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TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 26, 1998
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund V,
L.P. (the "Partnership") the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
The financial statements included in the enclosed Annual Report on Form 10K 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
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 0-25946
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(Exact name of Registrant as specified in its charter)
California 93-1122553
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 California Street, 16th Floor, San Francisco, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code:
(415) 434-0551
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS (THE "UNITS")
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
Documents Incorporated by Reference
The Registrant's Prospectus as contained in Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement, as filed with the Commission on April 8,
1994, as supplemented by Post-Effective Amendment No. 2 as filed under Section
8(c) of the Securities Exchange Act of 1933 on May 5, 1995 and as supplemented
by Supplement No. 5 as filed under Rule 424(b) of the Securities Exchange Act of
1933 on March 18, 1996.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
For more detailed information about the Registrant's business, see "Business of
the Partnership" in the Registrant's Prospectus as supplemented.
(a) General Development of Business
The Registrant is a California Limited Partnership formed on July 15,
1993 to purchase, own, operate, lease, and sell equipment (the
Equipment) used in the containerized cargo shipping industry. The
Registrant commenced offering units representing limited partnership
interests (Units) to the public on May 1, 1994 in accordance with its
Registration Statement and ceased to offer such Units as of April 29,
1996. The Registrant raised a total of $89,305,000 from the offering.
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. Buying
the cars at fleet prices and selling them in the secondary
market are also key elements to the successful operation of a
rental car business.
Container leasing companies and the Registrant operate in a
similar manner by owning and leasing a worldwide fleet of new
and used transportation containers to international shipping
companies hauling various types of goods among numerous trade
routes. In addition to paying a daily rental rate, all lessees
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, special
handling fees and/or drop-off charges may also be charged in
certain markets. Container leasing companies compete with one
another on the basis of lease rates, availability of equipment
and services provided. Revenues and profits are generated by
maintaining the highest lease rates and the highest equipment
utilization factors allowed by market conditions. Rental
revenues from the Registrant's containers result primarily
under master leases which are comparable to the corporate rate
agreements used by rental car companies. The master leases
provide that container leasing customers, 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 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.
Rental car companies usually purchase only new cars, but since
containers are completely standardized, a used container in
serviceable condition usually rents for the same rate as a new
one although the purchase price is lower. For this reason, the
Registrant occasionally buys used containers. The Registrant
also sells containers in the course of its business if
opportunities arise or at the end of the container's useful
life. See "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 had rental revenue for the year ended
December 31, 1997 which was 10% or more of the total rental
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 92% of the total
equipment held by all container leasing companies. The top two
container leasing companies combined control approximately
47% 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 8% of the
equipment held by all container leasing companies. 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.
Additionally, shipping alliances and other operational
consolidations among shipping lines have recently allowed
shipping lines to operate with fewer containers, thereby
decreasing the demand for leased containers. This decrease
in demand along with the entry of new leasing company
competitors offering low container rental rates to shipping
lines has increased competition among lessors such as the
Registrant.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Capital Corporation
(TCC), the managing General Partner of the Registrant, is
responsible for the overall management of the business of the
Registrant and has 7 employees. Textainer Equipment Management
Limited (TEM), an Associate General Partner, is responsible
for the management of the leasing operations of the Registrant
and has a total of 149 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 12.23%, 10.63% and 3.6% of the Registrant's rental
revenue during the years ended December 31, 1997, 1996 and 1995,
respectively, was derived from operations sourced or terminated
domestically. These percentages do not reflect the proportion of the
Partnership's income from operations generated in domestic waterways.
Substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations. See "Business of
the Partnership", and for a discussion of the risks of leasing
containers for use in world trade, "Risk Factors" in the Registrant's
Prospectus, as supplemented.
ITEM 2 - PROPERTIES
As of December 31, 1997, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 10,231
40-foot standard dry freight containers 10,295
40-foot high cube dry freight containers 3,762
--------
24,288
========
During December 1997, approximately 88% of these shipping containers were on
lease to international shipping companies and the balance were being stored at
shipping container manufacturers' locations and at a large number of storage
depots located worldwide.
For information about the Registrant's property, see "Business of the
Partnership" in the Registrant's Prospectus, as supplemented.
ITEM 3 - LEGAL PROCEEDINGS
The Registrant is not subject to any legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Inapplicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 201:
(a) Market Information.
(a)(1)(i) The Registrant's limited partnership units are not publicly
traded and there is no established trading market for such
Units. The Registrant has a program whereby limited partners
may redeem Units for a specified redemption price. The program
operates only when the Managing General Partner determines,
among other matters, that 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, 1998, there were 4,807 holders of record of
limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data".
ITEM 701: Inapplicable.
ITEM 6 - SELECTED FINANCIAL DATA
(Amounts in thousands except for per unit amounts)
Period from July
15, 1993
Year Ended December 31, (inception) to
December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Rental income................................................. $ 14,012 $ 13,588 $ 10,467 $ 3,783 $ 318
Net earnings (loss)........................................... $ 3,961 $ 3,834 $ 3,116 $ 367 $ (136)
Net earnings per unit of limited partnership interest......... $ 0.86 $ 0.93 $ 1.71 $ 1.44 N/A
Distributions per unit of limited partnership interest........ $ 1.87 $ 2.02 $ 1.97 $ 0.81 N/A
Distributions per unit of limited partnership interest
representing a return of capital.......................... $ 1.01 $ 1.09 $ 0.26 N/A N/A
Total assets.................................................. $ 69,609 $ 73,927 $ 70,558 $ 32,265 $ 9,830
Outstanding balance on revolving credit line.................. $ - $ - $ 10,000 $ 15,000 $ 6,465
Intercompany borrowings for Equipment purchases............... $ 318 $ - $ - $ - $ -
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, 1997,
1996 and 1995. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
Liquidity and Capital Resources
From May 1, 1994 until April 29, 1996, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $5,000 on August 23, 1994 and on April 29, 1996, the
Partnership's offering of limited partnership interests was closed at $89,305.
From time to time, the Partnership redeems units from limited partners for a
specified redemption value. The redemption price is set by formula and varies
depending on length of time the Units are outstanding. 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. Because any excess cash was used to purchase new
Equipment, the Partnership did not redeem any Units for the year ended December
31, 1997.
The Partnership invests working capital and cash flow from operations prior to
its distribution to the partners in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
During the year ended December 31, 1997, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1996
through November 1997 in the amount of $8,316. These distributions represent a
return of 10% on original capital (measured on an annualized basis) on each unit
for December 1996 through March 1997 and 9% of original capital (measured on an
annualized basis) on each unit for April 1997 through November 1997. On a GAAP
basis, $4,488 of these distributions were a return of capital and the balance
was from net earnings. On a cash basis $8,178 of these distributions were from
operations and the balance was from reserves.
During the years ended December 31, 1997 and 1996, the Partnership had net cash
provided by operating activities of $8,178 and $8,533, respectively. This
decrease of $355 was primarily attributable to an increase in accounts
receivable which was primarily due to a deterioration in payment performance of
one of its lessees, which leased 9% of the Partnership's Equipment portfolio
during 1997.
