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TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 20, 2001
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 TCC Equipment Income Fund (the
"Partnership") the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
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
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, 2000
Commission file number 0-17688
TCC EQUIPMENT INCOME FUND (a California limited partnership)
------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-3045888
(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)
Securities registered pursuant to Section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP DEPOSITARY UNITS
(TITLE OF CLASS)
LIMITED PARTNERSHIP INTERESTS (UNDERLYING 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.
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Documents Incorporated by Reference
The Registrant's Prospectus as contained in Post-effective Amendment No. 2 to
the Registrant's Registration Statement, as filed with the Commission on
November 30, 1988 as supplemented by Supplement No. 6 filed with the Commission
under Rule 424(b)(3) of the Securities Act of 1933 on October 16, 1989.
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 as of
August 3, 1987 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 October 26, 1987 in accordance with its
Registration Statement and ceased to offer such Units as of October
26, 1989. The Registrant raised a total of $29,491,080 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.
In October 1998, the Registrant entered into its liquidation phase.
During this phase, the Registrant will no longer add to its
container fleet but will instead sell its containers (i) in one or
more large transactions or (ii) gradually, either as they reach the
end of their useful marine lives or when an analysis indicates that
their sale is warranted based on existing market conditions and the
container's age, location and condition. Sales proceeds, after
reserves for working capital, will generally be distributed to the
Partners. The Registrant will be terminated and dissolved on the
earlier of December 31, 2007 or the sale of all or substantially
all of its equipment.
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.
(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, 2000, 1999 and 1998 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 89% of the total equipment held by
all container leasing companies. The top two container leasing
companies combined control approximately 34% 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 and allowing lessees to gain concessions from lessors
about price, special charges or credits and, in certain markets,
the age specification of the containers rented. 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 Financial Services
Corporation (TFS), a wholly owned subsidiary of 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, 2000 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, 2000 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 15%, 15% and 20%, of the Registrant's rental revenue
during the years ended December 31, 2000, 1999 and 1998,
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", in the Registrant's
Prospectus, as supplemented, and for a discussion of the risks of
leasing containers for use in world trade see "Risk Factors and
Forward-Looking Statements" in Item 7 herein.
ITEM 2. PROPERTIES
As of December 31, 2000, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 2,338
40-foot standard dry freight containers 1,646
40-foot high cube dry freight containers 1,135
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5,119
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During December 2000, approximately 79% 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. At December 31, 2000 approximately
2% of the Partnership's equipment had been specifically identified as for sale.
The Partnership sells containers (i) that have reached the end of their useful
life or (ii) that an analysis indicates that their sale is otherwise warranted.
The Partnership expects more containers to be identified as for sale for these
reasons and as the Partnership continues its liquidation plans.
For information about the Registrant's property, see "Business of the
Partnership" in the Registrant's Prospectus, as supplemented. See also Item 7,
"Results of Operations" regarding current, and 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 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
the 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, 2001, there were 1,936 holders of record of
limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
The Registrant makes quarterly distributions to its limited partners in an
amount equal to the Registrant's excess cash, after redemptions and working
capital reserves. During the year ended December 31, 2000, the Registrant paid
distributions at an annualized rate equal to 10% of a Unit's initial cost, or
$2.00 per Unit per year. For information about the amount of distributions paid
during the five most recent fiscal years, see Item 6, "Selected Financial Data."
ITEM 701: Inapplicable.
ITEM 6. SELECTED FINANCIAL DATA.
(Amounts in thousands except for per unit amounts)
Year Ended December 31,
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2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Rental income....................... $ 2,885 $ 3,204 $ 4,358 $ 4,784 $ 5,383
Income from operations.............. $ 915 $ 411 $ 1,475 $ 1,759 $ 2,360
Net earnings........................ $ 954 $ 458 $ 1,569 $ 1,814 $ 2,382
Net earnings per unit
of limited partnership
interest.......................... $ 0.63 $ 0.27 $ 1.02 $ 1.21 $ 1.60
Distributions per unit of
limited partnership
interest.......................... $ 2.00 $ 2.85 $ 2.50 $ 2.00 $ 2.00
Distributions per unit of
limited partnership
interest representing
a return of capital............... $ 1.37 $ 2.58 $ 1.48 $ 0.79 $ 0.40
Total assets........................ $ 10,294 $ 12,465 $ 16,271 $ 18,560 $ 20,049
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, which will assist in evaluating
the financial condition of the Partnership for the years ended December 31,
2000, 1999 and 1998. Please refer to the Financial Statements and Notes thereto
in connection with the following discussion.
Liquidity and Capital Resources
From October 1987 until October 1989, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $1,000 on April 8, 1988, and on October 26, 1989, the
Partnership's offering of limited partnership interests was closed at $29,491.
In October 1998, the Partnership entered its liquidation phase, which may last
up to six or more years depending on whether the containers are sold (i) in one
or more large transactions or (ii) gradually, either as they reach the end of
their useful marine lives or when an analysis indicates that their sale is
warranted based on existing market conditions and the container's age, location
and condition. The Partnership anticipates that all excess cash, after
redemptions and working capital reserves, will be distributed to the general and
limited partners on a quarterly basis. These distributions will consist of cash
from operations and/or cash from sales proceeds. As the Partnership's container
fleet decreases, cash from operations is expected to decrease, while cash from
investing activities is expected to fluctuate based on the number of containers
sold and the actual sales price per container received. Consequently, the
Partnership anticipates that a large portion of all future distributions will be
a return of capital.
To date, the Partnership has sold containers only gradually, rather than in
large transactions.
The final termination and winding up of the Partnership, as well as payment of
liquidating and/or final distributions, will occur at the end of the liquidation
phase when all or substantially all of the Partnership's containers have been
sold and the Partnership begins its dissolution.
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, 2000, the
Partnership redeemed 11,050 units for a total dollar amount of $71. The
Partnership used cash flow from operations to pay for the redeemed units.
The Partnership invests working capital and cash flow from operations and
investing activities prior to its distribution to the partners in short-term,
liquid investments. The Partnership's cash is affected by cash provided by or
used in operating, investing and financing activities. These activities are
discussed in detail below.
