TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 11, 2000
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund V,
L.P. (the "Partnership") the Partnership's Quarterly Report on Form 10-Q for the
Second Quarter ended June 30, 2000.
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-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 0-25946
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
(Exact name of Registrant as specified in its charter)
California 93-1122553
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 California Street, 16th Floor
San Francisco, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 2000
Table of Contents
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Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 2000 (unaudited) and
December 31, 1999................................................................................. 3
Statements of Operations for the three and six months
ended June 30, 2000 and 1999 (unaudited).......................................................... 4
Statements of Partners' Capital for the six months
ended June 30, 2000 and 1999 (unaudited).......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 (unaudited).......................................................... 6
Notes to Financial Statements (unaudited)......................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................... 11
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 2000 and December 31, 1999
(Amounts in thousands)
------------------------------------------------------------------------------------------------------------
2000 1999
--------------- -------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $24,983 (1999: $22,819) (note 4) $ 53,523 $ 55,441
Cash 2,567 1,405
Accounts receivable, net of allowance
for doubtful accounts of $332 (1999: $481) 3,036 2,800
Due from affiliates, net (note 2) 366 565
Prepaid expenses 4 13
--------------- -------------
$ 59,496 $ 60,224
=============== =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 311 $ 319
Accrued liabilities 267 218
Accrued recovery costs 186 172
Accrued damage protection plan costs 610 531
Container purchases payable 609 -
Deferred quarterly distributions 81 81
--------------- -------------
Total liabilities 2,064 1,321
--------------- -------------
Partners' capital:
General partners 36 38
Limited partners 57,396 58,865
--------------- -------------
Total partners' capital 57,432 58,903
--------------- -------------
$ 59,496 $ 60,224
=============== =============
See accompanying notes to financial statements
</TABLE>
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Operations
For the three and six months ended June 30, 2000 and 1999
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Six months Six months
Ended Ended Ended Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Rental income $ 3,199 $ 2,871 $ 6,342 $ 5,792
---------------- ----------------- ---------------- ----------------
Costs and expenses:
Direct container expenses 731 1,227 1,492 2,252
Bad debt (benefit) expense (155) (4) (139) 90
Depreciation 1,170 1,184 2,342 2,374
Professional fees 24 12 44 21
Management fees to affiliates (note 2) 289 266 575 542
General and administrative costs to
affiliates (note 2) 158 167 312 369
Other general and administrative costs 30 56 54 95
---------------- ----------------- ---------------- ----------------
2,247 2,908 4,680 5,743
---------------- ----------------- ---------------- ----------------
Income (loss) from operations 952 (37) 1,662 49
---------------- ----------------- ---------------- ----------------
Other income (expense):
Interest income 36 18 63 34
Loss on sale of containers (22) (71) (45) (135)
---------------- ----------------- ---------------- ----------------
14 (53) 18 (101)
---------------- ----------------- ---------------- ----------------
Net earnings (loss) $ 966 $ (90) $ 1,680 $ (52)
================ ================= ================ ================
Allocation of net earnings (loss) (note 2):
General partners $ 17 $ 14 $ 31 $ 32
Limited partners 949 (104) 1,649 (84)
---------------- ----------------- ---------------- ----------------
$ 966 $ (90) $ 1,680 $ (52)
================ ================= ================ ================
Limited partners' per unit share
of net earnings (loss) $ 0.21 $ (0.02) $ 0.37 $ (0.02)
================ ================= ================ ================
Limited partners' per unit share
of distributions $ 0.35 $ 0.35 $ 0.70 $ 0.75
================ ================= ================ ================
Weighted average number of limited
partnership units outstanding 4,454,893 4,454,893 4,454,893 4,454,893
================ ================= ================ ================
See accompanying notes to financial statements
</TABLE>
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 2000 and 1999
(Amounts in thousands)
(unaudited)
---------------------------------------------------------------------------------------------------------------------
Partners' Capital
-----------------------------------------------------
General Limited Total
------------ ------------ ------------
<S> <C> <C> <C>
Balances at January 1, 1999 $ 44 $ 64,215 $ 64,259
Distributions (35) (3,341) (3,376)
Net loss 32 (84) (52)
------------ ------------ ------------
Balances at June 30, 1999 $ 41 $ 60,790 $ 60,831
============ ============ ============
Balances at January 1, 2000 $ 38 $ 58,865 $ 58,903
Distributions (33) (3,118) (3,151)
Net earnings 31 1,649 1,680
------------ ------------ ------------
