with Drexel Burnham Lambert in New York. Mr. Brewer holds an
M.B.A. in Finance from the Graduate School of Business at Columbia University,
and a B.A. in Economics and Political Science from Colgate University.
Robert D. Pedersen is Senior Vice-President - Leasing Group and a
Director of TEM, responsible for worldwide sales and marketing related
activities and operations. Mr. Pedersen is a member of the Equipment Investment
Committee and the Credit Committee (see "Committees" below). He joined Textainer
in 1991 as Regional Vice President for the Americas Region. Mr. Pedersen has
extensive experience in the industry having held a variety of positions with
Klinge Cool, a manufacturer of refrigerated container cooling units (from 1989
to 1991), where he was worldwide sales and marketing director, XTRA, a container
lessor (from 1985 to 1988) and Maersk Line, a container shipping line (from 1978
to 1984). Mr. Pedersen is a graduate of the A.P. Moller shipping and
transportation program and the Merkonom Business School in Copenhagen, majoring
in Company Organization.
Ernest J. Furtado is Senior Vice President, CFO and Secretary of TGH,
TEM, TL, TCC and TFS and a Director of TCC and TFS, in which capacity he is
responsible for all accounting, financial management, and reporting functions
for TGH, TEM, TL, TCC and TFS. Additionally, he is a member of the Investment
Advisory Committee for which he serves as Secretary, the Equipment Investment
Committee and the Credit Committee (see "Committees", below). Prior to these
positions, he held a number of accounting and financial management positions at
Textainer, of increasing responsibility. Prior to joining Textainer in May 1991,
Mr. Furtado was Controller for Itel Instant Space and manager of accounting for
Itel Containers International Corporation, both in San Francisco, from 1984 to
1991. Mr. Furtado's earlier business affiliations include serving as audit
manager for Wells Fargo Bank and as senior accountant with John F. Forbes & Co.,
both in San Francisco. He is a Certified Public Accountant and holds a B.S. in
business administration from the University of California at Berkeley and an
M.B.A. in information systems from Golden Gate University.
Wolfgang Geyer is based in Hamburg, Germany and is Regional Vice
President - Europe, responsible for coordinating all leasing activities in this
area of operation. Mr. Geyer joined Textainer in 1993 and was the Marketing
Director in Hamburg through July 1997. From 1991 to 1993, Mr. Geyer most
recently was the Senior Vice President for Clou Container Leasing, responsible
for its worldwide leasing activities. Mr. Geyer spent the remainder of his
leasing career, 1975 through 1991, with Itel Container, during which time he
held numerous positions in both operations and marketing within the company.
Mak Wing Sing is based in Singapore and is the Regional Vice President
- - South Asia, responsible for container leasing activities in North/Central
People's Republic of China, Hong Kong, South China (PRC), and Southeast Asia.
Mr. Mak most recently was the Regional Manager, Southeast Asia, for Trans Ocean
Leasing, working there from 1994 to 1996. From 1987 to 1994, Mr. Mak worked with
Tiphook as their Regional General Manager, and with OOCL from 1976 to 1987 in a
variety of positions, most recently as their Logistics Operations Manager.
Masanori Sagara is based in Yokohama, Japan and is the Regional Vice
President - North Asia, responsible for container leasing activities in Japan,
Korea, and Taiwan. Mr. Sagara joined Textainer in 1990 and was the company's
Marketing Director in Japan through 1996. From 1987 to 1990, he was the
Marketing Manager at IEA. Mr. Sagara's other experience in the container leasing
business includes marketing management at Genstar from 1984 to 1987 and various
container operations positions with Thoresen & Company from 1979 to 1984. Mr.
Sagara holds a Bachelor of Science degree in Economics from Aoyama Bakuin
University.
John A. Lore is based in Hackensack, New Jersey and is the Regional
Vice President - Americas, responsible for container leasing activities in
North/South America, Australia/New Zealand, Africa, the Middle East and Persian
Gulf. Prior to joining Textainer in 1999, Mr. Lore was the America's Vice
President for Xtra International Limited from 1996 to 1999 and Area Director
from 1990 to 1996. He has held various positions within the container leasing
industry since 1978. Mr. Lore holds a B.B.A. in Marketing Management from Baruch
College and an M.B.A. in Executive Management from St. John's University.
Stefan Mackula is Vice President - Equipment Resale, responsible for
coordinating the worldwide sale of equipment into secondary markets. Mr. Mackula
also served as Vice President - Marketing from 1989 to 1991 where he was
responsible for coordinating all leasing activities in Europe, Africa, and the
Middle East. Mr. Mackula joined Textainer in 1983 as Leasing Manager for the
United Kingdom. Prior to joining Textainer, Mr. Mackula held, beginning in 1972,
a variety of positions in the international container shipping industry.