During the year ended December 31, 2000, the Partnership declared cash
distributions to limited partners pertaining to the fourth quarter of 1999
through the third quarter of 2000, in the amount of $2,930. This amount
represents $2.00 per unit, or 10% of the Limited Partner's original investment.
On a cash basis, after paying redemptions, $1,945 of total distributions was
from operations and the balance was a return of capital. On a GAAP basis, $915
of total distributions was from net income and the balance was a return of
capital.
Net cash provided by operating activities for the years ended December 31, 2000
and 1999, was $2,016 and $1,921 respectively. The increase of $95, or 5% was
primarily attributable to fluctuations in accounts receivable and the increase
in net earnings, adjusted for non-cash transactions, partially offset by the
fluctuations in due from affiliates, net and accrued damage protection plan
costs. The decrease in accounts receivable of $308 for the year ended December
31, 2000 was due to the decline in the average collection period of accounts
receivable and a decline in rental income. The decline in accounts receivable of
$101 for the year ended December 31, 1999 was due to the decrease in rental
income, offset by an increase in the average collection period of accounts
receivable. Net earnings, adjusted for non-cash transactions increased primarily
due to the decrease in direct container expenses, and was partially offset by
the decrease in rental income. These items are discussed more fully under
"Results of Operations". The fluctuations in due from affiliates, net resulted
from timing differences in payment of expenses and fees and the remittance of
net rental revenues and container sales proceeds, as well as in fluctuations in
these amounts. The decrease in accrued damage protection plan costs during the
year ended December 31, 2000 was primarily due to a decrease in the estimated
average repair cost per container and a decrease in the number of containers
covered under the damage protection plan.
For the year ended December 31, 2000, net cash provided by investing activities
(the sale of containers) was $875 compared to $1,235 for the same period in
1999. The decrease of $360 was primarily due to the Partnership selling fewer
containers during the year ended December 31, 2000 compared to the equivalent
period in 1999. Some of the containers sold in 1999 and 2000 were located in low
demand locations, and these sales were driven not only by the liquidation plans
discussed above, but also by adverse market conditions in these locations.
However, there were fewer low demand locations and fewer containers in these
locations in 2000, primarily as a result of previous sales efforts, resulting in
the decline in the number of containers sold. Despite a slight improvement in
the sales price recently realized on container sales, the sales price for
containers sold in these low demand locations has continued to be adversely
affected by market conditions. The sale of containers and these market
conditions are discussed more fully under "Results of Operations".
Due, in part, to these market conditions and their effect on demand for used
containers, the Partnership has been primarily selling containers only if the
containers are at the end of their useful lives or if they are located in these
low demand locations. Therefore, and as noted above, the Partnership has
implemented its liquidation phase to date by selling containers gradually. The
Partnership will continue to evaluate its options for selling containers in the
context of both these market conditions and the Partnership's liquidation plans.
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, 2000, 1999 and 1998, 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 1998
---- ---- ----
Beginning container fleet............... 5,771 6,769 7,887
Ending container fleet.................. 5,119 5,771 6,769
Average container fleet................. 5,445 6,270 7,328
The average container fleet decreased 13% from the year ended December 31, 1999
to the equivalent period in 2000 due to the continuing sale of containers (i)
that had reached the end of their useful lives or (ii) that an analysis had
indicated that their sale was otherwise warranted. Included in this second group
were containers located in low demand locations. The Partnership expects that
the size of its container fleet will further decline as additional containers
are sold for these reasons and as the Partnership continues its liquidation
plans. The decline in the container fleet has contributed to an overall decline
in rental income from the year ended December 31, 1999 to the equivalent period
in 2000. This decline is expected to continue in future years, as the size of
the Partnership's container fleet continues to decrease.
Rental income and direct container expenses are also affected by the average
utilization of the container fleet, which was 80%, 73% and 80% during the years
ended December 31, 2000, 1999 and 1998, respectively. In addition, rental income
is affected by daily rental rates, which have decreased between the periods, as
described below.
The following is a comparative analysis of the results of operations for the
years ended December 31, 2000, 1999 and 1998.
The Partnership's income from operations for the years ended December 31, 2000
and 1999 was $915 and $411, respectively, on rental income of $2,885 and $3,204,
respectively. The decrease in rental income of $319, or 10%, from the year ended
December 31, 1999 to the comparable period in 2000 was attributable to a
decrease in income from container rentals and other rental income, which is
discussed below. Income from container rentals, the major component of total
revenue, decreased $196, or 7%, primarily due to decreases in the average
container fleet of 13% and average rental rates of 4%, offset by the increase in
average on-hire utilization of 10%.
The Partnership's income from operations for the years ended December 31, 1999
and 1998 was $411 and $1,475, respectively, on rental income of $3,204 and
$4,358, respectively. The decrease in rental income of $1,154, or 26%, from the
year ended December 31, 1998 to the comparable period in 1999 was primarily
attributable to a decrease in income from container rentals, which decreased
$1,019, or 27%. This decrease was primarily due to decreases in the average
container fleet of 14%, average on-hire utilization of 9% and average rental
rates of 6%. The decline in the size of the container fleet, which is discussed
above, and the decline in utilization had the most significant adverse effect on
rental income.
The improvement in utilization, which began in the third quarter of 1999, 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. The decision to sell containers is based on the current
expectation that the economic benefit of selling these containers is greater
than the estimated economic benefit of continuing to own these containers. The
majority of the containers sold during 1999 and 2000 were older containers. The
expected economic benefit of continuing to own these older containers was less
than that of newer containers primarily due to their shorter remaining marine
life, the cost to reposition containers and the shipping lines' preference for
leasing newer containers when they are available.
Once the decision had been made to sell containers, if the book value of these
containers was greater than the estimated fair value, the Partnership wrote down
the value of these specifically identified containers to their estimated fair
value, which was based on recent sales prices. Due to unanticipated declines in
container sales prices during 1999, the actual sales prices received on some
containers were lower than the estimates used for the write-down, resulting in
the Partnership incurring losses upon the sale of some of these containers.
Until demand for leased containers improves, the Partnership may incur further
write-downs and/or losses on the sale of such containers. 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 on 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 in 2000, rental rates remained stable during 2000.