Net cash used in investing activities (the purchase and sale of Equipment) for
the year ended December 31, 1997 was $906 compared with $10,068 for the same
period in 1996. This difference is due to the fact that, on a cash basis, the
Partnership purchased more Equipment in the year ended December 31, 1996 than in
the comparable period in 1997, primarily due to available cash from fund raising
activity through April of 1996. The Partnership sells Equipment at the end of
its estimated useful life. Consistent with its investment objectives and the
General Partners' determination that Equipment can be profitably sold or bought
at any time, the Partnership intends to reinvest all or a significant amount of
proceeds from future Equipment sales in additional Equipment. Such additional
units of Equipment purchased may not, however, equal the number of units sold.
At December 31, 1997, the Partnership had no commitments to purchase Equipment.
During 1997 the Partnership borrowed $318 from a general partner which was used
to purchase Equipment. It is the policy of the Partnership and the General
Partners to charge interest on intercompany balances arising from the
Partnership's acquisition of Equipment which are outstanding for more than one
month. Interest is charged to the Partnership at a rate not greater than the
General Partners' own cost of funds. There was $3 of interest charged by the
general partner during the year ended December 31, 1997. The interest rate in
effect at December 31, 1997 was 8.5%. The Partnership anticipates repaying the
loan in 1998 with cash provided by operations and proceeds from the sale of
Equipment.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees to
affiliates, and reimbursement of administrative expenses was directly related to
the size of the container fleet ("inventory") during the years ended December
31, 1997, 1996 and 1995, as well as certain other factors as discussed below.
The following is a summary of the size of the container fleet (in units)
available for lease during those periods:
1997 1996 1995
---- ---- ----
Opening inventory................... 23,952 21,345 8,797
Closing inventory................... 24,288 23,952 21,345
Average............................. 24,120 22,649 15,071
The 6% increase in average inventory from 1996 to 1997 was due to the purchase
of additional containers with proceeds from the sale of Equipment, intercompany
borrowings and reserves. The growth in average inventory of 50% between 1995 and
1996, is due to the buildup of the Partnership's portfolio as the initial gross
proceeds raised were invested in Equipment.
Rental income and direct container expenses are also affected by lease
utilization percentages for the Equipment which were 85%, 82% and 87% on average
during the years ended December 31, 1997, 1996 and 1995, respectively. In
addition, rental income is affected by daily rental rates.
The following is a comparative analysis of the results of operations for the
years ended December 31, 1997, 1996 and 1995.
The Partnership's income from operations for the years ended December 31, 1997
and 1996 was $3,853 and $3,826, respectively, on rental income of $14,012 and
$13,588, respectively. The increase in rental income of $424, an increase of 3%
from the year ended December 31, 1996 to the equivalent period in 1997, was
primarily attributable to income from container rentals, the major component of
total revenue, which increased by $271, or 2%, from 1996 to 1997. Income from
container rentals is largely dependent upon three factors: Equipment available
for lease (average inventory), average on-hire (utilization) percentage, and
average daily rental rates. Average inventory increased 6%, average on-hire
utilization increased by 4% and average daily rental rates decreased 4% from the
year ended December 31, 1996 to the year ended December 31, 1997.
The Partnership's income from operations for the years ended December 31, 1996
and 1995 was $3,826 and $3,944, respectively, on rental income of $13,588 and
$10,467, respectively. The increase in rental income was primarily attributable
to income from container rentals which increased $3,273, or 35%, which increased
primarily due to the increase in the size of the average container fleet, offset
by lower utilization and lower daily rental rates. Average inventory increased
50% from the year ended December 31, 1996 to the same period in 1997.
Utilization decreased 6% and average daily rental rates decreased 4% between
periods.
The declines in container utilization during 1996 and part of 1997 and in rental
rates during 1996 and 1997 for the fleet managed by Textainer Equipment
Management Limited (TEM) were primarily due to decreased demand for leased
containers and increased competition. The decrease in demand for leased
containers resulted from changes in the business of shipping line customers
consisting primarily of (i) over-capacity resulting from the 1995 and 1996
additions of new, larger ships to the existing container ship fleet at a rate in
excess of the growth rate in containerized cargo trade; (ii) shipping line
alliances and other operational consolidations that have allowed shipping lines
to operate with fewer containers; and (iii) shipping lines reducing their ratio
of leased versus owned containers by purchasing containers. This decreased
demand, along with the entry of new leasing company competitors offering low
container rental rates to shipping lines, resulted in downward pressure on
rental rates, and also caused leasing companies to offer higher leasing
incentives and other discounts to shipping lines.
Utilization for the fleet managed by TEM increased during the second and third
quarters of 1997 and began declining again during the fourth quarter of 1997 and
into the beginning of 1998. Rental rates for the fleet managed by TEM continued
to decline into the beginning of 1998. For the near term, the General Partners
do not foresee any changes in existing market conditions and caution that both
utilization and lease rates could continue to decline, adversely affecting the
Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of Equipment under short-term operating leases.
The balance of rental income consists of other lease-related items, primarily
income from charges to the lessees under a damage protection plan (DPP), income
for handling and returning containers and income from charges to the lessees for
pick-up of containers from prime locations less credits granted to lessees for
leasing containers from less desirable locations (location income). For the year
ended December 31, 1997, the total of these other rental income items was
$1,138, an increase of $153 from the equivalent period in 1996. The increase was
primarily due to increases in handling and DPP income of $114 and $56,
respectively, partially offset by a decrease in location income of $20. Handling
income increased due to an increase in container movement and to a higher
average price charged per container during the year ended December 31, 1997,
compared to 1996. The increase in DPP income resulted from the increase in the
number of lessees under DPP, slightly offset by a lower average DPP price
charged per container during 1997 as compared to 1996. Location income decreased
primarily due to lower demand, which increased credits to lessees for picking up
containers from less desirable locations. This was offset by an increase in
average drop-off charges per container which increased drop-off charges to
lessees.
For the year ended December 31, 1996, the total of these other rental income
items was $985, a decrease of $152 from the equivalent period in 1995. The
primary component of this net decrease was a decrease in location income of
$375, partly offset by an increase in DPP of $146. The decrease in location
income is largely due to increased credits granted to lessees for picking up
containers from less desirable locations, which was offset by the effect of an
increase in average drop-off charges per container. The increase in DPP is
primarily due to the increase in the number of lessees under the plan.
Direct container expenses increased $277, or 11%, from the year ended December
31, 1996, to the same period in 1997. The primary components of this increase
were increases in repositioning and handling expenses of $275 and $118,
respectively, offset by a decrease in DPP expense of $136 between periods.
Repositioning expense increased due to a greater number of units being
transported from surplus locations to higher demand locations. The increase in
handling expense resulted from the greater per unit average cost incurred in
handling the containers, an to an increase in the number of containers being
handled during 1997 when compared with 1996. The decrease in DPP expense was due
to a decrease in the average repair cost per container between the two periods.
Direct container expenses increased $1,128, or 79%, from the year ended December
31, 1995, to the same period in 1996. The primary components of this increase
were increases in storage, repositioning and DPP expenses of $604, $170 and
$145, respectively, which were primarily due to the increase in fleet size.
Bad debt expense decreased $12, or 9%, from the year ended December 31, 1996 to
1997 due to lower reserve requirements. Bad debt expense increased $17, or 15%,
from the year ended December 31, 1995 to 1996 primarily due to the increase in
fleet size. As a percentage of gross revenue, bad debt expense was consistent at
1% for the years ended 1997, 1996 and 1995.
Depreciation and amortization expenses increased $110, or 2%, from the year
ended December 31, 1996 to 1997 primarily due to the increase in the average
fleet size. Depreciation and amortization expenses increased $1,498, or 47%,
from the year ended December 31, 1995 to 1996 primarily as a result of the
increase in fleet size due to the build up of the Fleet.