Balances at June 30, 2000 $ 36 $ 57,396 $ 57,432
============ ============ ============
See accompanying notes to financial statements
</TABLE>
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 2000 and 1999
(Amounts in thousands)
(unaudited)
--------------------------------------------------------------------------------------------------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,680 $ (52)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation 2,342 2,374
(Decrease) increase in allowance for doubtful accounts (149) 68
Write-off of organization costs - 35
Loss on sale of containers 45 135
(Increase) decrease in assets:
Accounts receivable 15 121
Due from affiliates, net 247 137
Prepaid expenses 9 13
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 41 62
Accrued recovery costs 14 23
Damage protection plan costs 79 80
---------------- ---------------
Net cash provided by operating activities 4,323 2,996
---------------- ---------------
Cash flows from investing activities:
Proceeds from sale of containers 205 398
Container purchases (215) (11)
---------------- ---------------
Net cash (used in) provided by investing activities (10) 387
---------------- ---------------
Cash flows from financing activities:
Distributions to partners (3,151) (3,389)
---------------- ---------------
Net cash used in financing activities (3,151) (3,389)
---------------- ---------------
Net increase (decrease) in cash 1,162 (6)
Cash at beginning of period 1,405 1,009
---------------- ---------------
Cash at end of period $ 2,567 $ 1,003
================ ===============
See accompanying notes to financial statements
</TABLE>
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<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 2000 and 1999
(Amounts in thousands)
(unaudited)
-------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers which had not been paid or
received as of June 30, 2000 and 1999, and December 31, 1999 and 1998, resulting
in differences in amounts recorded and amounts of cash disbursed or received by
the Partnership, as shown in the Statements of Cash Flows for the six-month
periods ended June 30, 2000 and 1999.
June 30 Dec. 31 June 30 Dec. 31
2000 1999 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Container purchases included in:
Container purchases payable.................... $609 $ - $ - $ -
Distributions to partners included in:
Due to affiliates.............................. 6 6 6 6
Deferred quarterly distributions............... 81 81 81 94
Proceeds from sale of containers included in:
Due from affiliates............................ 134 86 120 167
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers recorded by the Partnership and
the amounts paid or received as shown in the Statements of Cash Flows for the
six-month periods ended June 30, 2000 and 1999.
2000 1999
----- -----
Container purchases recorded...................................................... $ 824 $ 11
Container purchases paid.......................................................... 215 11
Distributions to partners declared................................................ 3,151 3,376
Distributions to partners paid.................................................... 3,151 3,389
Proceeds from sale of containers recorded......................................... 253 351
Proceeds from sale of containers received......................................... 205 398
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying value of containers transferred during the six-month period ended
June 30, 2000 was $102. There were no direct finance leases entered into during
the six-month period ended June 30, 1999.
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Notes To Financial Statements
For the three and six months ended June 30, 2000 and 1999
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
--------------------------------------------------------------------------------
Note 1. General
Textainer Equipment Income Fund V, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1993.
The Partnership owns a fleet of intermodal marine cargo containers which
are leased to international shipping lines.
The accompanying interim financial statements have not been audited by an
independent public accountant. However, all adjustments (which were only
normal and recurring adjustments), which are, in the opinion of
management, necessary to fairly present the financial position of the
Partnership as of June 30, 2000 and December 31, 1999 and the results of
its operations, changes in partners' capital, and cash flows for the
six-month periods ended June 30, 2000 and 1999, have been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and other accompanying notes
included in the Partnership's audited financial statements as of December
31, 1999, in the Annual Report filed on Form 10-K.
Certain estimates and assumptions were made by the Partnership's
management that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Note 2. Transactions with Affiliates
Textainer Capital Corporation (TCC) is the managing general partner, and
Textainer Equipment Management Limited (TEM) and Textainer Limited (TL)
are the associate general partners of the Partnership. The managing
general partner and the associate general partners are collectively
referred to as the General Partners and are commonly owned by Textainer
Group Holdings Limited (TGH). The General Partners also act in this
capacity for other limited partnerships. The General Partners manage and
control the affairs of the Partnership.