Anthony C. Sowry is Vice President - Corporate Operations and
Acquisitions. He is also a member of the Equipment Investment Committee and the
Credit Committee (see "Committees", below). Mr. Sowry supervises all
international container operations and maintenance and technical functions for
the fleets under Textainer's management. In addition, he is responsible for the
acquisition of all new and used containers for the Textainer Group. He began his
affiliation with Textainer in 1982, when he served as Fleet Quality Control
Manager for Textainer Inc. until 1988. From 1980 to 1982, he was operations
manager for Trans Container Services in London; and from 1978 to 1982, he was a
technical representative for Trans Ocean Leasing, also in London. He received
his B.A. degree in business management from the London School of Business. Mr.
Sowry is a member of the Technical Committee of the International Institute of
Container Lessors and a certified container inspector.
Richard G. Murphy is Vice President, Risk Management, responsible for
all credit and risk management functions. He also supervises the administrative
aspects of equipment acquisitions. He is a member of and acts as secretary to
the Equipment Investment and Credit Committees (see "Committees", below). He
previously served as TEM's Director of Credit and Risk Management from 1989 to
1991 and as Controller from 1988 to 1989. Prior to the takeover of the
management of the Interocean Leasing Ltd. fleet by TEM in 1988, Mr. Murphy held
various positions in the accounting and financial areas with that company from
1980, acting as Chief Financial Officer from 1984 to 1988. Prior to 1980, he
held various positions with firms of public accountants in the U.K. Mr. Murphy
is an Associate of the Institute of Chartered Accountants in England and Wales
and holds a Bachelor of Commerce degree from the National University of Ireland.
Janet S. Ruggero is Vice President, Administration and Marketing
Services. Ms. Ruggero is responsible for the tracking and billing of fleets
under TEM management, including direct responsibility for ensuring that all data
is input in an accurate and timely fashion. She assists the marketing and
operations departments by providing statistical reports and analyses and serves
on the Credit Committee (see "Committees", below). Prior to joining Textainer in
1986, Ms. Ruggero held various positions with Gelco CTI over the course of 15
years, the last one as Director of Marketing and Administration for the North
American Regional office in New York City. She has a B.A. in education from
Cumberland College.
Jens W. Palludan is based in Hackensack, New Jersey and is the
Regional Vice President - Logistics Division, responsible for coordinating
container logistics. He joined Textainer in 1993 as Regional Vice President -
Americas/Africa/Australia, responsible for coordinating all leasing activities
in North and South America, Africa and Australia/New Zealand. Mr. Palludan
spent his career from 1969 through 1992 with Maersk Line of Copenhagen, Denmark
in a variety of key management positions in both Denmark and overseas. Mr.
Palludan's most recent position at Maersk was that of General Manager,
Equipment and Terminals, where he was responsible for the entire managed fleet.
Mr. Palludan holds an M.B.A. from the Centre European D'Education Permanente,
Fontainebleau, France.
Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal stockholder of the IKK Group, Jeddah, Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and internationally. In
1959 Sheikh Isam Kabbani joined the Saudi Arabian Ministry of Foreign Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum Exporting Countries
(OPEC). After a period as Chief Economist of OPEC, in 1967 he became the Saudi
Arabian member of OPEC's Board of Governors. In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 18 years. Sheikh Kabbani holds
a B.A. degree from Swarthmore College, Pennsylvania, and an M.A. degree in
Economics and International Relations from Columbia University.
James A. C. Owens is a director of TGH and TL. Mr. Owens has been
associated with the Textainer Group since 1980. In 1983 he was appointed to
the Board of Textainer Inc., and served as President of Textainer Inc. from
1984 to 1987. From 1987 to 1998, Mr. Owens served as an alternate director on
the Boards of TI, TGH and TL. Apart from his association with the Textainer
Group, Mr. Owens has been involved in insurance and financial brokerage
companies and captive insurance companies. He is a member of a number of Boards
of Directors. Mr. Owens holds a Bachelor of Commerce degree from the University
of South Africa.
S. Arthur Morris is a director of TGH, TEM and TL. He is a founding
partner in the firm of Morris and Kempe, Chartered Accountants (1962-1977) and
currently functions as a correspondent member of a number of international
accounting firms through his firm Arthur Morris and Company (1977 to date). He
is also President and director of Continental Management Limited (1977 to date).
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Morris has over 30 years
experience in public accounting and serves on numerous business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr. Morris
became a director of TL and TGH in 1993, and TEM in 1994.