Management fees to affiliates increased $23, or 2%, from the year ended December
31, 1996 to the equivalent period in 1997 due to an increase in equipment
management fees, offset by a slight decrease in incentive management fees.
Equipment management fees, which are based primarily on gross revenue, increased
as a result of the increase in rental income and were approximately 7% of gross
revenue for the periods. Incentive management fees, which are based on the
Partnership's limited and general partner distribution percentage and partners'
capital, decreased $8, or 2% primarily due to the decrease in the limited
partner distribution rate from 10% to 9% in April 1997.
Management fees to affiliates increased $406, or 45%, from the year ended
December 31, 1995 to the equivalent period in 1996 due to an increase in
equipment and incentive management fees. Equipment management fees, which are
based primarily on gross revenue, increased as a result of the increase in
rental income and were approximately 7% of gross revenue for the period.
Incentive management fees, which are based on the Partnership's limited and
general partner distribution percentage and partners' capital, increased $189,
or 114% due to the increase in partners capital.
General and administrative costs to affiliates remained comparable from the year
ended December 31, 1996, to the same period in 1997. General and administrative
costs to affiliates increased by $105, or 14%, from the year ended December 31,
1996, compared to the same period in 1995 primarily due to an increase in the
overhead costs allocated by TEM.
Other income provided $108 of additional income for the year ended December 31,
1997, representing an increase of $100 over the equivalent period in 1996. The
increase was due to an increase in interest income of $133, offset by a decrease
in gain from sale of Equipment of $33.
Other income provided $8 of additional income for the year ended December 31,
1996, representing an increase of $836 over the equivalent period in 1995. The
increase was due to a $801 decrease in interest expense, accompanied by an
increase in gain from sale of Equipment of $35.
Net earnings per limited partnership unit decreased to $0.86 from $0.93 for the
year ended December 31, 1997, as compared to the same period in 1996. Despite
the growth in limited partner net earnings, which increased from $3,748 for the
year ended December 31, 1996, to $3,828 for the same period in 1997, the average
outstanding units increased at a greater rate, resulting in a decrease in
earnings on a per unit basis.
Net earnings per limited partnership unit decreased from $1.71 to $0.93 from the
year ended December 31, 1995, as compared to the same period in 1996. Despite
the growth in limited partner net earnings, which increased from $3,078 for the
year ended December 31, 1995, to $3,748 for the same period in 1996, the average
outstanding units increased at a greater rate, resulting in a decrease in
earnings on a per unit basis.
Many computer systems may experience difficulty processing dates beyond the year
1999 and, as such, some computer hardware and software will need to be modified
prior to the year 2000 to remain functional. The Partnership's and General
Partner's certain core internal systems that have recently been implemented are
year 2000 compliant. The remaining core internal systems are scheduled to be
revised to be year 2000 compliant by the end of 1998. Based on its initial
evaluation, the Partnership and the General Partners do not believe that the
cost of remedial actions relating to these systems will have a material adverse
effect on the Partnership's results of operations and financial condition.
Additionally, the Partnership and the General Partners are also completing a
preliminary assessment of year 2000 issues not related to its core systems,
including issues surrounding systems that interface with external third parties.
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 Equipment. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep the Equipment under lease, rather than the geographic location
of the Equipment or the domicile of the lessees. The Equipment is generally
operated on the international high seas rather than on domestic waterways. The
Equipment is subject to the risk of war or other political, economic or social
occurrence where the Equipment is used, which may result in the loss of
Equipment, 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, 1997 which would result in such a
risk materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning Equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Equipment, 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 Partnership's business.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached pages 11 to 22.
Independent Auditors' Report
The Partners
Textainer Equipment Income Fund V, L.P.:
We have audited the accompanying balance sheets of Textainer Equipment Income
Fund V, L.P. (a California limited partnership) as of December 31, 1997 and
1996, and the related statements of earnings, partners' capital and cash flows
for each of the years in the three-year period ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
V, L.P. as of December 31, 1997 and 1996, 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, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
San Francisco, California
February 18, 1998
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
(Amounts in thousands)
1997 1996
---------------- ----------------
Assets
Container rental equipment, net of accumulated
depreciation of $13,833 (1996: $9,118) $ 66,066 $ 69,985
Cash 108 943
Accounts receivable, net of allowance
for doubtful accounts of $387 (1996: $269) 3,220 2,829
Organization costs, net of accumulated
amortization of $175 (1996: $122) 87 140
Prepaid expenses 128 30
---------------- ----------------
$ 69,609 $ 73,927
================ ================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 274 $ 333
Accrued liabilities 90 -
Accrued recovery costs (note 1(k)) 89 54
Accrued damage protection plan costs (note 1(l)) 340 361
Due to affiliates, net (note 2) 412 154
Deferred quarterly distribution (note 1(g)) 114 124
Equipment purchases payable - 169
---------------- ----------------
Total liabilities 1,319 1,195
---------------- ----------------
Partners' capital:
General partners 48 2
Limited partners 68,242 72,730
---------------- ----------------
Total partners' capital 68,290 72,732
---------------- ----------------
$ 69,609 $ 73,927
================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
Years ended December 31, 1997, 1996 and
1995 (Amounts in thousands except for unit and per
unit amounts)
1997 1996 1995
----------------- ----------------- -----------------
Rental Income $ 14,012 $ 13,588 $ 10,467
----------------- ----------------- -----------------
Costs and expenses:
Direct container expenses 2,838 2,561 1,433
Bad debt expense 116 128 111
Depreciation and amortization 4,825 4,715 3,217
Professional fees 38 50 57
Management fees to affiliates (note 2) 1,328 1,305 899
General and administrative costs to affiliates (note 2) 860 862 757
Other general and administrative costs 154 141 49
----------------- ----------------- -----------------
10,159 9,762 6,523
----------------- ----------------- -----------------
Income from operations 3,853 3,826 3,944
----------------- ----------------- -----------------
Other income (expense):
Interest income (expense), net 34 (99) (900)
Gain on sale of containers 74 107 72
----------------- ----------------- -----------------
108 8 (828)
----------------- ----------------- -----------------
Net earnings $ 3,961 $ 3,834 $ 3,116
================= ================= =================
Allocation of net earnings (note 1(g)):
General partners $ 133 $ 86 $ 38
Limited partners 3,828 3,748 3,078
----------------- ----------------- -----------------
$ 3,961 $ 3,834 $ 3,116
================= ================= =================
Limited partners' per unit share of net earnings $ 0.86 $ 0.93 $ 1.71
================= ================= =================
Limited partners' per unit share of distributions $ 1.87 $ 2.02 $ 1.97
================= ================= =================
Weighted average number of limited
partnership units outstanding (note 1(m)) 4,454,893 4,041,267 1,796,771
================= ================= =================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1997, 1996 and 1995
(Amounts in thousands)
Partners' Capital
----------------------------------------------------------
General Limited Total
----------------- ----------------- -----------------
Balances at December 31, 1994 $ 2 16,062 $ 16,064
Proceeds from sale of limited partnership units - 48,807 48,807
Syndication and offering costs - (6,407) (6,407)
Distributions (38) (3,533) (3,571)
Net earnings 38 3,078 3,116
----------------- ----------------- -----------------
Balances at December 31, 1995 2 58,007 58,009
----------------- ----------------- -----------------
