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TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 20, 2001
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund III,
L.P. (the "Partnership") the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
The financial statements included in the enclosed Annual Report on Form 10-K do
not reflect a change from the preceding year in any accounting principles or
practices, or in the method of applying any such principles or practices.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission file number 0-20140
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(Exact name of Registrant as specified in its charter)
California 94-3121277
(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 DEPOSITARY UNITS
(TITLE OF CLASS)
LIMITED PARTNERSHIP INTERESTS (UNDERLYING THE UNITS)
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
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Documents Incorporated by Reference
The Registrant's Prospectus as contained in Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement dated and filed with the Commission December
21, 1990, as supplemented by Post-Effective Amendments No. 1, 2 and 3 filed with
the Commission under Section 8(c) of the Securities Act of 1933 on March 1,
1991, January 13, 1992 and February 4, 1992, respectively.
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 26,
1990 to purchase, own, operate, lease, and sell equipment used in the
containerized cargo shipping industry. The Registrant commenced
offering units representing limited partnership interests (Units) to
the public on January 16, 1991 in accordance with its Registration
Statement, and ceased to offer such Units as of May 4, 1992. The
Registrant raised a total of $125,000,000 from the offering and
invested a substantial portion of the money raised in equipment. The
Registrant has since engaged in leasing this and other equipment in the
international shipping industry.
See Item 10 herein for a description of the Registrant's General
Partners. See Item 7 herein for a description of current market
conditions affecting the Registrant's business.
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A container leasing company generally, and the Registrant
specifically, is an operating business comparable to a rental
car business. A customer can lease a car from a bank leasing
department for a monthly charge which represents the cost of
the car, plus interest, amortized over the term of the lease;
or the customer can rent the same car from a rental car
company at a much higher daily lease rate. The customer is
willing to pay the higher daily rate for the convenience and
value-added features provided by the rental car company, the
most important of which is the ability to pick up the car
where it is most convenient, use it for the desired period of
time, and then drop it off at a location convenient to the
customer. Rental car companies compete with one another on the
basis of lease rates, availability of cars, and the provision
of additional services. They generate revenues by maintaining
the highest lease rates and the highest utilization factors
that market conditions will allow, and by augmenting this
income with proceeds from sales of insurance, drop-off fees,
and other special charges. A large percentage of lease
revenues earned by car rental companies are generated under
corporate rate agreements wherein, for a stated period of
time, employees of a participating corporation can rent cars
at specific terms, conditions and rental rates.
Container leasing companies and the Registrant operate in a
similar manner by owning a worldwide fleet of new and used
transportation containers and leasing these containers to
international shipping companies hauling various types of
goods among numerous trade routes. All lessees pay a daily
rental rate and in certain markets may pay special handling
fees and/or drop-off charges. In addition to these fees and
charges, a lessee must either provide physical damage and
liability insurance or purchase a damage waiver from the
Registrant, in which case the Registrant agrees to pay the
cost of repairing any physical damage to containers caused by
lessees. Container leasing companies compete with one another
on the basis of lease rates, availability of equipment and
services provided. To ensure the availability of equipment to
its customers, container leasing companies and the Registrant
may pay to reposition containers from low demand locations to
higher demand locations. By maintaining the highest lease
rates and the highest equipment utilization factors allowed by
market conditions, the Registrant attempts to generate revenue
and profit. The majority of the Registrant's equipment is
leased under master leases, which are comparable to the
corporate rate agreements used by rental car companies. The
master leases provide that the lessee, for a specified period
of time, may rent containers at specific terms, conditions and
rental rates. Although the terms of the master lease governing
each container under lease do not vary, the number of
containers in use can vary from time to time within the term
of the master lease. The terms and conditions of the master
lease provide that the lessee pays a daily rental rate for the
entire time the container is in his possession (whether or not
he is actively using it), is responsible for any damage, and
must insure the container against liabilities. For a more
detailed discussion of the leases for the Registrant's
equipment, see "Leasing Policy" under "Business of the
Partnership" in the Registrant's Prospectus as supplemented.
The Registrant also sells containers in the course of its
business as opportunities arise, at the end of the container's
useful life or if market and economic considerations indicate
that a sale would be beneficial. See Item 7 herein and
"Business of the Partnership" in Registrant's Prospectus, as
supplemented.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) Inapplicable.
(c)(1)(vi) Inapplicable.
(c)(1)(vii) No single lessee had generated lease revenue for the years
ended December 31, 2000, 1999 and 1998 which was 10% or more
of the total revenue of the Registrant.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) There are approximately 80 container leasing companies of
which the top ten control approximately 89% of the total
equipment held by all container leasing companies. The top two
container leasing companies combined control approximately 34%
of the total equipment held by all container leasing
companies. Textainer Equipment Management Limited, an
Associate General Partner of the Registrant and the manager of
its marine container equipment, is the third largest container
leasing company and manages approximately 13% of the equipment
held by all container leasing companies. The customers for
leased containers are primarily international shipping lines.
The Registrant alone is not a material participant in the
worldwide container leasing market. The principal methods of
competition are price, availability and the provision of
worldwide service to the international shipping community.
Competition in the container leasing market has increased over
the past few years. Since 1996, shipping alliances and other
operational consolidations among shipping lines have allowed
shipping lines to begin operating with fewer containers,
thereby decreasing the demand for leased containers and
allowing lessees to gain concessions from lessors about price,
special charges or credits and, in certain markets, the age
specification of containers rented. Furthermore, primarily as
a result of lower new container prices and low interest rates,
shipping lines now own, rather than lease, a higher percentage
of containers. The decrease in demand from shipping lines,
along with the entry of new leasing company competitors
offering low container rental rates, has increased competition
among container lessors such as the Registrant.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Financial Services
Corporation (TFS), a wholly owned subsidiary of Textainer
Capital Corporation (TCC), the Managing General Partner of the
Registrant, is responsible for the overall management of the
business of the Registrant and at December 31, 2000 had 4
employees. Textainer Equipment Management Limited (TEM), an
Associate General Partner, is responsible for the management
of the leasing operations of the Registrant and at December
31, 2000 had a total of 164 employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant is involved in the leasing of shipping containers to
international shipping companies for use in world trade and
approximately 15%, 15% and 22% of the Registrant's rental revenue
during the years ended December 31, 2000, 1999 and 1998, respectively,
was derived from operations sourced or terminated domestically. These
percentages do not reflect the proportion of the Partnership's income
from operations generated domestically or in domestic waterways.
Substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations. See "Business of
the Partnership" in the Registrant's Prospectus, as supplemented, and
for a discussion of the risks of leasing containers for use in world
trade see "Risk Factors and Forward-Looking Statements" in Item 7
herein.
ITEM 2. PROPERTIES
As of December 31, 2000, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 8,328
40-foot standard dry freight containers 10,843
40-foot high cube dry freight containers 7,981
------
27,152
======
During December 2000, approximately 75% of these containers were on lease to
international shipping companies, and the balance were being stored at container
manufacturers' locations and at a large number of storage depots located
worldwide. The Partnership sells containers when (i) a container reaches the end
of its useful life or (ii) an analysis indicates that the sale is warranted
based on existing market conditions and the container's age, location and
condition. At December 31, 2000, less than 1% of the Partnership's equipment had
been identified as being for sale.
For information about the Registrant's property, see "Business of the
Partnership" and "Risk Factors" in the Registrant's Prospectus, as supplemented.
See also Item 7, "Results of Operations" regarding current, and possible future,
write-downs of some of the Registrant's property.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not subject to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 201:
(a) Market Information.
(a)(1)(i) The Registrant's limited partnership Units are not publicly
traded and there is no established trading market for such
Units. The Registrant has a program whereby limited partners
may redeem Units for a specified redemption price. The program
operates only when the Managing General Partner determines,
among other matters, that payment for redeemed units will not
impair the capital or operations of the Registrant.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders.
(b)(1) As of January 1, 2001, there were 7,662 holders of record of
limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
At December 31, 2000, the Registrant was paying distributions at an annualized
rate equal to 7% of a Unit's initial cost, or $1.40 per Unit per year. For
information about the amount of distributions paid during the five most recent
fiscal years, see Item 6 "Selected Financial Data". Distributions are made
monthly by the Registrant to its limited partners.
ITEM 701: Inapplicable.