In the fourth quarter of 2000, utilization began to decline and has continued to
decline into the beginning of 2001. This decline was primarily due to the
slowing United States economy and the resulting decline in exports out of Asia.
The General Partners caution that utilization could continue to decline in 2001
if these conditions persist and demand for leased containers does not improve.
Despite the decline in utilization, rental rates have remained stable into the
beginning of 2001. New container prices declined in 2001, and this decline,
combined with the recent decline in utilization may have a negative effect on
rental rates in the future.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's containers under master operating leases. The
Partnership also leases containers under direct finance leases and at December
31, 2000, 1999 and 1998, there were 35, 29 and 26 containers under direct
finance leases, respectively. Rental income from direct finance leases was $4,
$5 and $50 during the years ended December 31, 2000, 1999 and 1998,
respectively.
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 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, 2000, other rental
income was $277, a decrease of $123 from the equivalent period in 1999. The
decrease in other rental income was due to the decrease in fleet size and
additional decreases in DPP, location and handling income of $49, $43 and $31,
respectively. The additional decline in DPP income was due to decreases in the
average DPP price charged per container and in the number of containers covered
under DPP. The further decline in location income was due to a decrease in
charges to lessees for dropping off containers in certain locations. Handling
income decreased primarily due to the decrease in container movement.
For the year ended December 31, 1999, the total of these other rental income
items was $400, a decrease of $135 from the equivalent period in 1998. The
decrease was primarily due to the decline in fleet size and additional decreases
in location and handling income of $106 and $37, respectively. Location income
further decreased primarily due to a decrease in charges to lessees for dropping
off containers in certain locations. Handling income decreased due to decreases
in container movement and in the average handling price charged per container.
Direct container expenses decreased $323, or 40%, from the year ended December
31, 1999 to the equivalent period in 2000. The decrease was primarily due to the
decreases in storage, DPP and handling expenses of $150, $88, and $33,
respectively. The decrease in these expenses, as well as other direct container
expenses, was partially due to the overall decrease in the average container
fleet. Storage expense further declined due to the improvement in utilization
noted above and a lower average storage cost per container. DPP expense declined
due to decreases in the average repair cost per DPP container and in the number
of containers covered under DPP. Handling expense declined primarily due to the
decline in container movement.
Direct container expenses decreased $82, or 9%, from the year ended December 31,
1998 to the equivalent period in 1999. The decrease was primarily due to the
decline in the average container fleet which contributed to the decreases in
repositioning, insurance and handling expenses of $72, $22 and $20,
respectively, partially offset by an increase in DPP expense of $46.
Repositioning expense decreased due to the decrease in the number of containers
repositioned during the year ended December 31, 1999 compared to the same period
in 1998. Insurance expense decreased due to a reduction in insurance premiums.
Handling expense decreased primarily due to the decrease in container movement.
DPP expense increased primarily due to an increase in the average repair cost
per DPP container from the year ended December 31, 1998 to the comparable period
in 1999.
Bad debt (benefit) expense was ($22), $51, and ($40) for the years ended
December 31, 2000, 1999, and 1998, respectively. The benefit recorded for the
year ended December 31, 2000 was due to overall lower required reserves at
December 31, 2000 than at December 31, 1999. The effect of insurance proceeds
received during the year ended 1998 relating to certain receivables against
which reserves had been recorded in 1994 and 1995, as well as the resolution of
payment issues with one lessee during 1998, were primarily responsible for the
benefit recorded in 1998 and, therefore, the fluctuation in bad debt expense
(benefit) between 1998 and 1999.
Depreciation expense decreased $182, or 15%, and $127, or 9%, from the years
ended December 31, 1999 to 2000 and December 31, 1998 to 1999, respectively. The
decreases were primarily due to the decline in the average fleet size and due to
certain containers which were acquired used and have now been fully depreciated.
These decreases were offset by additional charges included in depreciation as
described below.
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, the cost of new containers at year-end 1998,
during 1999 and 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 at December 31, 2000, 1999 and
1998 for containers to be held for continued use and determined that a reduction
to the carrying value of these containers was not required. The Partnership also
evaluated the recoverability of the recorded amount of containers identified for
sale in the ordinary course of business and determined that a reduction to the
carrying value of these containers was required. The Partnership wrote down the
value of these containers to their estimated fair value, which was based on
recent sales prices less cost to sell. During the years ended December 31, 2000,
1999, and 1998 the Partnership recorded additional depreciation expense of $72,
$105 and $61, respectively on 179, 245, and 298, containers identified as for
sale and requiring a reserve. At December 31, 2000 and 1999, the net book value
of containers identified as for sale was $98 and $177, respectively.
The Partnership sold 205 of these previously written down containers for a loss
of $4 during the year ended December 31, 2000 and sold 478 previously written
down containers for a loss of $6 during the same period in 1999. During the year
ended December 31, 1998 there were no sales of previously written down
containers as the initial write-down was recorded at December 31, 1998. The
Partnership incurred losses on the sale of some containers previously written
down as the actual sales prices received on these containers were lower than the
estimates used for the write-downs, primarily due to unexpected declines in
container prices.
The Partnership also sold containers that had not been written down and recorded
(gains)/losses of ($91), $27 and ($68) during the years ended December 31, 2000,
1999 and 1998, respectively.
As more containers are subsequently identified for sale or if container sales
prices decline, the Partnership may incur additional write-downs on containers
and/or may incur losses on the sale of containers.
Management fees to affiliates decreased $83 or 21% from the year ended December
31, 1999 to the same period in 2000 due to decreases in incentive and equipment
management fees. Incentive management fees, which are based on the Partnership's
limited and general partner distributions, decreased $56, or 32%, primarily due
to a decrease in distributions paid during the year ended December 31, 2000
compared to the equivalent period in 1999. Equipment management fees decreased
$27 due to the decrease in rental income, upon which equipment management fees
are primarily based. These fees were approximately 7% of rental income for both
periods.
Management fees to affiliates decreased $32, or 7% from the year ended December
31, 1998 to the comparable period in 1999 due to a decrease in equipment
management fees, offset by an increase in incentive management fees. Equipment
management fees decreased $54, or 19%, primarily due to the decrease in rental
income and were approximately 7% of rental income for the year ended December
31, 1999. Equipment management fees for the year ended December 31, 1998 were
only 6% of rental income due to an adjustment resulting from the write-off of
receivables for two lessees. Incentive management fees increased $22, or 14%,
primarily due to greater distributions paid during the year ended December 31,
1999 compared to the same period in 1998.