Proceeds from sale of limited partnership units - 21,848 21,848
Syndication and offering costs - (2,553) (2,553)
Distributions (86) (8,168) (8,254)
Redemptions (note 1(n)) - (152) (152)
Net earnings 86 3,748 3,834
----------------- ----------------- -----------------
Balances at December 31, 1996 2 72,730 72,732
----------------- ----------------- -----------------
Distributions (87) (8,316) (8,403)
Net earnings 133 3,828 3,961
----------------- ----------------- -----------------
Balances at December 31, 1997 $ 48 $ 68,242 $ 68,290
================= ================= =================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(Amounts in thousands)
1997 1996 1995
--------------- --------------- --------------
Cash flows from operating activities:
Net earnings $ 3,961 $ 3,834 $ 3,116
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 4,772 4,663 3,165
Increase in allowance for doubtful accounts 118 118 108
Amortization of organization costs 53 52 52
Gain on sale of equipment (74) (107) (72)
Changes in assets and liabilities:
Increase in accounts receivable (509) (140) (1,561)
Increase in prepaid expenses (98) (5) (10)
Increase (decrease) in accounts payable and accrued liabilitie 31 (103) 58
Increase in accrued recovery costs 35 50 2
(Decrease) increase in accrued damage protection plan costs (21) 129 124
(Decrease) increase in due to affiliates, net (90) 42 (112)
--------------- --------------- --------------
Net cash provided by operating activities 8,178 8,533 4,870
--------------- --------------- --------------
Cash flows from investing activities:
Equipment purchases (1,365) (10,486) (43,946)
Proceeds from sale of equipment 459 418 307
Cash collateral deposit - - 2,700
--------------- --------------- --------------
Net cash used in investing activities (906) (10,068) (40,939)
--------------- --------------- --------------
Cash flows from financing activities:
Proceeds from sales of limited partnership units - 22,084 48,571
Syndication and offering costs - (2,644) (6,396)
Distributions to partners (8,425) (8,182) (3,501)
Redemptions of limited partnership units - (152) -
Repayments under revolving credit line - (10,000) (5,000)
Borrowings from affiliates 318 - -
--------------- --------------- --------------
Net cash (used in) provided by financing activities (8,107) 1,106 33,674
--------------- --------------- --------------
Net decrease in cash (835) (429) (2,395)
Cash at beginning of period 943 1,372 3,767
--------------- --------------- --------------
Cash at end of period $ 108 $ 943 $ 1,372
=============== =============== ==============
Interest paid during the period $ - $ 280 $ 1,187
=============== =============== ==============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Statements of Cash Flows--Continued
Years ended December 31, 1997, 1996 and 1995
(Amounts in thousands)
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of Equipment purchases, distributions
to partners, syndication and offering costs, proceeds from sale of Equipment and
proceeds from sale of limited partnership units which had not been paid or
received by the Partnership as of December 31, 1997, 1996, 1995 and 1994,
resulting in differences in amounts recorded and amounts paid or received by the
Partnership, as shown in the Statements of Cash Flows.
1997 1996 1995 1994
---- ---- ---- ----
Equipment purchases included in:
Due to affiliates.......................................... $ 39 $ 4 $ 453 $ 145
Equipment purchases payable................................ - 169 1,168 245
Distributions to partners included in:
Due to affiliates.......................................... 20 32 4 -
Deferred quarterly distribution............................ 114 124 80 14
Syndication and offering costs included in:
Due to affiliates.......................................... - - 91 80
Proceeds from sale of Equipment included in:
Due from affiliates........................................ 51 58 53 17
Proceeds from sale of limited partnership units included in:
Accounts receivable........................................ - - 236 -
The following table summarizes the amounts of Equipment purchases, distributions
to partners, syndication and offering costs, proceeds from sale of Equipment and
proceeds from the sale of limited partnership units recorded by the Partnership
and the amounts paid or received as shown on the Statements of Cash Flows for
the years ended December 31, 1997, 1996 and 1995.
1997 1996 1995
---- ---- ----
Equipment purchases recorded........................................... $ 1,231 $ 9,038 $45,177
Equipment purchases paid............................................... 1,365 10,486 43,946
Distributions to partners declared..................................... 8,403 8,254 3,571
Distributions to partners paid......................................... 8,425 8,182 3,501
Syndication and offering costs recorded................................ - 2,553 6,407
Syndication and offering costs paid.................................... - 2,644 6,396
Proceeds from sale of Equipment recorded............................... 452 423 343
Proceeds from sale of Equipment received............................... 459 418 307
Proceeds from sales of limited partnership units recorded.............. - 21,848 48,807
Proceeds from sales of limited partnership units received.............. - 22,084 48,571
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California limited partnership)
Notes to Financial Statements
Years ended December 31, 1997, 1996 and 1995
(Amounts in thousands except for unit and per unit
amounts)
Note 1. Summary of Significant Accounting Policies
(a) Nature of Operations
Textainer Equipment Income Fund V, L.P. (TEIF V or the Partnership), a
California limited partnership, with a maximum life of 20 years, was
formed on July 15, 1993. The Partnership was formed to engage in the
business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, marine vessels, trailers and
other container related equipment (the Equipment). TEIF V offered units
representing limited partnership interests (Units) to the public from May
1, 1994 until April 29, 1996, the close of the offering period, when a
total of 4,465,263 Units had been purchased for a total of $89,305. At
December 31, 1995 and 1994, 3,369,810 and 929,461 limited partnership
units had been purchased totaling $67,396 and $18,589, respectively.
Limited partners with capital contributions representing recorded capital
of the Partnership of $4,738 and $3,614 at December 31, 1995 and 1994,
respectively, were admitted as limited partners on January 1, 1996 and
1995, respectively. The purchase price of such Units was $20 per Unit.
Textainer Capital Corporation (TCC) is the managing general partner of the
Partnership. Textainer Equipment Management Limited (TEM) and Textainer
Limited (TL) are the associate general partners of the Partnership. The
managing general partner and associate general partners are collectively
referred to as the General Partners. The General Partners also act in this
capacity for other limited partnerships. Textainer Acquisition Services
Limited (TAS) is an affiliate of the General Partners which performs
services related to the acquisition of Equipment outside the United States
on behalf of the Partnership. TCC, TEM, TL and TAS are subsidiaries of
Textainer Group Holdings Limited (TGH). TCC Securities Corporation (TSC),
a licensed broker and dealer in securities and an affiliate of the General
Partners, was the managing sales agent for the offering of Units for sale.
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
financing 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
Equipment 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, 1997 and 1996, the fair value of the
Partnership's financial instruments approximate the related book value of
such instruments.
(e) Equipment
The Equipment is recorded at the cost of the assets purchased, which
includes acquisition fees, less depreciation charged. Depreciation of new
Equipment is computed using the straight-line method over its estimated
useful life of 12 years to a 28% salvage value. Used Equipment is
depreciated based upon its 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 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", the Partnership periodically compares the carrying
value of the Equipment 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
fair value. There were no reductions to the carrying value of the
Equipment made during 1997, 1996 or 1995.
(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 Equipment. The Partnership's
business risk in its foreign operations lies with the creditworthiness of
the lessees rather than the geographic location of the Equipment 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, 1997 and 1995. For the year ended
December 31, 1996, revenue from one lessee accounted for 10.11% of the
Partnership's revenues. No other single lessee accounted for more than 10%
of the Partnership's revenues.