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands except for per unit amounts)
Year Ended December 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Rental income........................... $ 15,135 $ 15,224 $ 18,904 $ 19,361 $ 21,349
Income (loss) from operations........... $ 2,466 $ (179) $ 3,769 $ 5,096 $ 7,709
Net earnings (loss)..................... $ 2,710 $ (21) $ 3,886 $ 5,173 $ 7,795
Net earnings (loss) per unit of
limited partner interest.............. $ 0.43 $ (0.02) $ 0.61 $ 0.82 $ 1.24
Distributions per unit of
limited partner interest.............. $ 1.40 $ 1.61 $ 1.77 $ 1.85 $ 1.85
Distributions per unit of limited
partnership interest representing
a return of capital.................. $ 0.97 $ 1.61 $ 1.16 $ 1.03 $ 0.61
Total assets............................ $ 59,080 $ 64,803 $ 74,579 $ 82,248 $ 88,765
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
The Financial Statements contain information that will assist in evaluating the
financial condition of the Partnership for the years ended December 31, 2000,
1999 and 1998. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
Liquidity and Capital Resources
From January 16, 1991 until May 4, 1992, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $1,000 on February 11, 1991 and on May 4, 1992 the
Partnership's offering of limited partnership interest was closed at $125,000.
From time to time, the Partnership redeems units from limited partners for a
specified redemption value, which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the year ended December 31, 2000, the
Partnership redeemed 22,472 units for a total dollar amount of $166. The
Partnership used cash flow from operations to pay for the redeemed units.
The Partnership invests working capital, cash flow from operations prior to its
distribution to the partners and proceeds from container sales that have not
been used to purchase containers in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
Limited partners are currently receiving monthly distributions in an annualized
amount equal to 7% of their original investment. During the year ended December
31, 2000, the Partnership declared cash distributions to limited partners
pertaining to the period from December 1999 through November 2000, in the amount
of $8,581. On a cash basis, all of these distributions were from current year
operating activities. On a GAAP basis, $5,961 of these distributions was a
return of capital and the balance was from net income.
At December 31, 2000, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the years ended December 31, 2000
and 1999, was $9,953 and $8,550, respectively. The increase of $1,403 or 16% was
primarily attributable to the fluctuation in accounts receivable and the
increase in net earnings, adjusted for non-cash transactions, offset by the
fluctuations in accrued damage protection plan costs and due from affiliates,
net. The decrease in accounts receivable of $1,257 during the year ended
December 31, 2000 was primarily due to the decrease in the average collection
period of accounts receivable. For the comparable period in 1999, accounts
receivable decreased primarily due to the decline in rental income offset by an
increase in the average collection period of accounts receivable. Net earnings,
adjusted for non-cash transactions, increased primarily due to the decline in
direct container expenses, which are discussed more fully in "Results of
Operations." The decline in accrued damage protection plan costs of $157 during
the year ended December 31, 2000 was primarily due to a decrease in the
estimated average repair cost per container and a decrease in the number of
containers covered under the damage protection plan. The fluctuations in due
from affiliates, net resulted from timing differences in the payment of expenses
and fees and the remittance of net rental revenues and container sales proceeds,
as well as in fluctuations in these amounts.
For the year ended December 31, 2000, net cash used in investing activities (the
purchase and sale of containers) was $1,594 compared to net cash provided by
investing activities of $1,501 for the comparable period in 1999. The increase
in net cash used in investing activities of $3,095 was due to the decrease in
proceeds from container sales and the increase in cash used for container
purchases. The decrease in proceeds from container sales during 2000 was
primarily due to the Partnership selling fewer units during 2000 than in 1999.
Cash used for container purchases increased primarily due to the Partnership
purchasing more containers during the year ended December 31, 2000 than the same
period in 1999. The General Partners believe that the fluctuation in container
purchases reflect normal fluctuations in recent container purchases. The
Partnership continued to sell containers in low demand locations (described
below under "Results of Operations"); however there were fewer low demand
locations and fewer containers in these locations, primarily as a result of
previous sales efforts, which resulted in the decline in the number of
containers sold and consequently, the decline in proceeds from container sales.
The sales prices received on container sales declined slightly. Current sales
prices are lower than sales prices received in previous years as a result of
current market conditions, which have adversely affected the value of used
containers. Until conditions improve in these low demand locations, the
Partnership plans to continue to sell some of its containers in these locations.
The amount of these sales proceeds will affect how much the Partnership can
reinvest in new containers.
Consistent with its investment objectives and subject to its distribution
policy, the Partnership intends to continue to reinvest both cash from
operations available for reinvestment and all, or a significant amount of, the
proceeds from container sales in additional containers. Cash from operations
available for reinvestment is generally equal to cash provided by operating
activities, less distributions and redemptions paid, which are subject to the
General Partners' authority to set these amounts (and modify reserves and
working capital), as provided in the Partnership Agreement. The amount of sales
proceeds available for reinvestment will fluctuate based on the number of
containers sold and the sales price received. The Partnership sells containers
when (i) a container reaches the end of its useful life or (ii) an analysis
indicates that the sale is warranted based on existing market conditions and the
container's age, location and condition.
The rate of reinvestment is also affected by cash from operations available for
reinvestment which, like sales proceeds, has been adversely affected by market
conditions. These market conditions have resulted in a slower than anticipated
rate of reinvestment. Market conditions are discussed more fully under "Results
of Operations." A slower rate of reinvestment will, over time, affect the size
of the Partnership's container fleet. Furthermore, even with reinvestment, the
Partnership is not likely to be able to replace all the containers it sells,
since new container prices are usually higher than the average sales price for a
used container.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during the years ended December 31, 2000, 1999 and 1998, as well
as certain other factors as discussed below. The following is a summary of the
container fleet (in units) available for lease during those periods:
2000 1999 1998
---- ---- ----
Beginning container fleet............... 27,225 29,237 31,342
Ending container fleet.................. 27,152 27,225 29,237
Average container fleet................. 27,189 28,231 30,290
The average container fleet decreased 4% and 7% from the years ended December
31, 1999 to 2000 and from December 31, 1998 to 1999, respectively, primarily due
to sales of containers. Although sales proceeds were used to purchase additional
containers, fewer containers were bought than sold as container sales prices
were lower than new container prices. The Partnership's primary source of funds
for container purchases is these sales proceeds. Additionally, the rate of
decline in average fleet size will fluctuate due to timing differences in the
purchase and sale of containers and fluctuations in container sale and purchase
prices during these periods.
As noted above, when containers are sold in the future, sales proceeds are not
likely to be sufficient to replace all of the containers sold, resulting in the
continuing decline in the average container fleet. This trend is expected to
continue. Other factors related to this trend are discussed above in "Liquidity
and Capital Resources".
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 78%, 72% and 78% on average during the years
ended December 31, 2000, 1999 and 1998, respectively. In addition, rental income
is affected by daily rental rates, which have decreased between the periods as
described below.
The following is a comparative analysis of the results of operations for the
years ended December 31, 2000, 1999 and 1998.
The Partnership's income (loss) from operations for the years ended December 31,
2000 and 1999 was $2,466 and ($179), respectively, on rental income of $15,135
and $15,224, respectively. The decrease in rental income of $89, or 1%, from the
year ended December 31, 1999 to the year ended December 31, 2000 was
attributable to a decrease in other rental income, which is discussed below,
offset by an increase in income from container rentals. Income from container
rentals, the major component of total revenue, increased $258, or 2%, primarily
due to the increase in average on-hire utilization of 8%, offset by the
decreases in the average container fleet of 4% and average rental rates of 4%.
The Partnership's income (loss) from operations for the years ended December 31,
1999 and 1998 was ($179) and $3,769, respectively, on rental income of $15,224
and $18,904, respectively. The decrease in rental income of $3,680, or 19%, from
the year ended December 31, 1998 to the year ended December 31, 1999 was
attributable to decreases in container rental income and other rental income.
Income from container rentals, decreased $3,217, or 19%, primarily due to the
decreases in the average on-hire utilization of 8%, the average container fleet
of 7% and rental rates of 5%.
The improvement in utilization, which began in the third quarter of 1999, was
due to improvements in demand for leased containers and in the trade balance,
primarily as a result of the improvement in certain Asian economies and a
related increase in exports out of Europe. This improvement in demand, coupled
with container lessors' efforts to sell older containers in low demand
locations, has also reduced the container surplus.
However, the trade imbalance between Asia and North America still exists, and as
a consequence, the build-up of containers, primarily on the East Coast of the
United States, persists. The Partnership has been unable to reposition a large
number of newer containers to higher demand locations in Asia, due to lack of
available vessel capacity from the United States East Coast ports.
As a result, the Partnership continues to sell some containers located in low
demand locations. The decision to sell containers is based on the current
expectation that the economic benefit of selling these containers is greater
than the estimated economic benefit of continuing to own these containers. The
majority of the containers sold during 1999 and 2000 were older containers. The
expected economic benefit of continuing to own these older containers was less
than that of newer containers primarily due to their shorter remaining marine
life, the cost to reposition containers and the shipping lines' preference for
leasing newer containers when they are available.