Dudley R. Cottingham is Assistant Secretary, Vice President and a
director of TGH, TEM and TL. He is a partner with Arthur Morris and Company
(1977 to date) and a Vice President and director of Continental Management
Limited (1978 to date), both in the Cayman Islands and Turks and Caicos Islands.
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Cottingham has over 20 years
experience in public accounting with responsibility for a variety of
international and local clients. Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.
Nadine Forsman is the Controller of TCC and TFS. Additionally, she is a
member of the Investment Advisory Committee and Equipment Investment Committee
(See "Committees" below). As controller of TCC and TFS, she is responsible for
accounting, financial management and reporting functions for TCC and TFS as well
as overseeing all communications with the Limited Partners and as such,
supervises personnel in performing these functions. Prior to joining Textainer
in August 1996, Ms. Forsman was employed by KPMG LLP, holding various positions,
the most recent of which was manager, from 1990 to 1996. Ms. Forsman holds a
B.S. in Accounting and Finance from San Francisco State University and holds a
general securities license and a financial and operations principal securities
license.
Committees
The Managing General Partner has established the following three
committees to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of equipment for
the Partnership and for other programs organized by the Textainer Group:
Equipment Investment Committee. The Equipment Investment Committee
will review the equipment leasing operations of the Partnership on a regular
basis with emphasis on matters involving equipment purchases, the equipment mix
in the Partnership's portfolio, equipment remarketing issues, and decisions
regarding ultimate disposition of equipment. The members of the committee
are John A. Maccarone (Chairman), James E. Hoelter, Anthony C. Sowry, Richard
G. Murphy (Secretary), Alex M. Brown, Philip K. Brewer, Robert D. Pedersen,
Ernest J. Furtado and Nadine Forsman.
Credit Committee. The Credit Committee will establish credit limits
for every lessee and potential lessee of equipment and periodically review
these limits. In setting such limits, the Credit Committee will consider such
factors as customer trade routes, country, political risk, operational history,
credit references, credit agency analyses, financial statements, and other
information. The members of the Credit Committee are John A. Maccarone
(Chairman), Richard G. Murphy (Secretary), Janet S. Ruggero, Anthony C. Sowry,
Philip K. Brewer, Ernest J. Furtado and Robert D. Pedersen.
Investment Advisory Committee. The Investment Advisory Committee will
review investor program operations on at least a quarterly basis, emphasizing
matters related to cash distributions to investors, cash flow management,
portfolio management, and liquidation. The Investment Advisory Committee is
organized with a view to applying an interdisciplinary approach, involving
management, financial, legal and marketing expertise, to the analysis of
investor program operations. The members of the Investment Advisory Committee
are John A. Maccarone (Chairman), James E. Hoelter, Ernest J. Furtado
(Secretary), Nadine Forsman, Harold J. Samson, Alex M. Brown and Neil I. Jowell.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has no executive officers and does not reimburse TCC, TEM or TL
for the remuneration payable to their executive officers. For information
regarding reimbursements made by the Registrant to the General Partners, see
note 2 of the Financial Statements in Item 8.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
There is no person or "Group" who is known to the Registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership interest in the Registrant.
(b) Security Ownership of Management
As of January 1, 2000:
Number
Name of Beneficial Owner Of Units % All Units
-------- ---------
Ernest J. Furtado...................... 600 0.0135%
James E. Hoelter....................... 1,370 0.0308%
----- -------
Officers and Management as a Group..... 1,970 0.0443%
===== =======
(c) Changes in control.
Inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Amounts in thousands)
(a) Transactions with Management and Others.
At December 31, 1999 and 1998, due from affiliates, net, is comprised
of:
1999 1998
---- ----
Due from affiliates:
Due from TEM................................ $581 $558
--- ---
Due to affiliates:
Due to TL................................... 4 5
Due to TCC.................................. 12 8
--- ---
16 13
--- ---
Due from affiliates, net $565 $545
=== ===
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 and in the accrual and remittance of
net rental revenues from 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 and $3 of interest expense on amounts due to the General
Partners for the years ended December 31, 1998 and 1997, respectively.
The Partnership did not incur interest expense during the year ended
December 31, 1999.