(g) Allocation of Net Earnings and Partnership Distributions
In accordance with the Partnership Agreement, net earnings or losses and
distributions are allocated 1% to the general partners and 99% to the
limited partners. Gross income is specially allocated to the General
Partners to the extent that their capital accounts' deficits exceed the
portion of syndication and offering costs allocated to them.
Notwithstanding the above, the special allocation of gross income and
restoration of deficit general partner capital accounts was deferred by
Partnership Agreement amendment until the partnership's complete
syndication which occurred during the year ended December 31, 1996. On
termination of the Partnership, the General Partners shall be allocated
gross income equal to their allocations of syndication and offering costs.
Actual cash distributions to the Limited Partners differ from the
allocated net earnings as presented in these financial statements because
cash distributions are based on cash available for distribution. Cash
distributions are paid to the general and limited partners on a monthly
basis in accordance with the provisions of the Partnership Agreement. Some
limited partners have elected to have their distributions paid quarterly.
The Partnership has recorded these distributions of $114 and $124 as an
accrued liability at December 31, 1997 and 1996, respectively.
(h) Income Taxes
The Partnership is not subject to income taxes. Accordingly, no provision
for income taxes has been made. The Partnership files federal and state
information returns only. Taxable income or loss is reportable by the
individual partners.
(i) Organization Costs
Organization costs, which resulted from the formation of the Partnership
were capitalized and are being amortized on a straight-line basis over
five years.
(j) Acquisition Fees
In accordance with the Partnership Agreement, acquisition fees equal to 5%
of Equipment purchase price are paid to TAS (note 2). These fees are
capitalized as part of the cost of the Equipment.
(k) Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess of
estimated insurance proceeds. At December 31, 1997 and 1996, the amounts
accrued were $89 and $54, respectively.
(l) Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
Equipment. 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 revenues when
earned and provide a reserve sufficient to cover the Partnership's
obligation for estimated future repair costs. DPP expenses are included in
direct container expenses in the Statements of Earnings and the related
reserve at December 31, 1997 and 1996, was $340 and $361, 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 the years ended December 31, 1997, 1996 and 1995 which was
4,454,893, 4,041,267, and 1,796,771, respectively.
(n) Redemptions
The following redemption offerings were consummated by the Partnership
during the year ended December 31, 1996:
Units Average
Redeemed Redemption Price Amount Paid
Year ended December 31, 1996:
3rd quarter.............. 5,576 $18.18 $ 102
4th quarter.............. 2,875 $17.57 50
----- -----
Balance at December 31, 1996 8,451 $17.97 $ 152
----- ----
Partnership to date.................. 8,451 $17.97 $ 152
===== ====
There were no redemptions during 1997. The redemption price is fixed by
formula, and varies depending on the length of time the units have been
outstanding.
(o) Reclassifications
Certain reclassifications, not affecting net earnings, have been made to
prior years' amounts in order to conform with the 1997 financial statement
presentation.
Note 2. Transactions with Affiliates
During the offering period, the Partnership paid a managing sales agent
fee to TSC of up to 9% of the gross proceeds from the sale of limited
partnership units, from which TSC paid commissions to independent
participating broker/dealers who participated in the offering. The amount
of the managing sales agent fee and the broker/dealers' commissions are
determined by the volume of Units sold to each investor by the
broker/dealers. Additionally, the General Partners and TSC are entitled to
be reimbursed by the Partnership for certain organizational and offering
costs, incurred in connection with the organization of the Partnership, up
to a maximum of 6% of gross proceeds raised as allowed by the Partnership
Agreement. These reimbursements, which totaled $2,553 and $6,407, during
1996 and 1995, respectively, were deducted as syndication and offering
costs in the determination of net limited partnership contributions.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners or TAS an incentive management fee, an acquisition
fee, an equipment management fee and an equipment liquidation fee. These
fees are for various services provided in connection with the
administration and management of the Partnership. The Partnership incurred
$347, $355, and $166 of incentive management fees during the years ended
December 31, 1997, 1996 and 1995, respectively, and incurred and
capitalized $68, $478, and $2,107 of equipment acquisition fees as part of
Equipment costs during the same periods. No equipment liquidation fees
were incurred in 1997, 1996 or 1995.
The Equipment of the Partnership is managed by TEM. In its role as
manager, TEM has authority to acquire, hold, manage, lease, sell and
dispose of the Equipment. Additionally, TEM holds, for the payment of
direct operating expenses, a reserve of cash that has been collected from
Equipment leasing operations; such cash is included as an offset to the
amount due to affiliates, net at December 31, 1997, and 1996.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. For the years
ended December 31, 1997, 1996 and 1995, these fees totaled $981, $950 and
$733, respectively. The Equipment is leased by TEM to third party lessees
on operating master leases, spot leases, term leases and full payout net
leases. All are operating leases with limited terms and no purchase
option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are incurred and paid by TCC and TEM. Total general and
administrative costs allocated to the Partnership were $860, $862 and $757
for the years ended December 31, 1997, 1996 and 1995, respectively, of
which $468, $463 and $363 were for salaries.
TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed Equipment to the total Equipment
managed by TEM during the period. TCC allocates these costs based on the
ratio of the Partnership's Equipment to the total Equipment of all limited
partnerships managed by TCC. General and administrative costs allocated to
the Partnership by TEM were $761, $744 and $640 for the years ended
December 31, 1997, 1996 and 1995, respectively. TCC allocated $99, $118
and $117 of general and administrative costs to the Partnership during the
same periods.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may then
be resold to the Partnership on an all-cash basis at a price equal to the
actual cost as defined in the Partnership Agreement. In addition, the
General Partners or TAS are entitled to an acquisition fee for any
Equipment resold to the Partnership.
At December 31, 1997 and 1996, due to affiliates, net is comprised of:
1997 1996
---- ----
Due from affiliates:
Due from TEM........................... $ 14 $ -
------ ------
Due to affiliates:
Due to TEM............................. - 125
Due to TL.............................. 338 -
Due to TCC............................. 49 28
Due to TAS............................. 39 1
------ ------
426 154
------ ------
Due to affiliates, net $ 412 $ 154
====== ======
Included in the amounts due to TL at December 31, 1997 is $318 in loans
used to facilitate Equipment purchases. There were no intercompany loans
between the Partnership and affiliates during 1996. All other amounts
receivable from and payable to affiliates were incurred in the ordinary
course of business between the Partnership and its affiliates and
represent timing differences in the accrual and payment of expenses and
fees described above or in the accrual and remittance of net rental
revenues by TEM.
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances outstanding for more than one month, to
the extent such balances relate to loans for Equipment purchases. Interest
is charged at a rate not greater than the General Partners' own cost of
funds. The Partnership incurred interest expense of $3 on intercompany
balances for the year ended December 31, 1997. There was no interest
expense incurred on intercompany balances for the years ended December 31,
1996 or 1995.
Note 3. Rentals under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at December 31, 1997. Although the leases are
generally cancelable at the end of each twelve-month period with a
penalty, the following schedule assumes that the leases will not be
terminated.
Year ending December 31,
1998..................................................... $1,191
1999..................................................... 217
2000..................................................... 69
-----
Total minimum future rentals receivable... .............. $1,477
=====
Note 4. Note Payable
The Partnership had a short-term revolving credit line with an available
limit of $15,000 which was used for Equipment purchases. Balances borrowed
under this credit facility bore interest at either the Prime Rate plus
.25% or the London Interbank Offered Rate (LIBOR) plus 2.00%, and the
Partnership paid a commitment fee of 1/2% on the unused portion of the
credit facility. The credit line was paid in full on April 8, 1996 and
expired on May 31, 1996.