Once the decision had been made to sell containers, if the book value of these
containers was greater than the estimated fair value, the Partnership wrote down
the value of these specifically identified containers to their estimated fair
value, which was based on recent sales prices. Due to unanticipated declines in
container sales prices during 1999, the actual sales prices received on some
containers were lower than the estimates used for the write-down, resulting in
the Partnership incurring losses upon the sale of some of these containers.
Until demand for leased containers improves, the Partnership may incur further
write-downs and/or losses on the sale of such containers. Should the decline in
economic value of continuing to own such containers turn out to be permanent,
the Partnership may be required to increase its depreciation rate or write-down
the value on some or all of its container rental equipment.
The decline in the purchase price of new containers and the container surplus
mentioned above have resulted in the decline in rental rates in recent years.
However, as a result of the improvement in demand and increases in the purchase
price of new containers in 2000, rental rates remained stable during 2000.
In the fourth quarter of 2000, utilization began to decline and has continued to
decline into the beginning of 2001. This decline was primarily due to the
slowing United States economy and the resulting decline in exports out of Asia.
The General Partners caution that utilization could continue to decline in 2001
if these conditions persist and demand for leased containers does not improve.
Despite the decline in utilization, rental rates have remained stable into the
beginning of 2001. New container prices declined in 2001, and this decline,
combined with the recent decline in utilization may have a negative effect on
rental rates in the future.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's containers under master operating leases.
Other rental income consists of other lease-related items, primarily income from
charges to lessees for dropping off containers in surplus locations less credits
granted to lessees for leasing containers from surplus locations (location
income), income from charges to lessees for handling related to leasing and
returning containers (handling income) and income from charges to lessees for a
Damage Protection Plan (DPP). For the year ended December 31, 2000, other rental
income was $1,460, a decrease of $347 from the equivalent period in 1999. The
decrease was primarily due to decreases in location, DPP and handling income of
$147, $138, and $61, respectively. The decline in location income was due to a
decrease in charges to lessees for dropping off containers in certain locations,
offset by a decrease in credits granted to lessees for picking up containers
from surplus locations. DPP income declined due to a decrease in the average DPP
price charged per container and a decrease in the number of containers covered
under DPP. Handling income declined primarily due to the decline in container
movement.
For the year ended December 31, 1999, other rental income was $1,807, a decrease
of $463 from the year ended December 31, 1998. This decrease was primarily due
to the decrease in location income of $460. Location income decreased due to a
decrease in charges to lessees for dropping off containers in certain locations
and an increase in credits given to lessees for picking up containers from
certain locations.
Direct container expenses decreased $842, or 18% from the year ended December
31, 1999 to the same period in 2000. The decrease was primarily due to declines
in storage, DPP and handling expenses of $585, $361 and $116, offset by an
increase in repositioning expense. Storage expense declined due to the
improvement in utilization noted above and a lower average storage cost per
container. DPP expense declined primarily due to decreases in the average repair
cost per DPP container and in the number of containers covered under DPP.
Handling expense decreased due to the decrease in container movement and a lower
average handling cost per container. The increase in repositioning costs was due
to the increase in the average cost to reposition a container due to the high
demand for limited vessel capacity, offset by the decrease in the number of
containers repositioned.
Direct container expenses increased $486, or 12%, from the year ended December
31, 1998 to same period in 1999. The increase was primarily due to increases in
DPP and storage expenses of $393 and $341, respectively, partially offset by
decreases in insurance and repositioning expenses of $84 and $72, respectively.
DPP expense increased primarily due to an increase in the average repair cost
per DPP container and an increase in the number of containers covered under DPP.
Storage expense increased primarily due to the decrease in average utilization.
Insurance expense decreased due to a reduction in insurance premiums.
Repositioning expense decreased due to lower average repositioning costs per
container, partially offset by an increase in the number of containers
repositioned from the year ended December 31, 1998 to the same period in 1999.
Bad debt (benefit) expense was ($23), $353 and ($244) for the years ended
December 31, 2000, 1999 and 1998, respectively. The benefit recorded for the
year ended December 31, 2000 was due to the overall lower required reserves at
December 31, 2000 than at December 31, 1999. The effect of insurance proceeds
received during 1998 relating to certain receivables against which reserves had
been recorded in 1994 and 1995, as well as the resolution of payment issues with
one lessee during 1998, were primarily responsible for the benefit recorded in
1998 and, therefore, the fluctuation in bad debt expense (benefit) between 1998
and 1999.
Depreciation expense decreased $402, or 7%, and $498, or 7%, from the years
ended December 31, 1999 to 2000 and December 31, 1998 to 1999, respectively,
primarily due to the declines in the average fleet size.
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, the cost of new containers at year-end 1998,
during 1999 and 2000 was significantly less than the average cost of containers
purchased in prior years. The Partnership evaluated the recoverability of the
recorded amount of container rental equipment at December 31, 2000, 1999 and
1998 for containers to be held for continued use and determined that a reduction
to the carrying value of these containers was not required. The Partnership also
evaluated the recoverability of the recorded amount of containers identified for
sale in the ordinary course of business and determined that a reduction to the
carrying value of these containers was required. The Partnership wrote down the
value of these containers to their estimated fair value, which was based on
recent sales prices less cost to sell. During the years ended December 31, 2000,
1999 and 1998 the Partnership recorded write-down expenses of $595, $733 and
$349, respectively, on 890, 1,398 and 930 containers identified as for sale and
requiring a reserve. At December 31, 2000 and 1999, the net book value of
containers identified as for sale was $493 and $747, respectively.
The Partnership sold 984 of these previously written down containers for a loss
of $57 during the year ended December 31, 2000 and sold 1,998 previously written
down containers for a loss of $290 during the same period in 1999. During the
year ended December 31, 1998 there were no sales of previously written down
containers as the initial write-down was recorded at December 31, 1998. The
Partnership incurred losses on the sale of some containers previously written
down as the actual sales prices received on these containers were lower than the
estimates used for the write-downs, primarily due to unexpected declines in
container sale prices.
The Partnership also sold containers that had not been written down and recorded
losses of $84, $691 and $1,240 during the years ended December 31, 2000, 1999
and 1998, respectively.
As more containers are subsequently identified for sale or if container sales
prices decline, the Partnership may incur additional write-downs on containers
and/or may incur losses on the sale of containers.
Management fees to affiliates decreased $70, or 5% and $244, or 14%, from the
years ended December 31, 1999 to 2000 and December 31, 1998 to 1999,
respectively. The decreases were due to decreases in both incentive and
equipment management fees. Incentive management fees, which are based on the
Partnership's limited and general partner distribution percentage and initial
limited partners' capital, decreased due to (i) decreases in the limited partner
distribution percentage from 9.25% to 8.25% in July 1998 and from 8.25% to 7% in
October 1999 and (ii) decreases in partners' capital due to redemptions of
limited partners units during the years ended December 31, 2000, 1999 and 1998.
Equipment management fees, which are based primarily on gross revenue, decreased
due to the declines in rental income and were approximately 7% of rental income
for the years ended December 31, 2000, 1999 and 1998.
General and administrative costs to affiliates decreased $49, or 6% and $224, or
22%, from the years ended December 31, 1999 to 2000 and December 31, 1998 to
1999, respectively. These decreases were primarily due to a decrease in the
allocation of overhead costs from TEM, as the Partnership represented a smaller
portion of the total fleet managed by TEM.
Loss on sale of containers was $141 and $981 during the years ended December 31,
2000 and 1999, respectively. The decrease in loss on sale of containers was
primarily due to the Partnership selling fewer containers during the year ended
December 31, 2000 than in the same period in 1999. The decline in the number of
container sold was primarily due to there being fewer lower demand locations and
fewer containers in these locations, primarily as a result of previous sales
efforts.
Loss on sale of containers decreased $259 from the year ended December 31, 1998
to the year ended December 31, 1999. Although the Partnership continued to sell
containers in low demand locations at lower average sales prices, as a result of
market conditions, it incurred fewer losses during 1999 than 1998 primarily due
to the write-down of certain containers recorded during 1998 and 1999.