In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings and creates a deficit
in a General Partner's capital account, the Partnership Agreement provides
for a special allocation of gross income equal to the amount of the
deficit to be made to the General Partners.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an acquisition fee, an equipment management fee, an
incentive management fee and an equipment liquidation fee. These fees are
for various services provided in connection with the administration and
management of the Partnership. The Partnership capitalized $39 of
container acquisition fees as a component of container costs during the
six-month period ended June 30, 2000. No acquisition fees were incurred
during the six-month period ended June 30, 1999. The Partnership incurred
$66 and $131 of incentive management fees during the three and six-month
periods ended June 30, 2000, respectively, and $66 and $138, respectively,
for the comparable periods in 1999. No equipment liquidation fees were
incurred during these periods.
The Partnership's container fleet is managed by TEM. In its role as
manager, TEM has authority to acquire, hold, manage, lease, sell and
dispose of the Partnership's containers. TEM holds, for the payment of
direct operating expenses, a reserve of cash that has been collected from
leasing operations; such cash is included in due from affiliates, net at
June 30, 2000 and December 31, 1999.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. These fees
totaled $223 and $444 for the three and six-month periods ended June 30,
2000, respectively, and $200 and $404, respectively, for the comparable
periods in 1999. The Partnership's container fleet is leased by TEM to
third party lessees on operating master leases, spot leases, term leases
and direct finance leases. The majority of the container fleet is leased
under operating master leases with limited terms and no purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are incurred and paid by TCC and TEM. General and
administrative costs allocated to the Partnership during the three and
six-month periods ended June 30, 2000 and 1999 were as follows:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Salaries $ 81 $ 90 $164 $197
Other 77 77 148 172
--- --- --- ---
Total general and
administrative costs $158 $167 $312 $369
=== === === ===
TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed containers to the total
container fleet managed by TEM during the period. TCC allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TCC. The General
Partners allocated the following general and administrative costs to the
Partnership during the three and six-month periods ended June 30, 2000 and
1999:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
TEM $135 $149 $268 $330
TCC 23 18 44 39
--- --- --- ---
Total general and
administrative costs $158 $167 $312 $369
=== === === ===
The General Partners may acquire containers in their own name and hold
title on a temporary basis for the purpose of facilitating the acquisition
of such containers for the Partnership. The containers may then be resold
to the Partnership on an all-cash basis at a price equal to the actual
cost, as defined in the Partnership Agreement. In addition, the General
Partners are entitled to an acquisition fee for any containers resold to
the Partnership.
At June 30, 2000 and December 31, 1999, due from affiliates, net is
comprised of:
2000 1999
---- ----
Due from affiliates:
Due from TEM........................... $416 $581
--- ---
Due to affiliates:
Due to TCC............................. 46 12
Due to TL.............................. 4 4
--- ---
50 16
--- ---
Due from affiliates, net $366 $565
=== ===
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and remittance of expenses
and fees described above and in the accrual and remittance of net rental
revenues and sales proceeds from TEM.
<PAGE>
Note 3. Rentals Under Long-Term Operating Leases
The following are the future rent receivables under cancelable long-term
operating leases at June 30, 2000. Although the leases are generally
cancelable with a penalty at the end of each twelve-month period, the
following schedule assumes that the leases will not be terminated.
Year ending June 30:
2001............................................... $648
2002............................................... 203
2003............................................... 79
2004............................................... 7
---
Total future rentals receivable.................... $937
===
Note 4. Container Rental Equipment
New container prices steadily declined from 1995 through 1999. Although
container prices began increasing in 2000, the cost of new containers at
year-end 1998, during 1999 and the first half of 2000 was significantly
less than the average cost of containers purchased in prior years. The
Partnership evaluated the recoverability of the recorded amount of
container rental equipment for containers to be held for continued use as
well as for containers identified for sale in the ordinary course of
business. Based on this evaluation, the Partnership determined that
reductions to the carrying value of these containers was not required
during the six-month periods ended June 30, 2000 and 1999.
The Partnership will continue to evaluate the recoverability of recorded
amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may
be required in future periods for some or all of its container rental
equipment.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
--------------------------------------------------------------------------------
The Financial Statements contain information, which will assist in evaluating
the financial condition of the Partnership as of and for the three and six-month
periods ended June 30, 2000 and 1999. Please refer to the Financial Statements
and Notes thereto in connection with the following discussion.
Liquidity and Capital Resources
From May 1, 1994 until April 29, 1996, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $5,000 on August 23, 1994 and on April 29, 1996 the
Partnership's offering of limited partnership interests was closed at $89,305.
From time to time, the Partnership redeems units from limited partners for a
specified redemption value, which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the six-month period ended June 30, 2000,
the Partnership did not redeem any units.