General and administrative costs to affiliates decreased $27, or 16%, and $68,
or 29%, from the years ended December 31, 1999 to 2000 and December 31, 1998 to
1999, respectively. These decreases were primarily due to decreases in overhead
costs allocated from TEM, as the Partnership represented a smaller portion of
the total fleet managed by TEM.
The gain/loss on sale of containers fluctuated from a loss of $33 to a gain of
$87. The fluctuation in gain/loss was primarily due to the Partnership selling
fewer containers at a slightly higher average sales price during the year ended
December 31, 2000 compared to the same period in 1999. The decline in the number
of containers sold was primarily due to there being fewer lower demand locations
and fewer containers in these locations, primarily as a result of previous sales
efforts. Gain/loss on sale of containers fluctuated from a gain of $68 during
the year ended December 31, 1998 to a loss of $33 for the comparable period in
1999. The loss on sale of containers during the year ended December 31, 1999 was
primarily due to the Partnership selling containers primarily in low demand
locations at lower average sale prices as discussed above.
Net earnings per limited partnership unit increased from $0.27 to $0.63 from the
year ended December 31, 1999 to the equivalent period in 2000, reflecting the
increases in net earnings allocated to limited partners from $402 to $915. Net
earnings per limited partnership unit decreased from $1.02 to $0.27 from the
year ended December 31, 1998 to the year ended December 31, 1999, reflecting the
decrease in net earnings allocated to limited partners from $1,494 to $402. The
allocation of net earnings for the years ended December 31, 2000, 1999 and 1998
included a special allocation to the General Partners of $29, $51, and $59,
respectively, in accordance with the Partnership Agreement.
Risk Factors and Forward Looking Statements
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, 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, including bad debts, 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.
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 SUPPLEMENTAL DATA
Attached pages 14 to 26.
Independent Auditors' Report
The Partners
TCC Equipment Income Fund:
We have audited the accompanying balance sheets of TCC Equipment Income Fund (a
California limited partnership) as of December 31, 2000 and 1999, and the
related statements of earnings, partners' capital and cash flows for each of the
years in the three-year period ended December 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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 TCC Equipment Income Fund as of
December 31, 2000 and 1999, 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, 2000, in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
San Francisco, California
February 16, 2001
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Balance Sheets
December 31, 2000 and 1999
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------
2000 1999
----------------- ----------------
Assets
Container rental equipment, net of accumulated
depreciation of $7,677 (1999: $8,217) $ 8,897 $ 10,675
Cash 713 862
Net investment in direct finance leases (note 3) 37 42
Accounts receivable, net of allowance
for doubtful accounts of $103 (1999: $178)(note 5) 518 751
Due from affiliates, net (note 2) 126 130
Prepaid expenses 3 5
--------------- ----------------
$ 10,294 $ 12,465
=============== ================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 139 $ 136
Accrued liabilities 57 46
Accrued recovery costs (note 1(j)) 38 33
Accrued damage protection plan costs (note 1(k)) 64 105
Warranty claims (note 1(l)) 5 68
--------------- ----------------
Total liabilities 303 388
--------------- ----------------
Partners' capital:
General partners - -
Limited partners 9,991 12,077
--------------- ----------------
Total partners' capital 9,991 12,077
--------------- ----------------
$ 10,294 $ 12,465
=============== ================
See accompanying notes to financial statements
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Statements of Earnings
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------------------------------------
2000 1999 1998
----------------- ---------------- -----------------
Rental income $ 2,885 $ 3,204 $ 4,358
----------------- ---------------- -----------------
Costs and expenses:
Direct container expenses 478 801 883
Bad debt (benefit) expense (22) 51 (40)
Depreciation (note 1(e)) 1,043 1,225 1,352
Professional fees 55 68 39
Management fees to affiliates (note 2) 318 401 433
General and administrative costs
to affiliates (note 2) 138 165 233
Other general and administrative costs 47 49 51
(Gain) loss on sale of containers (87) 33 (68)
----------------- ---------------- -----------------
1,970 2,793 2,883
----------------- ---------------- -----------------
Income from operations 915 411 1,475
----------------- ---------------- -----------------
Other income:
Interest income 39 47 94
----------------- ---------------- -----------------
39 47 94
----------------- ---------------- -----------------
Net earnings $ 954 $ 458 $ 1,569
================= ================ =================
Allocation of net earnings (note 1(g)):
General partners $ 39 $ 56 $ 75
Limited partners 915 402 1,494
----------------- ---------------- -----------------
$ 954 $ 458 $ 1,569
================= ================ =================
Limited partners' per unit share
of net earnings $ 0.63 $ 0.27 $ 1.02
================= ================ =================
Limited partners' per unit share
of distributions $ 2.00 $ 2.85 $ 2.50
================= ================ =================
Weighted average number of limited
partnership units outstanding (note 1(m)) 1,462,098 1,467,029 1,470,342
================= ================ =================
See accompanying notes to financial statements
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------------
Partners' Capital
--------------------------------------------------------
General Limited Total
-------------- --------------- ---------------
Balances at December 31, 1997 $ (36) $ 18,087 $ 18,051
Distributions (39) (3,677) (3,716)
Redemptions (note 1(n)) - (31) (31)
Net earnings 75 1,494 1,569
-------------- --------------- ---------------
Balances at December 31, 1998 - 15,873 15,873
-------------- --------------- ---------------
Distributions (56) (4,183) (4,239)
Redemptions (note 1(n)) - (15) (15)
Net earnings 56 402 458
-------------- --------------- ---------------
Balances at December 31, 1999 - 12,077 12,077
-------------- --------------- ---------------
Distributions (39) (2,930) (2,969)
Redemptions (note 1(n)) - (71) (71)
Net earnings 39 915 954
-------------- --------------- ---------------
Balances at December 31, 2000 $ - $ 9,991 $ 9,991
============== =============== ===============
See accompanying notes to financial statements
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands)
- --------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
Cash flows from operating activities:
Net earnings $ 954 $ 458 $ 1,569
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation (note 1(e)) 1,043 1,225 1,352
(Decrease) increase in allowance for doubtful
accounts, excluding write-off (note 5) (75) 44 (110)
(Gain) loss on sale of containers (87) 33 (68)
(Increase) decrease in assets:
Net investment in direct finance leases 18 13 130
Accounts receivable, excluding write-off (note 5) 308 101 556
Due from affiliates, net (62) 56 (311)
Prepaid expenses 2 1 35
Increase (decrease) in liabilities:
Accounts payable and accrued liablilties 14 21 (23)
Accrued recovery costs 5 11 (6)
Accrued damage protection plan costs (41) 22 (18)
Warranty claims (63) (64) (64)
--------------- --------------- ---------------
Net cash provided by operating activities 2,016 1,921 3,042
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from sale of containers 875 1,232 1,524
Container purchases - 3 (26)
--------------- --------------- ---------------
Net cash provided by investing activities 875 1,235 1,498
--------------- --------------- ---------------
Cash flows from financing activities:
Redemptions of limited partnership units (71) (15) (31)
Distributions to partners (2,969) (4,238) (3,716)
--------------- --------------- ---------------
Net cash used in financing activities (3,040) (4,253) (3,747)
--------------- --------------- ---------------
Net (decrease) increase in cash (149) (1,097) 793
Cash at beginning of period 862 1,959 1,166
--------------- --------------- ---------------
Cash at end of period $ 713 $ 862 $ 1,959
=============== =============== ===============
See accompanying notes to financial statements
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Statements of Cash Flows--Continued
Years ended December 31, 2000, 1999 and 1998
(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, 2000, 1999, 1998 and 1997,
resulting in differences in amounts recorded and amounts of cash disbursed or
received by the Partnership, as shown in the Statements of Cash Flows.