Net earnings per limited partnership unit increased from a loss of $0.02 to
earnings of $0.43 from the year ended December 31, 1999 to 2000, reflecting the
increase in net earnings allocated to limited partners from a loss of $125 to
earnings of $2,620, respectively. Net earnings per limited partnership unit
decreased from earnings of $0.61 to a loss of $0.02 from the year ended December
31, 1998 to 1999, reflecting the decrease in net earnings allocated to limited
partners from earnings of $3,771 to a loss of $125, respectively. The allocation
of net earnings for the years ended December 31, 2000, 1999 and 1998 included a
special allocation to the General Partners of $63, $104, and $76, respectively,
in accordance with the Partnership Agreement.
Risk Factors and Forward Looking Statements
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines, which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the containers. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep its containers under lease, rather than the geographic location
of the containers or the domicile of the lessees. The containers are generally
operated on the international high seas rather than on domestic waterways. The
containers are subject to the risk of war or other political, economic or social
occurrence where the containers are used, which may result in the loss of
containers, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of December 31, 2000, which would result in such a
risk materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, including bad debts, increases in maintenance expenses or other
costs of operating the containers, and the effect of world trade, industry
trends and/or general business and economic cycles on the Partnership's
operations. See "Risk Factors" in the Partnership's Prospectus, as supplemented,
for additional information on risks of the Partnership's business.
The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached pages 12 to 23.
Independent Auditors' Report
----------------------------
The Partners
Textainer Equipment Income Fund III, L.P.:
We have audited the accompanying balance sheets of Textainer Equipment Income
Fund III, L.P. (a California limited partnership) as of December 31, 2000 and
1999, the related statements of operations, partners' capital and cash flows for
each of the years in the three-year period ended December 31, 2000. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
III, L.P. as of December 31, 2000 and 1999, and the results of its operations,
its partners' capital and its cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
San Francisco, California
February 16, 2001
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Balance Sheets
December 31, 2000 and 1999
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------
2000 1999
--------------- --------------
Assets
Container rental equipment, net of accumulated
depreciation of $42,262 (1999: $40,469) $ 52,490 $ 56,757
Cash 2,875 3,355
Accounts receivable, net of allowance for doubtful
accounts of $465 (1999: $756) (note 4) 2,993 3,857
Due from affiliates, net (note 2) 707 816
Prepaid expenses 15 18
--------------- --------------
$ 59,080 $ 64,803
=============== ==============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 492 $ 432
Accrued liabilities 398 286
Accrued recovery costs (note 1(j)) 193 165
Accrued damage protection plan costs (note 1(k)) 279 436
Warranty claims (note 1(l)) 109 149
Deferred quarterly distributions (note 1(g)) 79 81
Container purchases payable 646 243
--------------- --------------
Total liabilities 2,196 1,792
--------------- --------------
Partners' capital:
General partners - -
Limited partners 56,884 63,011
--------------- --------------
Total partners' capital 56,884 63,011
--------------- --------------
$ 59,080 $ 64,803
=============== ==============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Operations
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
- ---------------------------------------------------------------------------------------------------------------
2000 1999 1998
----------------- ---------------- -----------------
Rental income $ 15,135 $ 15,224 $ 18,904
----------------- ---------------- -----------------
Costs and expenses:
Direct container expenses 3,851 4,693 4,207
Bad debt (benefit) expense (23) 353 (244)
Depreciation 5,746 6,148 6,646
Write-down of containers (note 1(e)) 595 733 349
Professional fees 62 70 41
Management fees to affiliates (note 2) 1,404 1,474 1,718
General and administrative costs
to affiliates (note 2) 736 785 1,009
Other general and administrative costs 157 166 169
Loss on sale of containers 141 981 1,240
----------------- ---------------- -----------------
12,669 15,403 15,135
----------------- ---------------- -----------------
Income (loss) from operations 2,466 (179) 3,769
----------------- ---------------- -----------------
Other income:
Interest income 244 158 117
----------------- ---------------- -----------------
244 158 117
----------------- ---------------- -----------------
Net earnings (loss) $ 2,710 $ (21) $ 3,886
================= ================ =================
Allocation of net earnings (loss) (note 1(g)):
General partners $ 90 $ 104 $ 115
Limited partners 2,620 (125) 3,771
----------------- ---------------- -----------------
$ 2,710 $ (21) $ 3,886
================= ================ =================
Limited partners' per unit share
of net earnings (loss) $ 0.43 $ (0.02) $ 0.61
================= ================ =================
Limited partners' per unit share
of distributions $ 1.40 $ 1.61 $ 1.77
================= ================ =================
Weighted average number of limited
partnership units outstanding (note 1(m)) 6,127,711 6,136,934 6,162,976
================= ================ =================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
Year ended December 31, 2000, 1999 and 1998
- ----------------------------------------------------------------------------------------------------
Partners' Capital
---------------------------------------------------------
General Limited Total
-------------- -------------- --------------
Balances at December 31, 1997 $ - $ 80,438 $ 80,438
Distributions (115) (10,890) (11,005)
Redemptions (note 1(n)) - (153) (153)
Net earnings 115 3,771 3,886
-------------- -------------- --------------
Balances at December 31, 1998 - 73,166 73,166
-------------- -------------- --------------
Distributions (104) (9,873) (9,977)
Redemptions (note 1(n)) - (157) (157)
Net earnings (loss) 104 (125) (21)
-------------- -------------- --------------
Balances at December 31, 1999 - 63,011 63,011
-------------- -------------- --------------
Distributions (90) (8,581) (8,671)
Redemptions (note 1(n)) - (166) (166)
Net earnings 90 2,620 2,710
-------------- -------------- --------------
Balances at December 31, 2000 $ - $ 56,884 $ 56,884
============== ============== ==============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
--------------- ------------- -------------
Cash flows from operating activities:
Net earnings (loss) $ 2,710 $ (21) $ 3,886
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Depreciation and container write-downs 6,341 6,881 6,995
(Decrease) increase in allowance for doubtful accounts,
excluding write-off (note 4) (291) 317 (415)
Loss on sale of containers 141 981 1,240
Decrease (increase) in assets:
Accounts receivable, excluding write-off (note 4) 1,257 145 1,041
Due from affiliates, net (211) 31 (410)
Prepaid expenses 3 8 146
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 172 53 39
Accrued recovery costs 28 49 (3)
Accrued damage protection plan costs (157) 145 (60)
Warranty claims (40) (39) (40)
--------------- ------------- -------------
Net cash provided by operating activities 9,953 8,550 12,419
--------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of containers 3,030 4,947 3,329
Container purchases (4,624) (3,446) (1,480)
--------------- ------------- -------------
Net cash (used in) provided by investing activities (1,594) 1,501 1,849
--------------- ------------- -------------
Cash flows from financing activities:
Redemptions of limited partnership units (166) (157) (153)
Distributions to partners (8,673) (9,994) (11,030)
--------------- ------------- -------------
Net cash used in financing activities (8,839) (10,151) (11,183)
--------------- ------------- -------------
Net (decrease) increase in cash (480) (100) 3,085
Cash at beginning of period 3,355 3,455 370
--------------- ------------- -------------
Cash at end of period $ 2,875 $ 3,355 $ 3,455
=============== ============= =============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(A California Limited Partnership)
Statements of Cash Flows - Continued
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands)
- ----------------------------------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers which had not been paid or
received by the Partnership as of December 31, 2000, 1999, 1998 and 1997,
resulting in differences in amounts recorded and amounts of cash disbursed or
received by the Partnership, as shown in the Statements of Cash Flows.
2000 1999 1998 1997
---- ---- ---- ----
Container purchases included in:
Due to affiliates..................................... $ - $ - $ 16 $ 42
Container purchases payable........................... 646 243 56 365
Distributions to partners included in:
Due to affiliates..................................... 8 8 9 10
Deferred quarterly distributions...................... 79 81 97 121
Proceeds from sale of containers included in:
Due from affiliates................................... 281 601 812 399
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers recorded by the Partnership and
the amounts paid or received as shown on the Statements of Cash Flows for the
years ended December 31, 2000, 1999 and 1998.
2000 1999 1998
---- ---- ----
Container purchases recorded......................................... $5,027 $3,617 $ 1,145
Container purchases paid............................................. 4,624 3,446 1,480
Distributions to partners declared................................... 8,671 9,977 11,005
Distributions to partners paid....................................... 8,673 9,994 11,030
Proceeds from sale of containers recorded............................ 2,710 4,736 3,742
Proceeds from sale of containers received............................ 3,030 4,947 3,329
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying values of containers transferred during the years ended December
31, 2000, 1999 and 1998 was $102, $134 and $98, respectively.