Note 5. Income Taxes
During 1997, 1996 and 1995, there were temporary differences of $22,904,
$13,625, and $6,127, respectively, between the financial statement
carrying value of certain assets and liabilities and the federal income
tax basis of such assets and liabilities. The reconciliation of net income
for financial statement purposes to net loss for federal income tax
purposes for the years ended December 31, 1997, 1996 and 1995 is as
follows:
1997 1996 1995
---- ---- ----
Net income per financial statements.......................... $ 3,961 $ 3,834 $ 3,116
Increase in provision for bad debt........................... 118 118 108
Depreciation for income tax purposes in excess
of depreciation for financial statement purposes......... (8,480) (7,799) (4,831)
Gain on sale of fixed assets for federal income tax
purposes in excess of gain recognized for
financial statement purposes.............................. 104 54 165
(Decrease) increase in damage protection plan reserve........ (21) 129 124
------- ------- -------
Net loss for federal income tax purposes..................... $ (4,318) $ (3,664) $ (1,318)
======= ======= =======
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 TI which comprised the Textainer Group. Effective October 1,
1993, the Textainer Group streamlined 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. Textainer Inc. (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 a corporate reorganization
effective October 1, 1993, which caused TFS, TEM and TL to fall under the common
ownership of TGH. (The Managing General Partner and Associate General Partners
are collectively referred to as the General Partners). Pursuant to this
restructuring, TI has 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, TEM and TL now
serve as General Partners for the Registrant and are wholly-owned or
substantially-owned subsidiaries of TGH. The General Partners also act in this
capacity for other limited partnerships. Textainer Acquisition Services Limited
(TAS) is an affiliate of the General Partners, which performs services relative
to the acquisition of Equipment outside the United States on behalf of the
Partnership. TCC Securities Corporation (TSC), a licensed broker and dealer in
securities and an affiliate of the General Partners, was the managing sales
agent for the offering of Units for sale.
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, 1997, all Section 16(a) filing requirements
were complied with (except that Robert D. Pedersen, a newly appointed
director of TEM, filed his initial statement of beneficial interest on
Form 3 late, which Form was filed on Form 5). No member of management, or
beneficial owner owned more than 10 percent of any interest in the
Partnership. None of the individual subject to section 16(a), including
Mr. Pedersen, 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 64 Director and Chairman of TGH, TEM, TL, TCC and TFS
James E. Hoelter 58 President and CEO of TGH and TL, Director of TGH, TEM, TL, TCC, TFS and TSC
John A. Maccarone 53 President and CEO of TEM and TSC, Vice President of TGH, Director of TGH,
TEM, TL, TCC, TFS and TSC
John R. Rhodes 48 Executive Vice President, CFO, and Secretary of TGH, TEM, TL, TCC and TFS
and Director of TEM, TCC and TFS
Alex M. Brown 59 Director of TGH, TEM, TL, TCC, TFS and TSC
Harold J. Samson 76 Director of TGH, TL and TSC
Philip K. Brewer 41 President of TCC and TFS, Senior Vice President - Capital Markets
for TGH and TL
Robert D. Pedersen 39 Senior Vice President - Marketing for TEM, Director of TEM
Anthony C. Sowry 45 Vice President - Operations and Acquisitions for TEM
Jens W. Palludan 47 Regional Vice President - Americas/Africa/Australia for TEM
Wolfgang Geyer 44 Regional Vice President - Europe/Middle East/Persian Gulf for TEM
Mak Wing Sing 40 Regional Vice President - South Asia for TEM
Masanori Sagara 42 Regional Vice President - North Asia for TEM
Stefan Mackula 45 Vice President - Equipment Resale for TEM
Ernest J. Furtado 42 Vice President, Finance and Assistant Secretary of TGH, TL, TEM, TCC and
TFS, Director of TCC and TFS
Richard G. Murphy 45 Vice President - Risk Management for TEM
Janet S. Ruggero 49 Vice President - Administration and Marketing Services for TEM
Adnan Z. Abou Ayyash 53 Director of TGH and TL
Isam K. Kabbani 63 Director of TGH and TL
S. Arthur Morris 64 Director of TGH, TEM and TL
Dudley R. Cottingham 46 Assistant Secretary, Vice President and Director of TGH, TEM and TL
Cara D. Smith 35 Member of Investment Advisory Committee
Nadine Forsman 30 Controller of TCC, TFS and TSC
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, transport, 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 a B.Com.L.L.B. from the University of Cape Town.
James E. Hoelter is President and Chief Executive Officer of TGH and
TL, and a director of TGH, TEM, TL, TCC, TFS and TSC. As President and Chief
Executive Officer of TGH, Mr. Hoelter is responsible for overseeing the
management of, and coordinating the activities of, TEM, TL, TCC and TFS. In
addition, Mr. Hoelter is Chairman of the Credit Committee, the Investment
Advisory Committee and the Equipment Investment Committee (see "Committees",
below). Prior to joining the Textainer Group in 1987, Mr. Hoelter was president
of Intermodal Equipment Associates ("IEA"), a marine container leasing company
based in San Francisco. Mr. Hoelter co-founded IEA in 1978 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 currently serves as a member of its Business
School's Dean's Advisory Board, and his M.B.A.from the Harvard Graduate School
of Business Administration.
John A. Maccarone is President and CEO of TEM and TSC, Vice President
of TGH and a director of TGH, TEM, TL, TCC, TFS and TSC. In this capacity he is
responsible for the performance of TEM's worldwide fleet of marine cargo
containers. Additionally, he is a member of the Equipment Investment Committee,
the Credit Committee and the Investment Advisory Committee (see "Committees",
below). Mr. Maccarone was instrumental in co-founding IEA with Mr. Hoelter 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 B.S. degree in
Engineering Management from Boston University and an M.B.A. from Loyola
University of Chicago.
John R. Rhodes is Executive Vice President, Chief Financial Officer
and Secretary of TGH, TEM, TL, TCC and TFS and a director of TEM, TCC and TFS.
In this capacity he is responsible for all accounting, financial management, and
reporting functions for the Textainer Group. He is also a member of the Credit
Committee, the Equipment Investment Committee and Investment Advisory Committee
(see "Committees", below). Prior to joining Textainer in November 1987, Mr.
Rhodes was Vice President of Finance for Greenbrier Capital Corporation in San
Francisco, a trailer leasing and management company, from 1986 to 1987; from
1981 to 1985, he was employed by Gelco Rail Services, an intermodal refrigerated
trailer company in San Francisco, first in the capacity of Vice President and
Controller and then as Senior Vice President and General Manager. Mr. Rhodes'
earlier business affiliations include serving as Vice President and General
Manager of Itel Capital Corporation and as senior accountant with Arthur
Andersen & Co., both in San Francisco. He is a Certified Public Accountant and
holds a B.A. in economics from Stanford University and an M.B.A. in accounting
from Golden Gate University.
Alex M. Brown is a director of TGH, TEM, TL, TCC, TFS and TSC.
Additionally, he is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Mr. Brown is also a
director of Trencor Ltd. (1996 to present) and Forward Corporation (1997 to
present). Both companies are publicly traded and are 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, TL and TSC and is a member of
the Investment Advisory Committee (see "Committees", below). Mr. Samson served
as a consultant to various securities firms since 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 President of TCC and TFS and is Senior Vice
President Capital Markets for TGH and TL. As President of TCC, Mr. Brewer is
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. Mr.