In addition, the Registrant paid or will pay the following amounts to
the General Partners or TAS:
Acquisition fees in connection with the purchase of containers on
behalf of the Registrant:
1999 1998 1997
---- ---- ----
TAS.................... $ - $ 1 $ 68
TEM.................... - 16 -
--- ---- ---
Total.................. $ - $ 17 $ 68
=== ==== ===
Management fees in connection with the operations of the Registrant:
1999 1998 1997
---- ---- ----
TEM.................... $1,109 $1,315 $1,328
===== ===== =====
Reimbursement for administrative costs in connection with the
operations of the Registrant:
1999 1998 1997
---- ---- ----
TEM.................... $ 561 $ 700 $ 761
TCC.................... 67 73 99
--- --- ---
Total.................. $ 628 $ 773 $ 860
=== === ===
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Management" and "Compensation of the General Partners and Affiliates"
sections of the Registrant's Prospectus, as supplemented, and the Notes to the
Financial Statements in Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Audited financial statements of the Registrant for the year
ended December 31, 1999 are contained in Item 8 of this
Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary
Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference.
(i) The Registrant's Prospectus as contained in
Pre-Effective Amendment No. 3 to the Registrant's
Registration Statement (No. 33-71944), as filed with
the Commission on April 8, 1994, as supplemented by
Post Effective Amendment No. 2 as filed under Section
8(c) of the Securities Exchange Act of 1993 on May 5,
1996 and Supplement No. 5 as filed under Rule 424(b)
of the Securities Exchange Act of 1933 on March 18,
1996.
(ii) The Registrant's limited partnership agreement, Exhibit A
to the Prospectus.
(b) During the year ended 1999, no reports on Form 8-K have been filed by the
Registrant.
<PAGE>
Independent Auditors' Report on Supplementary Schedule
The Partners
Textainer Equipment Income Fund V, L.P.:
Under the date of February 18, 2000, we reported on the balance sheets of
Textainer Equipment Income Fund V, L.P. (the Partnership) as of December 31,
1999 and 1998, and the related statements of earnings, partners' capital and
cash flows for each of the years in the three-year period ended December 31,
1999, which are included in the 1999 annual report on Form 10-K. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule as listed in Item 14. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
San Francisco, California
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Schedule II - Valuation and Qualifying Accounts
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------------
Charged Balance
Balance at to Costs Charged at End
Beginning and to Other of
of Period Expenses Accounts Deduction Period
--------- -------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1999:
Allowance for
doubtful accounts $ 353 $ 164 $ - $ (36) $ 481
---- ---- ----- ------ ----
Recovery cost reserve $ 132 $ 119 $ - $ (79) $ 172
---- ---- ----- ------ ----
Damage protection
plan reserve $ 397 $ 581 $ - $ (447) $ 531
---- ---- ----- ------ ----
For the year ended December 31, 1998:
Allowance for
doubtful accounts $ 387 $ 5 $ - $ (39) $ 353
---- ---- ----- ------ ----
Recovery cost reserve $ 89 $ 178 $ - $ (135) $ 132
---- ---- ----- ------ ----
Damage protection
plan reserve $ 340 $ 331 $ - $ (274) $ 397
---- ---- ----- ------ ----
For the year ended December 31, 1997:
Allowance for
doubtful accounts $ 269 $ 116 $ 2 $ - $ 387
---- ---- ----- ------ ----
Recovery cost reserve $ 54 $ 182 $ - $ (147) $ 89
---- ---- ----- ------ ----
Damage protection
plan reserve $ 361 $ 248 $ - $ (269) $ 340
---- ---- ----- ------ ----
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 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:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
___________________________ Senior Vice President, CFO March 28, 2000
Ernest J. Furtado (Principal Financial and
Accounting Officer),
Secretary and Director
___________________________ President (Principal Executive March 28, 2000
John A. Maccarone Officer), and Director
___________________________ Chairman of the Board and Director March 28, 2000
Neil I. Jowell
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 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:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Ernest J. Furtado
_____________________________ Senior Vice President, CFO March 28, 2000
Ernest J. Furtado (Principal Financial and
Accounting Officer),
Secretary and Director
/s/John A. Maccarone
_____________________________ President (Principal Executive March 28, 2000
John A. Maccarone (Officer), and Director
/s/Neil I. Jowell
_____________________________ Chairman of the Board and Director March 28, 2000
Neil I. Jowell
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
1999 Textainer Equipment Income Fund V 10K
</LEGEND>
<CIK> 0000915194
<NAME> Textainer Equipment Income Fund V, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,405
<SECURITIES> 0
<RECEIVABLES> 3,709
<ALLOWANCES> 481
<INVENTORY> 0
<CURRENT-ASSETS> 13
<PP&E> 78,397
<DEPRECIATION> 22,819
<TOTAL-ASSETS> 60,224
<CURRENT-LIABILITIES> 1,321
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 58,903
<TOTAL-LIABILITY-AND-EQUITY> 60,224
<SALES> 0
<TOTAL-REVENUES> 12,031
<CGS> 0
<TOTAL-COSTS> 10,779
<OTHER-EXPENSES> 81
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,171
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,171
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