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Notes to Financial Statements
Years ended December 31, 2000, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
(a) Nature of Operations
Textainer Equipment Income Fund III, L.P. (TEIF III or the Partnership), a
California limited partnership, with a maximum life of 20 years, was
formed on July 26, 1990. The Partnership was formed to engage in the
business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, trailers and other
container-related equipment. On January 16, 1991 TEIF III began offering
units representing limited partnership interests (Units) to the public. On
May 4, 1992, the Partnership had sold the maximum number of units offered.
On that date, the Partnership had issued 6,250,000 units, for a total of
$125,000.
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership and is a wholly-owned subsidiary of Textainer
Capital Corporation (TCC). Textainer Equipment Management Limited (TEM)
and Textainer Limited (TL) are associate general partners of the
Partnership. The managing general partner and the associate general
partners are collectively referred to as the General Partners and are
commonly owned by Textainer Group Holdings Limited (TGH). The General
Partners also act in this capacity for other limited partnerships. Prior
to its liquidation in October 1998, Textainer Acquisition Services Limited
(TAS), a former affiliate of the General Partners, performed services
related to the acquisition of containers outside the United States on
behalf of the Partnership. Effective November 1998, these services are
being performed by TEM. The General Partners manage and control the
affairs of the Partnership.
(b) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned according to the terms of the container rental
contracts. These contracts are classified as operating leases or direct
finance leases if they so qualify under Statement of Financial Accounting
Standards No. 13: "Accounting for Leases". Substantially all of the
Partnership's rental income was generated from the leasing of the
Partnership's containers under short-term operating leases.
(c) Use of Estimates
Certain estimates and assumptions were made by the Partnership's
management that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(d) Fair Value of Financial Instruments
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the Partnership
calculates the fair value of financial instruments and includes this
additional information in the notes to the financial statements when the
fair value is different than the book value of those financial
instruments. At December 31, 2000 and 1999, the fair value of the
Partnership's financial instruments approximates the related book value of
such instruments.
(e) Container Rental Equipment
Container rental equipment is recorded at the cost of the assets
purchased, which includes acquisition fees, less depreciation charged.
Depreciation of new containers is computed using the straight-line method
over an estimated useful life of 12 years to a 28% salvage value. Used
containers are depreciated based upon their estimated remaining useful
life at the date of acquisition (from 2 to 11 years). When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the equipment accounts and any resulting
gain or loss is recognized in income for the period.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of" (SFAS 121), the Partnership periodically compares the
carrying value of the containers to expected future cash flows for the
purpose of assessing the recoverability of the recorded amounts. If the
carrying value exceeds expected future cash flows, the assets are written
down to estimated fair value. In addition, containers identified for
disposal are recorded at the lower of carrying amount or fair value less
cost to sell.
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, the cost of new containers at year-end
1998, during 1999 and 2000 was significantly less than the average cost of
containers purchased in prior years. The Partnership evaluated the
recoverability of the recorded amount of container rental equipment at
December 31, 2000, 1999 and 1998 for containers to be held for continued
use and determined that a reduction to the carrying value of these
containers was not required. The Partnership also evaluated the
recoverability of the recorded amount of containers identified for sale in
the ordinary course of business and determined that a reduction to the
carrying value of these containers was required. The Partnership wrote
down the value of these containers to their estimated fair value, which
was based on recent sales prices less cost to sell. During the years ended
December 31, 2000, 1999 and 1998 the Partnership recorded write-down
expenses of $595, $733 and $349, respectively, on 890, 1,398 and 930
containers identified as for sale and requiring a reserve. At December 31,
2000 and 1999, the net book value of containers identified as for sale was
$493 and $747, respectively.
The Partnership sold 984 of these previously written down containers for a
loss $57 during the year ended December 31, 2000 and sold 1,998 previously
written down containers for a loss of $290 during the same period in 1999.
During the year ended December 31, 1998 there were no sales of previously
written down containers as the initial write-down was recorded at December
31, 1998. The Partnership incurred losses on the sale of some containers
previously written down as the actual sales prices received on these
containers were lower than the estimates used for the write-downs,
primarily due to unexpected declines in container sale prices.
The Partnership also sold containers that had not been written down and
recorded losses of $84, $691 and $1,240 during the years ended December
31, 2000, 1999 and 1998, respectively.
If more containers are subsequently identified for sale or if container
sales prices decline, the Partnership may incur additional write-downs on
containers and/or may incur losses on the sale of containers. The
Partnership will continue to evaluate the recoverability of the recorded
amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may
be required in future periods for some or all of its container rental
equipment.
(f) Nature of Income from Operations
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this
income is denominated in United States dollars. The Partnership's
customers are international shipping lines that transport goods on
international trade routes. The domicile of the lessee is not indicative
of where the lessee is transporting the containers. The Partnership's
business risk in its foreign operations lies with the creditworthiness of
the lessees rather than the geographic location of the containers or the
domicile of the lessees.
No single lessee accounted for more than 10% of the Partnership's revenues
for the years ended December 31, 2000, 1999 and 1998.
(g) Allocation of Net Earnings and Partnership Distributions
In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings and creates a deficit
in the General Partners' aggregate capital account, the Partnership
Agreement provides for a special allocation of gross income equal to the
amount of the deficit.
Actual cash distributions to the Limited Partners differ from the
allocated net earnings (losses) as presented in these financial statements
because cash distributions are based on cash available for distribution.
Cash distributions are paid to the general and limited partners on a
monthly basis in accordance with the provisions of the Partnership
Agreement. Some limited partners have elected to have their distributions
paid quarterly. The Partnership has recorded deferred distributions of $79
and $81 at December 31, 2000 and 1999, 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) Acquisition Fees
In accordance with the Partnership Agreement, acquisition fees equal to 5%
of the container purchase price were paid to TAS through October 1998 and
to TEM beginning in November 1998. These fees are capitalized as part of
the cost of the containers.
(j) Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess of
estimated insurance proceeds. At December 31, 2000 and 1999, the amounts
accrued were $193 and $165, respectively.
(k) Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
containers. Under the terms of DPP, the Partnership earns additional
revenues on a daily basis and, in return, has agreed to bear certain
repair costs. It is the Partnership's policy to recognize revenue when
earned and provide a reserve sufficient to cover the estimated future
repair costs. DPP expenses are included in direct container expenses in
the Statements of Operations and the related reserve at December 31, 2000
and 1999, was $279 and $436, respectively.
(l) Warranty Claims
During 1992 and 1995, the Partnership settled warranty claims against a
container manufacturer. The Partnership is amortizing the settlement
amounts over the remaining estimated useful lives of the applicable
containers (between six and seven years), reducing maintenance and repair
costs over that time. At December 31, 2000 and 1999, the unamortized
portion of the settlement amount was equal to $109 and $149, respectively.
(m) Limited Partners' Per Unit Share of Net Earnings (Loss) and
Distributions
Limited partners' per unit share of both net earnings (loss) and
distributions were computed using the weighted average number of units
outstanding during the years ended December 31, 2000, 1999 and 1998, which
were 6,127,711, 6,136,934, and 6,162,976, respectively.
(n) Redemptions
The following redemption offerings were consummated by the Partnership
during the years ended December 31, 2000, 1999 and 1998:
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- ------------
Total Partnership redemptions as of
December 31, 1997.................... 81,473 $ 14.69 $1,197
------- ------
Year ended December 31, 1998:
3rd quarter...................... 7,538 $ 10.61 80
4th quarter...................... 7,129 $ 10.24 73
------- ------
14,667 $ 10.43 153
------- ------
Year ended December 31, 1999:
1st quarter...................... 16,926 $ 9.28 157
------- ------
Year ended December 31, 2000:
1st quarter...................... 500 $ 7.50 4
3rd quarter...................... 12,921 $ 7.26 94
4th quarter...................... 9,051 $ 7.51 68
------- ------
22,472 $ 7.39 166
------- ------
Total Partnership redemptions as of
December 31, 2000.................... 135,538 $ 12.34 $1,673
======= ======
The redemption price is fixed by formula.
(o) Reclassification
Following the adoption of SAB 101, "Revenue Recognition in Financial
Statements", by the Partnership in the fourth quarter of fiscal 2000, the
Partnership has reclassified gain/loss on sale of containers from other
income (after income from operations) to costs and expenses (before income
from operations). All periods have been amended to reflect this
reclassification.
Note 2. Transactions with Affiliates
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners, or TAS prior to its liquidation, an acquisition fee,
an equipment management fee, an incentive management fee and an equipment
liquidation fee. These fees are for various services provided in
connection with the administration and management of the Partnership. The
Partnership capitalized $239, $172, and $55 of container acquisition fees
as part of container rental equipment costs during the years ended
December 31, 2000, 1999 and 1998, respectively. The Partnership incurred
$361, $410, and $454 of incentive management fees during each of the three
years ended December 31, 2000, 1999 and 1998, respectively. No equipment
liquidation fees were incurred during these periods.