2000 1999 1998 1997
---- ---- ---- ----
Container purchases included in:
Due to affiliates........................................ $ - $ - $ - $ 12
Container purchases payable.............................. - - - -
Distributions to partners included in:
Due to affiliates........................................ 3 3 2 2
Proceeds from sale of containers included in:
Due from affiliates...................................... 84 150 204 296
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 years ended December 31, 2000, 1999 and 1998.
2000 1999 1998
---- ---- ----
Container purchases recorded.............................................. $ - $ (3) $ 14
Container purchases paid.................................................. - (3) 26
Distributions to partners declared........................................ 2,969 4,239 3,716
Distributions to partners paid............................................ 2,969 4,238 3,716
Proceeds from sale of containers recorded................................. 809 1,178 1,432
Proceeds from sale of containers received................................. 875 1,232 1,524
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to net investment in
direct finance leases. The carrying values of containers transferred during the
years ended December 31, 2000, 1999 and 1998 were $13, $37 and $19,
respectively.
See accompanying notes to financial statements
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Notes to Financial Statements
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
(a) Nature of Operations
TCC Equipment Income Fund (TEIF or the Partnership), a California
limited partnership with a maximum life of 20 years, was formed on
August 3, 1987. The Partnership was formed to engage in the
business of owning, leasing and selling both new and used
containers related to the international containerized cargo
shipping industry, including, but not limited to, containers,
trailers, and other container-related equipment. TEIF offered units
representing limited partnership interests (Units) to the public
until October 26, 1989, the close of the offering period, when a
total of 1,474,554 Units had been purchased for a total of $29,491.
In January 1998, the Partnership ceased purchasing containers and
in October 1998, the Partnership began its liquidation phase. This
phase may last up to six or more years depending on whether the
containers are sold (i) in one or more large transactions or (ii)
gradually, either as they reach the end of their marine useful
lives or when an analysis indicates that their sale is warranted
based on existing market conditions and the container's age,
location and condition. The Partnership anticipates that all excess
cash, after redemptions and working capital reserves, will be
distributed to the limited and general partners on a quarterly
basis.
The final termination and winding up of the Partnership, as well as
payment of liquidating and/or final distributions, will occur at
the end of the liquidation phase when all or substantially all of
the Partnership's containers have been sold and the Partnership
begins its dissolution.
Textainer Financial Services Corporation (TFS) is the managing
general partner of the Partnership and is a wholly-owned subsidiary
of Textainer Capital Corporation (TCC). 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. 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 equipment
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, 2000 and 1999, 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 the 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 steadily declined from 1995 through 1999.
Although container prices increased in 2000, the cost of new
containers at year-end 1998, during 1999 and 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 at December 31, 2000, 1999 and 1998
for containers to be held for continued use and determined that a
reduction to the carrying value of these containers was not
required. The Partnership also evaluated the recoverability of the
recorded amount of containers identified for sale in the ordinary
course of business and determined that a reduction to the carrying
value of these containers was required. The Partnership wrote down
the value of these containers to their estimated fair value, which
was based on recent sales prices less cost to sell. During the
years ended December 31, 2000, 1999, and 1998 the Partnership
recorded additional depreciation expense of $72, $105 and $61,
respectively on 179, 245, and 298, containers identified as for
sale and requiring a reserve. At December 31, 2000 and 1999, the
net book value of containers identified as for sale was $98 and
$177, respectively.
The Partnership sold 205 of these previously written down
containers for a loss of $4 during the year ended December 31, 2000
and sold 478 previously written down containers for a loss of $6
during the same period in 1999. During the year ended December 31,
1998 there were no sales of previously written down containers as
the initial write-down was recorded at December 31, 1998. The
Partnership incurred losses on the sale of some containers
previously written down as the actual sales prices received on
these containers were lower than the estimates used for the
write-downs, primarily due to unexpected declines in container
sales prices.
The Partnership also sold containers that had not been written down
and recorded (gains)/losses of ($91), $27 and ($68) during the
years ended December 31, 2000, 1999 and 1998, respectively.
As more containers are subsequently identified for sale or if
container sales prices decline, the Partnership may incur
additional write-downs on containers and/or may incur losses on the
sale of containers. The Partnership will continue to evaluate the
recoverability of the 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, 2000, 1999 and 1998.