Brewer is a member of the Credit Committee, the Investment Advisory Committee
and the Equipment Investment Committee (see "Committees" below). Prior to
joining Textainer in 1996, 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 - Marketing for TEM and a
Director of TEM, responsible for worldwide sales and marketing related
activities. Mr. Pedersen is a member of the Equipment Investment Committee and
the Credit Committee (see "Committees" below). He joined TEM 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 Maersk Line, a container
shipping line (from 1978 to 1984), XTRA, a container lessor (1985 to 1988) and
Klinge Cool, a manufacturer of refrigerated container cooling units (1989 to
1991), where he was worldwide sales and marketing director. Mr. Pedersen is a
graduate of the A.P. Moller shipping and transportation program and Merkonom
Business School in Copenhagen, majoring in Company Organization.
Anthony C. Sowry is Vice President - Operations and Acquisitions for
TEM. He is also a member of the Credit Committee and the Equipment Investment
Committee (see "Committees", below). Mr. Sowry supervises all international
container operations and maintenance and technical functions for the fleets
under management. In addition, he is responsible for the acquisition of all new
and used containers for the Textainer Group. He began his affiliation with TEM
in 1988 and previously served as Fleet Quality Control Manager for Textainer
Inc. from 1982 through March 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.
Jens W. Palludan is based in Hackensack, New Jersey and is Regional
Vice President - Americas/Africa/Australia for TEM, 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. Prior to joining TEM in 1993 Mr. Palludan was General Manager,
Equipment and Terminals, where he was responsible for a fleet of over 200,000
TEUs. Mr. Palludan holds an M.B.A. from the Centre European D'Education
Permanente, Fontainebleau, France.
Wolfgang Geyer is based in Hamburg, Germany and is Regional Vice
President - Europe/ Middle East/ Persian Gulf for TEM, responsible for
coordinating all leasing activities in these areas of operation. Mr. Geyer
joined Textainer in 1993 and was the Marketing Director in Hamburg through July
1997. Mr. Geyer most recently was the Senior Vice President, for Clou Container
Leasing, responsible for Clou's leasing activities on a worldwide basis. Mr.
Geyer work for Clou from 1991 to 1993. 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 for TEM, responsible for container leasing activities in
North/Central People's Republic of China, Hong Kong and South China (PRC), and
Southeast Asia. Mr. Mak most recently was the Regional Manager, Southeast Asia,
for Trans Ocean Leasing, working there from 1994 to 1996. From 1987 to 1994, Mr.
Mak worked with Tiphook as their Regional General Manager, and with OOCL from
1976 to 1987 in a variety of positions, most recently as their Logistics
Operations Manager.
Masanori Sagara is based in Yokohama, Japan and is the Regional Vice
President - North Asia for TEM, responsible for Textainer's marketing 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 with 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 for TEM, in which
capacity he coordinates the worldwide sale of Equipment into secondary markets.
Mr. Mackula also served as Vice President - Marketing for TEM, in which capacity
he was responsible for coordinating all leasing activities in Europe, Africa,
and the Middle East. He joined TEM in 1983 as Leasing Manager for the United
Kingdom. Prior to joining TEM, Mr. Mackula held, beginning in 1972, a variety of
positions in the international container shipping industry.
Ernest J. Furtado is Vice President, Finance and Assistant Secretary
of TGH, TL, TEM, TCC and TFS and a Director of TCC and TFS, in which capacity he
is responsible for all accounting, financial management, and reporting functions
for TGH, TL, TEM, TCC and TFS. Additionally, he is a member of the Equipment
Investment Committee and the Investment Advisory Committee (see "Committees",
below). 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.
Richard G. Murphy is Vice President, Risk Management for TEM. Mr.
Murphy is responsible for all credit and risk management functions for TEM and
supervises the administrative aspects of Equipment acquisitions. He is a member
of and acts as secretary to the Credit and Equipment Investment 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 for TEM. 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.
Dr. Adnan Z. Abou Ayyash is a director of TGH and TL. Since 1974 he
has been General Manager and Chief Executive Officer of one of the largest firms
of consulting engineers in Saudi Arabia, Rashid Engineering. Dr. Adnan Abou
Ayyash holds a B.S. degree in Civil Engineering from the American University of
Beirut, as well as M.S. and Ph.D. degrees in Civil Engineering from the
University of Texas.
Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal stockholder of the IKK Group, Jeddah, Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and internationally. In
1959 Sheikh Isam Kabbani joined the Saudi Arabian Ministry of Foreign Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum Exporting Countries
(OPEC). After a period as Chief Economist of OPEC, in 1967 he became the Saudi
Arabian member of OPEC's Board of Governors. In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 18 years. Sheikh Kabbani holds
a B.A. degree from Swarthmore College, Pennsylvania, and an M.A. degree in
Economics and International Relations from Columbia University.
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 (1978 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.
Cara D. Smith is a member of the Investment Advisory Committee (see
"Committees", below). Ms. Smith was the President and Chief Executive Officer of
TSC through June 1997 and a director of TCC and TFS through August 1997. Ms.
Smith joined Textainer in 1992, and prior to 1996, was Vice President of
Marketing. Ms. Smith has worked in the securities industry for the past 13
years. Ms. Smith's extensive experience ranges from compliance and investor
relations to administration and marketing of equipment leasing, multi-family
housing and tax credit investment programs. She holds five securities licenses
and is a registered principal. Ms. Smith is also a member of the International
Association of Financial Planners.
Nadine Forsman is the Controller of TCC, TFS and TSC. In this capacity
she is responsible for accounting, financial management and reporting functions
for TCC, TFS and TSC as well as overseeing all communications with the Limited
Partners and as such, supervises personnel in performing this function. She is a
member of the Equipment Investment Committee and the Investment Advisory
Committee (See "Committees" below). Prior to joining Textainer in August 1996,
Ms. Forsman was employed by KPMG Peat Marwick LLP, holding various positions,
the most recent of which was manager, from 1990 to 1996. Ms Forsman holds a B.S.
in Accounting and Finance from San Francisco State University and holds a
financial and operations principal securities license.
Committees
The Managing General Partner has established the following three
committees to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of Equipment for
the Partnership and for other programs organized by the Textainer Group:
Equipment Investment Committee. The Equipment Investment Committee
will review the Equipment leasing programs of the Partnership on a regular basis
with emphasis on matters involving Equipment purchases, the Equipment mix in the
Partnership's portfolio, Equipment remarketing issues, and decisions regarding
ultimate disposition of Equipment. The members of the committee are James E.
Hoelter (Chairman), John A. Maccarone, John R. Rhodes, Anthony C. Sowry, Richard
G. Murphy (Secretary), Alex M. Brown, Philip K. Brewer, Robert D. Pedersen,
Ernest J. Furtado and Nadine Forsman.
Credit Committee. The Credit Committee will establish credit limits
for every lessee and potential lessee of Equipment and periodically review these
limits. In setting such limits, the Credit Committee will consider such factors
as customer trade routes, country, political risk, operational history, credit
references, credit agency analyses, financial statements, and other information.
The members of the Credit Committee are James E. Hoelter (Chairman), John A.
Maccarone, Richard G. Murphy (Secretary), Janet S. Ruggero, John R. Rhodes,
Anthony C. Sowry, Philip K. Brewer and Robert D. Pedersen.