The Partnership invests working capital, cash flow from operations prior to its
distribution to the partners and proceeds from container sales that have not
been used to purchase containers in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
Limited partners are currently receiving monthly distributions in an annualized
amount equal to 7% of their original investment. During the six-month period
ended June 30, 2000, the Partnership declared cash distributions to limited
partners pertaining to the period from December 1999 through May 2000, in the
amount of $3,118. On a cash basis, all of these distributions were from current
year operating activities. On a GAAP basis, $1,469 of these distributions was a
return of capital and the balance was from net earnings.
At June 30, 2000, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the six-month periods ended June
30, 2000 and 1999 was $4,323 and $2,996, respectively. The increase of $1,327,
or 44%, was primarily attributable to the increase in net earnings, adjusted for
non-cash transactions. Net earnings, adjusted for non-cash transactions,
increased primarily due to the decrease in direct container expenses and the
increase in rental income. The reasons for these fluctuations are discussed in
"Results of Operations".
For the six-month periods ended June 30, 2000 net cash used in investing
activities (the purchase and sale of containers) was $10, compared to net cash
provided by investing activities of $387, for the comparable period in 1999. The
fluctuation of $397 was primarily due to the increase in container purchases and
the decrease in proceeds from container sales. Container purchases increased
primarily due to the increase in cash available for container purchases. The
decrease in proceeds from container sales was primarily due to the Partnership
selling fewer damaged containers located in low demand locations during the
six-month period ended June 30, 2000 than the same period in 1999. The sales
prices received on container sales decreased slightly as a result of current
market conditions, which have adversely affected the value of used containers.
Until conditions improve in these low demand locations, the Partnership plans to
continue to sell damaged containers there and may sell other containers as well.
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.
Proceeds from container sales will fluctuate based on the number of containers
sold and the actual price received on the sale. Sales proceeds will affect the
rate of reinvestment in containers.
The rate of reinvestment is also affected by cash from operations available for
reinvestment. Subject to the General Partners' discretion, cash from operations
available for reinvestment is generally equal to cash provided by operating
activities less distributions and redemptions paid. Distributions and
redemptions are determined by the General Partners in accordance with the
Partnership Agreement. Consistent with its investment objectives and subject to
its distribution policy, the Partnership intends to continue to reinvest cash
from operations available for reinvestment and all or a significant amount of
the proceeds from container sales in additional containers. Although there has
been some recent improvement in market conditions, overall existing market
conditions have had and may continue to have an adverse effect on the amount of
cash provided by operations that is available for the purchase of additional
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. 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 six-month periods ended June 30, 2000 and 1999, as
well as certain other factors as discussed below. The following is a summary of
the container fleet (in units) available for lease during those periods:
2000 1999
------ ------
Beginning container fleet............... 23,810 24,165
Ending container fleet.................. 24,000 23,968
Average container fleet................. 23,905 24,067
The decline in the average container fleet of 1% from the six-month period ended
June 30, 1999 to the comparable period in 2000 was due to the Partnership having
sold more containers than it purchased since June 30, 1999. 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 in the future, sales proceeds
are not likely to be sufficient to replace all of the containers sold. This
trend, which is expected to continue, has contributed to a slower rate of
reinvestment than had been expected by the General Partners. Other factors
related to this trend are discussed above in "Liquidity and Capital Resources".
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 82% and 74% during the six-month periods ended
June 30, 2000 and 1999, respectively. In addition, rental income is affected by
daily rental rates.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 2000 and 1999.
The Partnership's income from operations for the six-month periods ending June
30, 2000 and 1999 was $1,662 and $49, respectively, on rental income of $6,342
and $5,792, respectively. The increase in rental income of $550, or 9%, from the
six-month period ended June 30, 1999 to the comparable period in 2000 was
primarily attributable to the increase in container rental income. Income from
container rentals, the major component of total revenue, increased $551, or 11%,
primarily due to the increase in the average on-hire utilization of 11%.
The improvement in utilization was due to improvements in demand for leased
containers and in the trade balance, primarily as a result of the improvement in
certain Asian economies and a related increase in exports out of Europe. This
improvement in demand, coupled with container lessors' efforts to sell older
containers in low demand locations, has also reduced the container surplus.
However, the trade imbalance between Asia and North America still exists, and as
a consequence, the build-up of containers, primarily on the East Coast of the
United States, persists. The Partnership has been unable to reposition a large
number of newer containers to higher demand locations in Asia, due to lack of
available vessel capacity from the United States East Coast ports.