(g) Allocation of Net Earnings and Partnership Distributions
In accordance with the Partnership Agreement, Sections 3.08 through
3.11, net earnings or losses and distributions are generally
allocated 1% to the General Partners and 99% to the Limited
Partners. Effective October 1998, the allocation of distributions
to the General Partners was increased to 1.3% in accordance with
Section 2.05 of the Partnership Agreement. In addition, if the
allocation of distributions exceeds the allocation of net earnings
and creates a deficit in the General Partners' aggregate capital
account, the Partnership Agreement provides for a special
allocation of 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 quarterly basis in accordance with the
provisions of the Partnership Agreement.
(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) Acquisition Fees
In accordance with the Partnership Agreement, acquisition fees
equal to 5% of the container purchase price were paid to TAS. These
fees were capitalized as part of the cost of the containers.
(j) 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, 2000 and
1999, the amounts accrued were $38 and $33, respectively.
(k) 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 to provide a reserve sufficient
to cover the estimated future repair costs. DPP expenses are
included in direct container expenses in the Statements of Earnings
and the related reserve at December 31, 2000 and 1999, was $64 and
$105, respectively.
(l) Warranty Claims
During 1992 and 1995, the Partnership settled warranty claims
against a container manufacturer. The Partnership is amortizing the
settlement amounts over the remaining estimated useful life of the
applicable containers (seven years), reducing maintenance and
repair costs over that time. At December 31, 2000 and 1999, the
unamortized portion of the settlement amounts was equal to $5 and
$68, 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 during each year of the Partnership's operations
which was 1,462,098, 1,467,029, and 1,470,342 during the years
ended December 31, 2000, 1999 and 1998, respectively.
(n) Redemptions
The following redemption offerings were consummated by the
Partnership during the years ended December 31, 2000, 1999 and
1998:
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- -----------
Total Partnership redemptions as of
December 31, 1997...................... 2,775 $ 8.29 $ 23
------- ---
Year ended December 31, 1998:
3rd quarter...................... 2,750 $ 10.55 29
4th quarter...................... 250 $ 8.00 2
------- ---
3,000 $ 10.33 31
------- ---
Year ended December 31, 1999:
1st quarter...................... 1,750 $ 8.57 15
------- ---
Year ended December 31, 2000
3rd quarter...................... 8,675 $ 6.45 56
4th quarter...................... 2,375 $ 6.32 15
------- ---
11,050 $ 6.43 71
------- ---
Total Partnership redemptions as of
December 31, 2000..................... 18,575 $ 7.56 $ 140
======= ===
The redemption price is fixed by formula.
(o) Reclassification
Following the adoption of SAB 101, "Revenue Recognition in
Financial Statements", by the Partnership in the fourth quarter of
fiscal 2000, the Partnership has reclassified gain/loss on sale of
containers from other income (after income from operations) to
costs and expenses (before income from operations). All periods
have been amended to reflect this reclassification.
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 $1 of
equipment acquisition fees as part of container rental equipment
costs during the year ended December 31, 1998. There were no
acquisition fees incurred during the years ended December 31, 2000
and 1999. The Partnership incurred $121, $177 and $155 of incentive
management fees during the years ended December 31, 2000, 1999 and
1998, 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, 2000 and 1999.
Subject to certain reductions, TEM receives a monthly equipment
management fee equal to 7% of gross lease revenues attributable to
master operating leases and 2% of gross lease revenues attributable
to full payout net leases. For the years ended December 31, 2000,
1999 and 1998, equipment management fees totaled $197, $224, and
$278, respectively. The Partnership's containers are leased by TEM
to third party lessees on operating master leases, spot leases,
term leases and full payout net leases. Although the Partnership
has some rent receivable under cancelable long term operating
leases, the majority of the Partnership's leases are operating
leases with limited terms and no purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the
Partnership. These costs are incurred and paid by TEM and TFS.
Total general and administrative costs allocated to the Partnership
were as follows:
2000 1999 1998
---- ---- ----
Salaries $ 68 $ 92 $ 126
Other 70 73 107
-- -- ---
Total general and
administrative costs $ 138 $ 165 $ 233
=== === ===
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. TFS
allocates these costs based on the ratio of the Partnership's
containers to the total container fleet of all limited partnerships
managed by TFS. The General Partners allocated the following
general and administrative costs to the Partnership:
2000 1999 1998
---- ---- ----
TEM $ 121 $ 147 $ 211
TFS 17 18 22
---- ---- ----
Total general and
administrative costs $ 138 $ 165 $ 233
=== === ===
At December 31, 2000 and 1999, due from affiliates, net, is
comprised of:
2000 1999
---- ----
Due from affiliates:
Due from TEM.......................... $ 156 $ 161
--- ---
156 161
--- ---
Due to affiliates:
Due to TCC............................ 4 3
Due to TFS............................ 26 28
--- ---
30 31
--- ---
Due from affiliates, net $ 126 $ 130
=== ===
These amounts receivable from and payable to affiliates were
incurred in the ordinary course of business between the Partnership
and its affiliates and represent timing differences in the accrual
and payment of expenses and fees described above or in the accrual
and remittance of net rental revenues and container sales proceeds
from TEM.
Note 3. Direct Finance Leases
The Partnership has leased containers under direct finance leases
with terms ranging from two to five years. The components of the
net investment in direct finance leases as of December 31, 2000 and
1999 are as follows:
2000 1999
---- ----
Future minimum lease payments receivable.... $ 43 $ 49
Residual value.............................. - 3
Less: unearned income....................... (6) (10)
--- ---
Net investment in direct finance leases..... $ 37 $ 42
=== ===
The following is a schedule by year of minimum lease payments
receivable under the direct finance leases at December 31, 2000:
Year ending December 31:
2001......................................... $ 20
2002......................................... 13
2003......................................... 7
2004......................................... 3
--
Total minimum lease payments receivable...... $ 43
==
Rental income for the years ended December 31, 2000, 1999, and 1998
includes $4, $5, and $50, respectively, of income from direct
finance leases.