The Partnership's containers are managed by TEM. In its role as manager,
TEM has authority to acquire, hold, manage, lease, sell and dispose of the
containers. TEM holds, for the payment of direct operating expenses, a
reserve of cash that has been collected from leasing operations; such cash
is included in due from affiliates, net, at December 31, 2000 and 1999.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross lease revenues attributable to master operating
leases and 2% of gross lease revenues attributable to full payout net
leases. For the years ended December 31, 2000, 1999 and 1998, equipment
management fees totaled $1,043, $1,064, and $1,264, respectively. The
Partnership's containers are leased by TEM to third party lessees on
operating master leases, spot leases, term leases and full payout net
leases. Although the Partnership has some rent receivable under cancelable
long term operating leases, the majority of the Partnership's leases are
operating leases with limited terms and no purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are incurred and paid by TEM and TFS. Total general and
administrative costs allocated to the Partnership were as follows:
2000 1999 1998
---- ---- ----
Salaries $ 380 $ 437 $ 547
Other 356 348 462
--- --- -----
Total general and
administrative costs $ 736 $ 785 $1,009
=== === =====
TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed containers to the total
container fleet managed by TEM during the period. TFS allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TFS. The General
Partners allocated the following general and administrative costs to the
Partnership:
2000 1999 1998
---- ---- ----
TEM $641 $701 $ 914
TFS 95 84 95
--- --- -----
Total general and
administrative costs $736 $785 $1,009
=== === =====
The General Partners, or TAS through October 1998, may acquire containers
in their own name and hold title on a temporary basis for the purpose of
facilitating the acquisition of such containers for the Partnership. The
containers may then be resold to the Partnership on an all-cash basis at a
price equal to the actual cost, as defined in the Partnership Agreement.
In addition, the General Partners and, prior to its liquidation, TAS are
entitled to an acquisition fee for any containers resold to the
Partnership.
At December 31, 2000 and 1999, due from affiliates, net, is comprised of:
2000 1999
---- ----
Due from affiliates:
Due from TEM........................... $755 $864
--- ---
Due to affiliates:
Due to TFS............................. 36 34
Due to TCC............................. 11 13
Due to TL.............................. 1 1
--- ---
48 48
--- ---
Due from affiliates, net $707 $816
=== ===
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and payment of expenses
and fees described above or in the accrual and remittance of net rental
revenues and sales proceeds from TEM.
Note 3. Income Taxes
At December 31, 2000, 1999 and 1998, there were temporary differences of
$40,837, $44,758, and $53,142, respectively, between the financial
statement carrying value of certain assets and liabilities and the federal
income tax basis of such assets and liabilities. The reconciliation of net
income for financial statement purposes to net income for federal income
tax purposes for the years ended December 31, 2000, 1999 and 1998 is as
follows:
2000 1999 1998
---- ---- ----
Net income (loss) per financial statements............... $ 2,710 $ (21) $ 3,886
(Decrease) increase in provision for bad debt............ (291) 317 (1,095)
Depreciation for federal income tax purposes
less than (in excess of) depreciation for
financial statement purposes........................... 1,571 2,373 (782)
Gain on sale of fixed assets for federal income
tax purposes in excess of gain/loss recognized
for financial statement purposes....................... 2,839 5,588 4,962
(Decrease) increase in damage protection plan costs...... (157) 145 (60)
Warranty reserve income for tax purposes in excess
of financial statement purposes........................ (40) (39) (40)
------ ------ ------
Net income for federal income tax purposes............... $ 6,632 $ 8,363 $ 6,871
====== ====== ======
Note 4. Accounts Receivable Write-Off
During 1998, the Partnership wrote-off $680 of delinquent receivables from
two lessees against which reserves were recorded in 1994 and 1995. During
the years ended December 31, 2000 and 1999, there were no such
individually significant write-offs.
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Selected Quarterly Financial Data
- -----------------------------------------------------------------------------------------------------------------------
The following is a summary of selected quarterly financial data for the years
ended December 31, 2000, 1999 and 1998:
(Amounts in thousands)
2000 Quarters Ended
------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
------------------------------------------------------------
Rental income $ 3,782 $ 3,824 $ 3,761 $3,768
Income from operations $ 357 $ 801 $ 702 $ 606
Net earnings $ 413 $ 873 $ 765 $ 659
Limited partners' share of net earnings $ 390 $ 851 $ 742 $ 637
Limited partners' share of distributions $ 2,148 $ 2,148 $ 2,144 $2,141
1999 Quarters Ended
------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
------------------------------------------------------------
Rental income $ 3,866 $ 3,607 $ 3,820 $3,931
Income (loss) from operations $ (39) $ (899) $ 170 $ 589
Net earnings (loss) $ 8 $ (857) $ 200 $ 628
Limited partners' share of net earnings (loss) $ (19) $ (910) $ 173 $ 631
Limited partners' share of distributions $ 2,534 $ 2,532 $ 2,531 $2,276
1998 Quarters Ended
------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
------------------------------------------------------------
Rental income $ 4,845 $ 4,724 $ 4,712 $4,623
Income from operations $ 1,473 $ 1,183 $ 1,039 $ 74
Net earnings $ 1,488 $ 1,211 $ 1,074 $ 113
Limited partners' share of net earnings $ 1,458 $ 1,181 $ 1,046 $ 86
Limited partners' share of distributions $ 2,852 $ 2,854 $ 2,645 $2,539
The amounts of income from operations are different from the amounts previously
reported in reports on Form 10-Q filed for the years 2000, 1999 and 1998 as the
Registrant adopted SAB 101, "Revenue Recognition in Financial Statements", in
the fourth quarter of fiscal 2000 and reclassified gain/loss on sale of
containers from other income (after income from operations) to costs and
expenses (before income from operations). To conform to the current year's
presentation, the following reclassifications were made to income from
operations:
Mar. 31 June 30 Sept. 30 Dec. 31
------------------------------------------------------------
2000 $ (131) $ 73 $ (57) $ (26)
1999 $ (257) $ (480) $ (160) $ (84)
1998 $ 42 $ (159) $ (254) $ (869)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no officers or directors.
As described in the Prospectus, the Registrant's three original general partners
were TCC, TEM and Textainer Inc. (TI), which comprised the original Textainer
Group. Effective October 1, 1993, the Textainer Group restructured its
organization by forming a new holding company, Textainer Group Holdings Limited
(TGH), and the shareholders of the underlying companies which include the
General Partners accepted shares in TGH in exchange for their shares in the
individual companies. Textainer Financial Services Corporation (TFS) is the
Managing General Partner of the Partnership (prior to its name change on April
4, 1994, TFS was known as Textainer Capital Corporation). TFS is a wholly-owned
subsidiary of Textainer Capital Corporation (TCC) (prior to its name change on
April 4, 1994, TCC was known as Textainer (Delaware) Inc.). Textainer Equipment
Management Limited (TEM) is an Associate General Partner of the Partnership. TI
was an Associate General Partner of the Partnership through September 30, 1993
when it was replaced in that capacity by Textainer Limited (TL), pursuant to the
corporate restructuring effective October 1, 1993, which caused TFS, TEM and TL
to fall under the common ownership of TGH. Pursuant to this restructuring, TI
transferred substantially all of its assets including all of its rights and
duties as Associate General Partner to TL. This transfer was effective from
October 1, 1993. The end result was that TFS now serves as the Managing General
Partner and TEM and TL now serve as the Associate General Partners. The Managing
General Partner and Associate General Partners are collectively referred to as
the General Partners and are wholly-owned or substantially-owned subsidiaries of
TGH. The General Partners also act in this capacity for other limited
partnerships. Prior to its liquidation in October 1998, Textainer Acquisition
Services Limited (TAS) was an affiliate of the General Partners and performed
services related to the acquisition of equipment outside the United States on
behalf of the Partnership. Effective November 1998, these services are performed
by TEM.
TFS, as the Managing General Partner, is responsible for managing the
administration and operation of the Registrant, and for the formulation and
administration of investment policies.
TEM, an Associate General Partner, manages all aspects of the operation of the
Registrant's equipment.
TL, an Associate General Partner, owns a fleet of container rental equipment
which is managed by TEM. TL provides advice to the Partnership regarding
negotiations with financial institutions, manufacturers and equipment owners,
and regarding the terms upon which particular items of equipment are acquired.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires the Partnership's
General Partners, policy-making officials and persons who beneficially own more
than ten percent of the Units to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of these reports
must also be furnished to the Partnership.