As a result, the Partnership continues to sell some containers located in low
demand locations, but primarily only those containers with significant damage.
The average sales price for used containers has decreased, partly due to the
trade imbalance and the accompanying build up of containers in low demand
locations. Other Partnerships managed by the General Partners have recorded
write-downs and losses on certain older containers, many of which were located
in these low demand locations. There have been no such losses or write-downs
recorded by the Partnership primarily due to the young age of the Partnership's
container fleet. Sales by the Partnership in these low demand locations have
been generally limited to damaged containers. However, as the container fleet
ages, the Partnership may incur losses and/or write-downs on the sale of its
older containers located in low demand locations if existing market conditions
continue. Additionally, should the decline in economic value of continuing to
own such containers turn out to be permanent, the Partnership may be required to
increase its depreciation rate or write-down the value for some or all of its
container rental equipment.
The decline in the purchase price of new containers and the container surplus
mentioned above have resulted in the decline in rental rates in recent years.
However, as a result of the improvement in demand and increases in the purchase
price of new containers, rental rates have stabilized during the first half of
2000.
The General Partners are cautiously optimistic that rental rates will remain
stable and the current level of utilization will be maintained during 2000 and
may improve if demand for leased containers and the trade balance continue to
improve. However, the General Partners caution that utilization, lease rates and
container sale prices could also decline, adversely affecting the Partnership's
operating results.
The balance of other rental income consists of other lease-related items,
primarily income from charges to lessees for dropping off containers in surplus
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income from charges to lessees for handling and
returning containers (handling income) and income from charges to lessees for a
Damage Protection Plan (DPP). For the six-month period ended June 30, 2000, the
total of these other rental income items was $630, a decrease of $1 from the
equivalent period in 1999. The decrease was primarily due to the decrease in
location income of $56, offset by the increase in DPP income of $48. Location
income decreased primarily due to a decrease in charges to lessees for dropping
off containers in certain locations, offset by a decrease in credits granted to
lessees for picking up containers from surplus locations. DPP income increased
primarily due to an increase in the number of containers covered by DPP.
Direct container expenses decreased $760, or 34%, from the six-month period
ending June 30, 1999 to the equivalent period in 2000, primarily due to the
decreases in repositioning and storage expenses of $352 and $301, respectively.
Repositioning expense decreased primarily due to the decrease in the number of
containers repositioned, offset by an increase in the average cost of
repositioning containers due to the high demand for limited vessel capacity
noted above. Storage expense decreased due to the increase in average
utilization and a decrease in the average storage cost per container.
Bad debt expense decreased from an expense of $90 for the six-month period ended
June 30, 1999, to a benefit of $139 for the comparable period in 2000. The
benefit recorded for the six-month period ended June 30, 2000 was primarily due
to an overall lower required reserve at June 30, 2000 than at December 31, 1999.
Depreciation expense decreased $32, or 1%, from the six-month period ended June
30, 1999 to the comparable period in 2000 due to the decrease in fleet size.
New container prices steadily declined from 1995 through 1999. Although
container prices began increasing in 2000, the cost of new containers at
year-end 1998, during 1999 and the first half of 2000 was significantly less
than the average cost of containers purchased in prior years. The Partnership
evaluated the recoverability of the recorded amount of container rental
equipment for containers to be held for continued use as well as for containers
identified for sale in the ordinary course of business. Based on this
evaluation, the Partnership determined that reductions to the carrying value of
these containers was not required during the six-month periods ended June 30,
2000 and 1999. The Partnership will continue to evaluate the recoverability of
recorded amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may be
required in future periods for some or all of its container rental equipment.
Management fees to affiliates increased $33, or 6%, from the six-month period
ended June 30, 1999 to the comparable period in 2000, due to the increase in
equipment management fees, offset by the decrease in incentive management fees.
Equipment management fees, which are based on gross revenue, increased due to
the increase in rental income and were approximately 7% of rental income for
both periods. Incentive management fees, which are based on the Partnership's
limited and general partner distributions and initial partners' capital
decreased due to the decrease in the limited partner distribution percentage
from 8% to 7% of partners' capital in March 1999.
General and administrative costs to affiliates decreased $57, or 15%, from the
six-month period ended June 30, 1999 to the comparable period in 2000. The
decrease was due to a decrease in the allocation of overhead costs from TEM, as
the Partnership represented a smaller portion of the total fleet managed by TEM.