Note 4. Income Taxes
At December 31, 2000, 1999 and 1998, there were temporary
differences of $7,026, $7,299, and $8,154, 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 income for federal income tax purposes
for the years ended December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
---- ---- ----
Net income per financial statements.................... $ 954 $ 458 $ 1,569
(Decrease) increase in provision for bad debt.......... (75) 44 (501)
Depreciation for federal income tax purposes
in excess of depreciation for financial
statement purposes........................... (264) (357) (429)
Gain on sale of fixed assets for federal income
tax purposes in excess of gain (loss) recognized
for financial statement purposes..................... 717 1,210 1,320
(Decrease) increase in damage protection
plan reserve......................................... (41) 22 (18)
Warranty reserve income for tax purposes in
excess of financial statement purposes............... (63) (64) (64)
Net income for ----- ----- -----
federal income tax purposes.......................... $ 1,228 $ 1,313 $ 1,877
===== ===== =====
Note 5. Accounts Receivable Write-Off
During 1998, the Partnership wrote-off $391 of delinquent
receivables from two lessees against which reserves were recorded
in 1994 and 1995. During the years ended December 31, 2000 and 1999
there were no such individually significant write-offs.
TCC EQUIPMENT INCOME FUND
(a California Limited Partnership)
Selected Quarterly Financial Data
- -------------------------------------------------------------------------------------------------------------------------
The following is a summary of selected quarterly financial data for the years
ended December 31, 2000, 1999 and 1998:
(Amounts in thousands)
2000 Quarters Ended
-----------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
-----------------------------------------------------------------
Rental income $ 772 $ 738 $ 697 $ 678
Income from operations $ 204 $ 287 $ 222 $ 202
Net earnings $ 213 $ 298 $ 231 $ 212
Limited partners' share of net earnings $ 203 $ 288 $ 222 $ 202
Limited partners' share of distributions $ 734 $ 733 $ 734 $ 729
1999 Quarters Ended
-----------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
-----------------------------------------------------------------
Rental income $ 854 $ 796 $ 773 $ 781
Income from operations $ 134 $ 16 $ 35 $ 226
Net earnings $ 148 $ 30 $ 45 $ 235
Limited partners' share of net earnings $ 147 $ 1 $ 28 $ 226
Limited partners' share of distributions $ 1,469 $ 733 $ 1,247 $ 734
1998 Quarters Ended
-----------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
-----------------------------------------------------------------
Rental income $ 1,127 $ 1,100 $ 1,088 $1,043
Income from operations $ 541 $ 413 $ 354 $ 167
Net earnings $ 559 $ 437 $ 383 $ 190
Limited partners' share of net earnings $ 551 $ 430 $ 375 $ 138
Limited partners' share of distributions $ 736 $ 736 $ 736 $1,469
The amounts of income from operations are different from the amounts previously
reported in reports on Form 10-Q filed for the years 2000, 1999 and 1998 as the
Registrant adopted SAB 101, "Revenue Recognition in Financial Statements", in
the fourth quarter of fiscal 2000 and reclassified gain/loss on sale of
containers from other income (after income from operations) to costs and
expenses (before income from operations). To conform to the current year's
presentation, the following reclassifications were made to income from
operations:
Mar. 31 June 30 Sept. 30 Dec. 31
------------------------------------------------------------------
2000 $ (12) $ 76 $ 22 $ 1
1999 $ - $ (9) $ (56) $ 32
1998 $ 116 $ 22 $ (2) $ (68)
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 original general partners
were TCC, TEM and Textainer Inc. (TI), which comprised the original Textainer
Group. Effective October 1, 1993, the Textainer Group restructured its
organization by forming a new holding company, Textainer Group Holdings Limited
(TGH), and the shareholders of the underlying companies which include the
General Partners accepted shares in TGH in exchange for their shares in the
individual companies. Textainer Financial Services Corporation (TFS) is the
Managing General Partner of the Partnership (prior to its name change on April
4, 1994, TFS was known as Textainer Capital Corporation). TFS is a wholly-owned
subsidiary of Textainer Capital Corporation (TCC) (prior to its name change on
April 4, 1994, TCC was known as Textainer (Delaware) Inc.). Textainer Equipment
Management Limited (TEM) is an Associate General Partner of the Partnership. TI
was an Associate General Partner of the Partnership through September 30, 1993
when it was replaced in that capacity by Textainer Limited (TL), pursuant to the
corporate restructuring effective October 1, 1993, which caused TFS, TEM and TL
to fall under the common ownership of TGH. Pursuant to this restructuring, TI
transferred substantially all of its assets including all of its rights and
duties as Associate General Partner to TL. This transfer was effective from
October 1, 1993. The end result was that TFS now serves as Managing General
Partner and TEM and TL now serve as Associate General Partners. The Managing
General Partner and Associate General Partners are collectively referred to as
the General Partners and are wholly-owned or substantially-owned subsidiaries of
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) 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.
TFS, 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, 2000, 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:
Name Age Position
Neil I. Jowell 67 Director and Chairman of TGH, TEM, TL, TCC and TFS
John A. Maccarone 56 President, CEO and Director of TGH, TEM, TL, TCC and TFS
James E. Hoelter 61 Director of TGH, TEM, TL, TCC and TFS
Alex M. Brown 62 Director of TGH, TEM, TL, TCC and TFS
Harold J. Samson 79 Director of TGH and TL
Philip K. Brewer 44 Senior Vice President - Asset Management Group and Director of TEM and TL
Robert D. Pedersen 41 Senior Vice President - Leasing Group, Director of TEM
Ernest J. Furtado 45 Senior Vice President , CFO and Secretary of TGH, TEM, TL, TCC and TFS,
Director of TEM, TCC and TFS
Wolfgang Geyer 47 Regional Vice President - Europe
Mak Wing Sing 43 Regional Vice President - South Asia
Masanori Sagara 45 Regional Vice President - North Asia
Stefan Mackula 48 Vice President - Equipment Resale
Anthony C. Sowry 48 Vice President - Corporate Operations and Acquisitions
Richard G. Murphy 48 Vice President - Risk Management
Janet S. Ruggero 52 Vice President - Administration and Marketing Services
Jens W. Palludan 50 Regional Vice President - Americas and Logistics
Isam K. Kabbani 66 Director of TGH and TL
James A. C. Owens 61 Director of TGH and TL
S. Arthur Morris 67 Director of TGH, TEM and TL
Dudley R. Cottingham 49 Assistant Secretary, Vice President and Director of TGH, TEM and TL
Nadine Forsman 33 Controller of TCC and TFS
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 all of these corporations. 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), which is 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 has served as such since
the Textainer Group's reorganization and formation of these companies in 1993.