Based solely on a review of the copies of such forms furnished to the
Partnership or on written representations that no forms were required to be
filed, the Partnership believes that with respect to its most recent fiscal year
ended December 31, 2000, all Section 16(a) filing requirements were complied
with. No member of management, or beneficial owner owned more than 10 percent of
any interest in the Partnership. None of the individuals subject to section
16(a) failed to file or filed late any reports of transactions in the Units.
The directors and executive officers of the General Partners are as follows:
Name Age Position
- ---- --- --------
Neil I. Jowell 67 Director and Chairman of TGH, TEM, TL, TCC and TFS
John A. Maccarone 56 President, CEO and Director of TGH, TEM, TL, TCC and TFS
James E. Hoelter 61 Director of TGH, TEM, TL, TCC and TFS
Alex M. Brown 62 Director of TGH, TEM, TL, TCC and TFS
Harold J. Samson 79 Director of TGH and TL
Philip K. Brewer 44 Senior Vice President - Asset Management Group and Director of TEM and TL
Robert D. Pedersen 41 Senior Vice President - Leasing Group, Director of TEM
Ernest J. Furtado 45 Senior Vice President , CFO and Secretary of TGH, TEM, TL, TCC and TFS,
Director of TEM, TCC and TFS
Wolfgang Geyer 47 Regional Vice President - Europe
Mak Wing Sing 43 Regional Vice President - South Asia
Masanori Sagara 45 Regional Vice President - North Asia
Stefan Mackula 48 Vice President - Equipment Resale
Anthony C. Sowry 48 Vice President - Corporate Operations and Acquisitions
Richard G. Murphy 48 Vice President - Risk Management
Janet S. Ruggero 52 Vice President - Administration and Marketing Services
Jens W. Palludan 50 Regional Vice President - Americas and Logistics
Isam K. Kabbani 66 Director of TGH and TL
James A. C. Owens 61 Director of TGH and TL
S. Arthur Morris 67 Director of TGH, TEM and TL
Dudley R. Cottingham 49 Assistant Secretary, Vice President and Director of TGH, TEM and TL
Nadine Forsman 33 Controller of TCC and TFS
Neil I. Jowell is Director and Chairman of TGH, TEM, TL, TCC and TFS
and a member of the Investment Advisory Committee (see "Committees" below). He
has served on the Board of Trencor Ltd. since 1966 and as Chairman since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an affiliate
of Trencor, and a non-executive director of Forward Corporation Ltd. (1993 to
present). Trencor is a publicly traded diversified industrial group listed on
the Johannesburg Stock Exchange. Its business is the leasing, owning, managing
and financing of marine cargo containers worldwide and the manufacture and
export of containers for international markets. In South Africa, it is engaged
in manufacturing, trading and exports of general commodities. Trencor also has
an interest in Forward Corporation Ltd., a publicly traded holding company
listed on the Johannesburg Stock Exchange. It has interests in industrial and
consumer businesses operating in South Africa and abroad. Mr. Jowell became
affiliated with the General Partners and its affiliates when Trencor became,
through its beneficial ownership in two controlled companies, a major
shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience in the transportation industry. He holds an M.B.A. degree from
Columbia University and Bachelor of Commerce and L.L.B. degrees from the
University of Cape Town.
John A. Maccarone is President, CEO and Director of TGH, TEM, TL, TCC
and TFS. In this capacity he is responsible for overseeing the management of and
coordinating the activities of Textainer's worldwide fleet of marine cargo
containers and the activities of all of these corporations. Additionally, he is
Chairman of the Equipment Investment Committee, the Credit Committee and the
Investment Advisory Committee (see "Committees", below). Mr. Maccarone was
instrumental in co-founding Intermodal Equipment Associates (IEA), a marine
container leasing company based in San Francisco, and held a variety of
executive positions with IEA from 1979 until 1987, when he joined the Textainer
Group. Mr. Maccarone was previously a Director of Marketing for Trans Ocean
Leasing Corporation in Hong Kong with responsibility for all leasing activities
in Southeast Asia. From 1969 to 1977, Mr. Maccarone was a marketing
representative for IBM Corporation. He holds a Bachelor of Science degree in
Engineering Management from Boston University and an M.B.A. from Loyola
University of Chicago.
James E. Hoelter is a director of TGH, TEM, TL, TCC and TFS. In addition,
Mr. Hoelter is a member of the Equipment Investment Committee and the Investment
Advisory Committee (see "Committees", below). Mr. Hoelter was the President and
Chief Executive Officer of TGH and TL from 1993 to 1998 and currently serves as
a consultant to Trencor (1999 to present). Prior to joining the Textainer Group
in 1987, Mr. Hoelter was president of IEA. Mr. Hoelter co-founded IEA in 1978
with Mr. Maccarone and was president from inception until 1987. From 1976 to
1978, Mr. Hoelter was vice president for Trans Ocean Ltd., San Francisco, a
marine container leasing company, where he was responsible for North America.
From 1971 to 1976, he worked for Itel Corporation, San Francisco, where he was
director of financial leasing for the container division. Mr. Hoelter received
his B.B.A. in finance from the University of Wisconsin, where he is an emeritus
member of its Business School's Dean's Advisory Board, and his M.B.A. from the
Harvard Graduate School of Business Administration.
Alex M. Brown is a director of TGH, TEM, TL, TCC and TFS. Additionally, he
is a member of the Equipment Investment Committee and the Investment Advisory
Committee (see "Committees", below). Among other directorships, Mr. Brown is a
director of Trencor Ltd. (1996 to present), which is publicly traded and listed
on the Johannesburg Stock Exchange. Mr. Brown became affiliated with the
Textainer Group in April 1986. From 1987 until 1993, he was President and Chief
Executive Officer of Textainer, Inc. and the Chairman of the Textainer Group.
Mr. Brown was the managing director of Cross County Leasing in England from 1984
until it was acquired by Textainer in 1986. From 1993 to 1997, Mr. Brown was
Chief Executive Officer of AAF, a company affiliated with Trencor Ltd. Mr. Brown
was also Chairman of WACO International Corporation, based in Cleveland, Ohio
until 1997.
Harold J. Samson is a director of TGH and TL and has served as such since
the Textainer Group's reorganization and formation of these companies in
1993. He is also a member of the Investment Advisory Committee (see
"Committees", below). Mr. Samson served as a consultant to various securities
firms from 1981 to 1989. From 1974 to 1981 he was Executive Vice President of
Foster & Marshall, Inc., a New York Stock Exchange member firm based in Seattle.
Mr. Samson was a director of IEA from 1979 to 1981. From 1957 to 1984 he served
as Chief Financial Officer in several New York Stock Exchange member firms. Mr.
Samson holds a B.S. in Business Administration from the University of
California, Berkeley and is a California Certified Public Accountant.
Philip K. Brewer is Senior Vice President - Asset Management Group and a
director of TEM and TL. He was President of TCC and TFS from January 1, 1998 to
December 31, 1998 until his appointment as Senior Vice President - Asset
Management Group. As President of TCC, Mr. Brewer was responsible for overseeing
the management of, and coordinating the activities of TCC and TFS. As Senior
Vice President, he is responsible for optimizing the capital structure of and
identifying new sources of finance for Textainer, as well as overseeing the
management of and coordinating the activities of Textainer's risk management,
logistics and the resale divisions. Mr. Brewer is a member of the Equipment
Investment Committee, the Credit Committee and was a member of the Investment
Advisory Committee through December 31, 1998 (see "Committees" below). Prior to
joining Textainer in 1996, as Senior Vice President - Capital Markets for TGH
and TL, Mr. Brewer worked at Bankers Trust from 1990 to 1996, starting as a Vice
President in Corporate Finance and ending as Managing Director and Country
Manager for Indonesia; from 1989 to 1990, he was Vice President in Corporate
Finance at Jarding Fleming; from 1987 to 1989, he was Capital Markets Advisor to
the United States Agency for International Development; and from 1984 to 1987 he
was an Associate with Drexel Burnham Lambert in New York. Mr. Brewer holds an
M.B.A. in Finance from the Graduate School of Business at Columbia University,
and a B.A. in Economics and Political Science from Colgate University.
Robert D. Pedersen is Senior Vice-President - Leasing Group and a Director
of TEM, responsible for worldwide sales and marketing related activities and
operations. Mr. Pedersen is a member of the Equipment Investment Committee and
the Credit Committee (see "Committees" below). He joined Textainer in 1991 as
Regional Vice President for the Americas Region. Mr. Pedersen has extensive
experience in the industry having held a variety of positions with Klinge Cool,
a manufacturer of refrigerated container cooling units (from 1989 to 1991),
where he was worldwide sales and marketing director, XTRA, a container lessor
(from 1985 to 1988) and Maersk Line, a container shipping line (from 1978 to
1984). Mr. Pedersen is a graduate of the A.P. Moller shipping and transportation
program and the Merkonom Business School in Copenhagen, majoring in Company
Organization.