Investment Advisory Committee. The Investment Advisory Committee
will review investor program operations on at least a quarterly basis,
emphasizing matters related to cash distributions to investors, cash flow
management, portfolio management, and liquidation. The Investment Advisory
Committee is organized with a view to applying an interdisciplinary approach,
involving management, financial, legal and marketing expertise, to the analysis
of investor program operations. The members of the Investment Advisory Committee
are James E. Hoelter (Chairman), John A. Maccarone, Cara D. Smith, Ernest J.
Furtado (Secretary), Philip K. Brewer, John R. Rhodes, 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.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Security Ownership Of Certain Beneficial Owners
There is no person or "Group" who is known to the registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership interest in the Registrant.
b) Security Ownership of Management
As of January 1, 1998:
Number
Name of Beneficial Owner Of Units % All Units
James E. Hoelter 1,370 0.0308%
Ernest J. Furtado 600 0.0135%
----- ------
Officers and Management as a Group 1,970 0.0443%
===== ======
c) Changes In Control.
Inapplicable.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Dollar amounts in thousands)
(a) Transactions with Management and Others.
At December 31, 1997 and 1996 due to affiliates, net is comprised of:
1997 1996
---- ----
Due from affiliates:
Due from TEM...................................... $ 14 $ -
---- -------
Due to affiliates:
Due to TEM........................................ - 125
Due to TL......................................... 338 -
Due to TCC........................................ 49 28
Due to TAS........................................ 39 1
---- -------
426 154
---- -------
Due to affiliates, net: $ 412 $ 154
==== ======
Included in the amounts due to TL at December 31, 1997 is $318 in loans
used to facilitate Equipment purchases. All other amounts receivable
from and payable to affiliates were incurred in the ordinary course of
business between the Partnership and its affiliates and represent
timing differences in the accrual and payment of expenses and fees or
in the accrual and remittance of net rental revenues from TEM.
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances outstanding for more than one month,
to the extent such balances relate to loans for Equipment purchases.
Interest is charged at a rate not greater than the General Partners'
own cost of funds. The Partnership incurred interest expense of $3 on
intercompany balances for the year ended December 31, 1997. There was
no interest expense incurred on intercompany balances for the years
ended December 31, 1996 or 1995.
In addition, the Registrant paid or will pay the following amounts to
the General Partners, TAS or TSC. TSC was the managing sales agent for
the offering of Units for sale and is a licensed broker and dealer in
securities. Both TSC and TAS are affiliates of the General Partners:
Syndication fees and organization and offering expense reimbursements:
1997 1996 1995
---- ---- ----
TCC................... $ - $ 272 $ 1,309
TSC................... - 2,281 5,098
--------- ------- -------
Total................. $ - $ 2,553 $ 6,407
========= ======= =======
Acquisition fees in connection with the purchase of Equipment on behalf
of the Registrant:
1997 1996 1995
---- ---- ----
TAS.................. $ 68 $ 478 $ 2,107
====== ======= ======
Management fees in connection with the operations of the Registrant:
1997 1996 1995
---- ---- ----
TEM.................. $ 1,328 $ 1,305 $ 899
===== ======= ======
Reimbursement for administrative costs in connection with of the
operations of the Registrant:
1997 1996 1995
---- ---- ----
TCC.................. $ 99 $ 118 $ 117
TEM.................. 761 744 640
-------- ------- ------
Total................ $ 860 $ 862 $ 757
======== ======= ======
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Management" and "Compensation of Affiliates" sections of the
Registrant's Prospectus, as supplemented, and the Notes to the Financial
Statements in Item 8.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Audited financial statements of the Registrant for the year
ended December 31, 1997 are contained in Item 8 of this
Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary
Financial Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference.
(i) The Registrant's Prospectus as contained in
Pre-Effective Effective No. 3 to the Registrant's
Registration Statement (No. 33-71944), as filed with
the Commission on April 8, 1994, as supplemented by
Post Effective Amendment No. 2 as filed under Section
8(c) of the Securities Exchange Act of 1933 on May 5,
1996 and Supplement No. 5 as filed under Rule 424(b)
of the Securities Exchange Act of 1933 on March 18,
1996.
(ii) The Registrant's limited partnership agreement,
Exhibit A to the Prospectus.
(b) During the year ended 1997, no reports on Form 8-K have been filed by the
Registrant.
Independent Auditors' Report on Supplementary Schedule
The Partners
Textainer Equipment Income Fund V, L.P.:
Under the date of February 18, 1998, we reported on the balance sheets of
Textainer Equipment Income Fund V, L.P. (the Partnership) as of December 31,
1997 and 1996, and the related statements of earnings, partners' capital and
cash flows for each of the years in the three-year period ended December 31,
1997, which are included in the 1997 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 Peat Marwick LLP
San Francisco, California
February 18, 1998
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Schedule II - Valuation and Qualifying Accounts
(Amounts in thousands)
Charged Balance
Balance at to Costs Charged at End
Beginning and to Other of
of Period Expenses Accounts Deduction Period
For the year ended December 31, 1997:
Allowance for doubtful accounts $ 269 $ 116 $ 2 $ - $ 387
------ ----- -------- --------- -----
Damage protection plan reserve $ 361 $ 248 $ - $ (269) $ 340
------ ----- -------- ------ -----
Recovery cost reserve $ 54 $ 182 $ - $ (147) $ 89
------ ----- -------- ------- -----
For the year ended December 31, 1996:
Allowance for doubtful accounts $ 151 $ 128 $ - $ (10) $ 269
------ ----- -------- -------- -----
Damage protection plan reserve $ 232 $ 384 $ - $ (255) $ 361
------ ----- -------- ------- -----
Recovery cost reserve $ 4 $ 179 $ - $ (129) $ 54
------ ----- -------- ------- -----
For the year ended December 31, 1995:
Allowance for doubtful accounts $ 43 $ 111 $ - $ (3) $ 151
------ ---- -------- ------- -----
Damage protection plan reserve $ 108 $ 239 $ - $ (115) $ 232
------ ----- -------- ------- -----
Recovery cost reserve $ 2 $ 99 $ - $ (97) $ 4
------ ----- -------- ------- -----
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By__________________________________
John R. Rhodes
Executive Vice President
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
Signature Title Date
__________________________________ Executive Vice President March 26, 1998
John R. Rhodes (Principal Financial and
Accounting Officer),
Secretary and Treasurer
__________________________________ President (Principal Executive March 26, 1998
Philip K. Brewer Officer)
__________________________________ Vice President, Finance, March 26, 1998
Ernest J. Furtado Assistant Secretary and Director
__________________________________ Director March 26, 1998
James E. Hoelter
__________________________________ Director March 26, 1998
John A. Maccarone
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By /s/John R. Rhodes
__________________________________
John R. Rhodes
Executive Vice President
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
Signature Title Date
/s/John R. Rhodes Executive Vice President March 26, 1998
__________________________________ (Principal Financial and
John R. Rhodes Accounting Officer), and
Secretary
/s/Philip K. Brewer President (Principal Executive March 26, 1998
__________________________________ Officer)
Philip K. Brewer
/s/Ernest J. Furtado Vice President, Finance March 26, 1998
__________________________________ Assistant Secretary and Director
Ernest J. Furtado
/s/James E. Hoelter Director March 26, 1998
__________________________________
James E. Hoelter
/s/John A. Maccarone Director March 26, 1998
__________________________________
John A. Maccarone