He is also 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 is Senior Vice President - Asset Management Group and
director of TEM and TL. He 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 TEM, 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 Europe, Africa
and the Middle East/Persian Gulf. 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), Southeast Asia and
Australia/New Zealand. 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.
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 - Americas and Logistics, responsible for container leasing
activities in North/South America and 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 has served as such
since the Textainer Group's reorganization and formation of these companies in
1993. 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 since been his principal business activity. 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 and has served as director of TGH and TL
since 1998. 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 is a
Certified Public Accountant and holds a B.S. in Accounting and Finance from San
Francisco State University.
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
reviews the equipment leasing operations of the Partnership on a regular basis
with emphasis on matters involving equipment purchases, 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 establishes credit limits
for every lessee and potential lessee of equipment and periodically reviews
these limits. In setting such limits, the Credit Committee considers 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
reviews 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 TFS, 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.
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 investment of the Registrant.
(b) Security Ownership of Management.
As of January 1, 2001:
Number
Name of Beneficial Owner Of Units % All Units
------------------------ -------- -----------
James E. Hoelter 2,500 0.17%
John A. Maccarone 1,915 0.13%
----- -----
Officers and Management as a Group 4,415 0.30%
===== =====
(c) Changes in Control.
Inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Amounts in thousands)
(a) Transactions with Management and Others.
At December 31, 2000 and 1999, due from affiliates, net, is
comprised of:
2000 1999
---- ----
Due from affiliates:
Due from TEM...................... $156 $161
--- ---
156 161
--- ---
Due to affiliates:
Due to TCC........................ 4 3
Due to TFS........................ 26 28
--- ---
30 31
--- ---
Due from affiliates, net $126 $130
=== ===
These amounts receivable from and payable to affiliates were
incurred in the ordinary course of business between the Partnership
and its affiliates and represent timing differences in the accrual
and payment of expenses and fees and in the accrual and remittance
of net rental revenues and container sales proceeds from TEM.
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:
2000 1999 1998
---- ---- ----
TAS........................................... $ - $ - $ 1
==== ==== ====
Management fees in connection with the operations of the Registrant:
2000 1999 1998
---- ---- ----
TEM........................................... $221 $259 $309
TFS........................................... 97 142 124
---- ---- ----
Total......................................... $318 $401 $433
==== ==== ====
Reimbursement for administrative costs in connection with the
operations of the Registrant:
2000 1999 1998
---- ---- ----
TEM........................................... $121 $147 $211
TFS........................................... 17 18 22
---- ---- ----
Total......................................... $138 $165 $233
==== ==== ====
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Management" and "Compensation of General Partners and Affiliates"
sections of the Registrant's Prospectus, as supplemented, and the Notes to
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, 2000 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 Post-effective
Amendment No. 2 to the Registrant's Registration Statement
(No. 33-16447), as filed with the Commission on November 30,
1988, as supplemented by Supplement No. 6 as filed with the
Commission under Rule 424(b)(3) of the Securities Act of 1933
on October 16, 1989.
(ii) The Registrant's limited partnership agreement, Exhibit A to
the Prospectus.
(b) During the year ended 2000, no reports on Form 8-K have been filed
by the Registrant.
Independent Auditors' Report on Supplementary Schedule
The Partners
TCC Equipment Income Fund:
Under the date of February 16, 2001, we reported on the balance sheets of TCC
Equipment Income Fund (the Partnership) as of December 31, 2000 and 1999, and
the related statements of earnings, partners' capital and cash flows for each of
the years in the three-year period ended December 31, 2000, which are included
in the 2000 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 16, 2001
TCC EQUIPMENT INCOME FUND
(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
For the year ended December 31, 2000:
Allowance for
doubtful accounts $ 178 $ (22) $ - $ (53) $ 103
------ ------ --------- -------- ------
Recovery cost reserve $ 33 $ 23 $ - $ (18) $ 38
------ ------ --------- -------- ------
Damage protection
plan reserve $ 105 $ 62 $ - $ (103) $ 64
------ ------ --------- -------- ------
For the year ended December 31, 1999:
Allowance for
doubtful accounts $ 134 $ 51 $ - $ (7) $ 178
------ ------ --------- -------- ------
Recovery cost reserve $ 22 $ 31 $ - $ (20) $ 33
------ ------ --------- -------- ------
Damage protection
plan reserve $ 83 $ 149 $ - $ (127) $ 105
------ ------ --------- -------- ------
For the year ended December 31, 1998:
Allowance for
doubtful accounts $ 635 $ (40) $ (391) $ (70) $ 134
------ ------ --------- -------- ------
Recovery cost reserve $ 28 $ 53 $ - $ (59) $ 22
------ ------ --------- -------- ------
Damage protection
plan reserve $ 101 $ 103 $ - $ (121) $ 83
------ ------ --------- -------- ------
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.
TCC EQUIPMENT INCOME FUND
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By
____________________________________
Ernest J. Furtado
Senior Vice President
Date: March 20, 2001
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 Financial
Services Corporation, the managing general partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
_______________________________ Senior Vice President, CFO March 20, 2001
Ernest J. Furtado (Principal Financial and
Accounting Officer),
Secretary and Director
_______________________________ President (Principal Executive March 20, 2001
John A. Maccarone Officer), and Director
_______________________________ Chairman of the Board of Director March 20, 2001
Neil I. Jowell
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.
TCC EQUIPMENT INCOME FUND
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By/s/Ernest J. Furtado
___________________________________________
Ernest J. Furtado
Senior Vice President
Date: March 20, 2001
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 Financial
Services Corporation, the managing general partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
/s/ Ernest J. Furtado Senior Vice President, CFO March 20, 2001
_________________________________ (Principal Financial and
Ernest J. Furtado Accounting Officer),
Secretary and Director
/s/ John A. Maccarone President (Principal Executive March 20, 2001
_________________________________ Officer), and Director
John A. Maccarone
/s/ Neil I. Jowell Chairman of the Board and Director March 20, 2001
_________________________________
Neil I. Jowell