Other income increased $119 from an expense of $101 for the six-month period
ended June 30, 1999 to income of $18 for the comparable period in 2000. The
increase was due to the decrease in loss on sale of containers of $90 and an
increase in interest income of $29.
Net earnings per limited partnership unit increased from a loss of $0.02 for the
six-month period ended June 30, 1999 to earnings of $0.37 for the same period in
2000, reflecting the increase in net earnings allocated to limited partners from
a loss of $84 to earnings of $1,649, respectively. The allocation of net
earnings (loss) included a special allocation of gross income to the General
Partners made in accordance with the Partnership Agreement.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 2000 and 1999.
The Partnership's income (loss) from operations for the three-month periods
ending June 30, 2000 and 1999 was $952 and ($37), on rental income of $3,199 and
$2,871, respectively. The increase in rental income of $328, or 11%, from the
three-month period ended June 30, 1999 to the comparable period in 2000 was
primarily attributable to the increase in container rental income. Income from
container rentals increased $339, or 13%, primarily due to the increase in the
average on-hire utilization of 11%, offset by the decline in average rental
rates of 3%.
Other rental income was $295 for the three-month period ended June 30, 2000, a
decrease of $11 from the equivalent period in 1999. The decrease was primarily
due to the decrease in location income of $22, offset by the increase in DPP
income of $13. Location income decreased primarily due to a decrease in charges
to lessees for dropping off containers in certain locations, offset by a
decrease in credits granted to lessees for picking up containers from surplus
locations. DPP income increased primarily due to an increase in the number of
containers covered by DPP.
Direct container expenses decreased $496, or 40%, from the three-month period
ending June 30, 1999 to the equivalent period in 2000, primarily due to
decreases in repositioning and storage expenses of $246 and $151, respectively.
Repositioning expense decreased primarily due to the decrease in the number of
containers repositioned, offset by an increase in the average cost of
repositioning containers due to the high demand for limited vessel capacity
noted above. Storage expense decreased due to the increase in average
utilization and a decrease in the average storage cost per container.
Bad debt benefit increased $151 from the three-month period ended June 30, 1999
to the equivalent period in 2000 primarily due to a greater decrease to bad debt
reserve during the three-month period ended June 30, 2000 than in the same
period in 1999.
Depreciation expense decreased $14, or 1%, from the three-month period ended
June 30, 1999 to the comparable period in 2000 due to the decrease in fleet
size.
Management fees to affiliates increased $23, or 9%, from the three-month period
ended June 30, 1999 to the comparable period in 2000, due to the increase in
equipment management fees, which increased due to the increase in rental income.
These fees were approximately 7% of rental income for both periods. Incentive
management fees were comparable at $66 for both periods.
General and administrative costs to affiliates decreased $9, or 5%, from the
three-month period ended June 30, 1999 to the comparable period in 2000. The
decrease was primarily due to a decrease in the allocation of overhead costs
from TEM, as the Partnership represented a smaller portion of the total fleet
managed by TEM.
Other income increased $67 from an expense of $53 for the three-month period
ended June 30, 1999 to income of $14 for the comparable period in 2000. The
increase was primarily due to the decrease in loss on sale of containers of $49
and an increase in interest income of $18.
Net earnings per limited partnership unit increased from a loss of $0.02 for the
three-month period ended June 30, 1999 to earnings of $0.21 for the same period
in 2000, reflecting the increase in net earnings allocated to limited partners
from a loss of $104 to earnings of $949, respectively. The allocation of net
earnings (loss) included a special allocation of gross income to the General
Partners made in accordance with the Partnership Agreement.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines, which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the containers. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep its containers under lease, rather than the geographic location
of the containers or the domicile of the lessees. The containers are generally
operated on the international high seas rather than on domestic waterways. The
containers are subject to the risk of war or other political, economic or social
occurrence where the containers are used, which may result in the loss of
containers, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of June 30, 2000, which would result in such a risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the containers, and the effect of world trade, industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented, for additional information on
risks of the Partnership's business.
Forward Looking Statements
The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By _______________________________
Ernest J. Furtado
Senior Vice President
Date: August 11, 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, August 11, 2000
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive August 11, 2000
John A. Maccarone Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By /s/Ernest J. Furtado
___________________________________
Ernest J. Furtado
Senior Vice President
Date: August 11, 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 August 11, 2000
____________________________ Senior Vice President,
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
/s/John A. Maccarone August 11, 2000
____________________________ President (Principal Executive
John A. Maccarone Officer)
</TABLE>