Ernest J. Furtado is Senior Vice President, CFO and Secretary of TGH, TEM,
TL, TCC and TFS and a Director of TEM, TCC and TFS, in which capacity he is
responsible for all accounting, financial management, and reporting functions
for TGH, TEM, TL, TCC and TFS. Additionally, he is a member of the Investment
Advisory Committee for which he serves as Secretary, the Equipment Investment
Committee and the Credit Committee (see "Committees", below). Prior to these
positions, he held a number of accounting and financial management positions at
Textainer, of increasing responsibility. Prior to joining Textainer in May 1991,
Mr. Furtado was Controller for Itel Instant Space and manager of accounting for
Itel Containers International Corporation, both in San Francisco, from 1984 to
1991. Mr. Furtado's earlier business affiliations include serving as audit
manager for Wells Fargo Bank and as senior accountant with John F. Forbes & Co.,
both in San Francisco. He is a Certified Public Accountant and holds a B.S. in
business administration from the University of California at Berkeley and an
M.B.A. in information systems from Golden Gate University.
Wolfgang Geyer is based in Hamburg, Germany and is Regional Vice President
- - Europe, responsible for coordinating all leasing activities in Europe, Africa
and the Middle East/Persian Gulf. Mr. Geyer joined Textainer in 1993 and was the
Marketing Director in Hamburg through July 1997. From 1991 to 1993, Mr. Geyer
most recently was the Senior Vice President for Clou Container Leasing,
responsible for its worldwide leasing activities. Mr. Geyer spent the remainder
of his leasing career, 1975 through 1991, with Itel Container, during which time
he held numerous positions in both operations and marketing within the company.
Mak Wing Sing is based in Singapore and is the Regional Vice President -
South Asia, responsible for container leasing activities in North/Central
People's Republic of China, Hong Kong, South China (PRC), Southeast Asia and
Australia/New Zealand. Mr. Mak most recently was the Regional Manager, Southeast
Asia, for Trans Ocean Leasing, working there from 1994 to 1996. From 1987 to
1994, Mr. Mak worked with Tiphook as their Regional General Manager, and with
OOCL from 1976 to 1987 in a variety of positions, most recently as their
Logistics Operations Manager.
Masanori Sagara is based in Yokohama, Japan and is the Regional Vice
President - North Asia, responsible for container leasing activities in Japan,
Korea, and Taiwan. Mr. Sagara joined Textainer in 1990 and was the company's
Marketing Director in Japan through 1996. From 1987 to 1990, he was the
Marketing Manager at IEA. Mr. Sagara's other experience in the container leasing
business includes marketing management at Genstar from 1984 to 1987 and various
container operations positions with Thoresen & Company from 1979 to 1984. Mr.
Sagara holds a Bachelor of Science degree in Economics from Aoyama Bakuin
University.
Stefan Mackula is Vice President - Equipment Resale, responsible for
coordinating the worldwide sale of equipment into secondary markets. Mr. Mackula
also served as Vice President - Marketing from 1989 to 1991 where he was
responsible for coordinating all leasing activities in Europe, Africa, and the
Middle East. Mr. Mackula joined Textainer in 1983 as Leasing Manager for the
United Kingdom. Prior to joining Textainer, Mr. Mackula held, beginning in 1972,
a variety of positions in the international container shipping industry.
Anthony C. Sowry is Vice President - Corporate Operations and Acquisitions.
He is also a member of the Equipment Investment Committee and the Credit
Committee (see "Committees", below). Mr. Sowry supervises all international
container operations and maintenance and technical functions for the fleets
under Textainer's management. In addition, he is responsible for the acquisition
of all new and used containers for the Textainer Group. He began his affiliation
with Textainer in 1982, when he served as Fleet Quality Control Manager for
Textainer Inc. until 1988. From 1980 to 1982, he was operations manager for
Trans Container Services in London; and from 1978 to 1982, he was a technical
representative for Trans Ocean Leasing, also in London. He received his B.A.
degree in business management from the London School of Business. Mr. Sowry is a
member of the Technical Committee of the International Institute of Container
Lessors and a certified container inspector.
Richard G. Murphy is Vice President, Risk Management, responsible for all
credit and risk management functions. He also supervises the administrative
aspects of equipment acquisitions. He is a member of and acts as secretary to
the Equipment Investment and Credit Committees (see "Committees", below). He
previously served as TEM's Director of Credit and Risk Management from 1989 to
1991 and as Controller from 1988 to 1989. Prior to the takeover of the
management of the Interocean Leasing Ltd. fleet by TEM in 1988, Mr. Murphy held
various positions in the accounting and financial areas with that company from
1980, acting as Chief Financial Officer from 1984 to 1988. Prior to 1980, he
held various positions with firms of public accountants in the U.K. Mr. Murphy
is an Associate of the Institute of Chartered Accountants in England and Wales
and holds a Bachelor of Commerce degree from the National University of Ireland.
Janet S. Ruggero is Vice President, Administration and Marketing Services.
Ms. Ruggero is responsible for the tracking and billing of fleets under TEM
management, including direct responsibility for ensuring that all data is input
in an accurate and timely fashion. She assists the marketing and operations
departments by providing statistical reports and analyses and serves on the
Credit Committee (see "Committees", below). Prior to joining Textainer in 1986,
Ms. Ruggero held various positions with Gelco CTI over the course of 15 years,
the last one as Director of Marketing and Administration for the North American
Regional office in New York City. She has a B.A. in education from Cumberland
College.
Jens W. Palludan is based in Hackensack, New Jersey and is the Regional
Vice President - Americas and Logistics, responsible for container leasing
activities in North/South America and for coordinating container logistics. He
joined Textainer in 1993 as Regional Vice President - Americas/Africa/Australia,
responsible for coordinating all leasing activities in North and South America,
Africa and Australia/New Zealand. Mr. Palludan spent his career from 1969
through 1992 with Maersk Line of Copenhagen, Denmark in a variety of key
management positions in both Denmark and overseas. Mr. Palludan's most recent
position at Maersk was that of General Manager, Equipment and Terminals, where
he was responsible for the entire managed fleet. Mr. Palludan holds an M.B.A.
from the Centre European D'Education Permanente, Fontainebleau, France.
Sheikh Isam K. Kabbani is a director of TGH and TL. He has served as such
since the Textainer Group's reorganization and formation of these companies in
1993. He is Chairman and principal stockholder of the IKK Group, Jeddah, Saudi
Arabia, a manufacturing and trading group which is active both in Saudi Arabia
and internationally. In 1959 Sheikh Isam Kabbani joined the Saudi Arabian
Ministry of Foreign Affairs, and in 1960 moved to the Ministry of Petroleum for
a period of ten years. During this time he was seconded to the Organization of
Petroleum Exporting Countries (OPEC). After a period as Chief Economist of OPEC,
in 1967 he became the Saudi Arabian member of OPEC's Board of Governors. In 1970
he left the ministry of Petroleum to establish his own business, the National
Marketing Group, which has since been his principal business activity. Sheikh
Kabbani holds a B.A. degree from Swarthmore College, Pennsylvania, and an M.A.
degree in Economics and International Relations from Columbia University.
James A. C. Owens is a director of TGH and TL. Mr. Owens has been
associated with the Textainer Group since 1980. In 1983 he was appointed to the
Board of Textainer Inc., and served as President of Textainer Inc. from 1984 to
1987. From 1987 to 1998, Mr. Owens served as an alternate director on the Boards
of TI, TGH and TL and has served as director of TGH and TL since 1998. Apart
from his association with the Textainer Group, Mr. Owens has been involved in
insurance and financial brokerage companies and captive insurance companies. He
is a member of a number of Boards of Directors. Mr. Owens holds a Bachelor of
Commerce degree from the University of South Africa.
S. Arthur Morris is a director of TGH, TEM and TL. He is a founding partner
in the firm of Morris and Kempe, Chartered Accountants (1962-1977) and currently
functions as a correspondent member of a number of international accounting
firms through his firm Arthur Morris and Company (1977 to date). He is also
President and director of Continental Management Limited (1977 to date).
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Morris has over 30 years
experience in public accounting and serves on numerous business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr. Morris
became a director of TL and TGH in 1993, and TEM in 1994.
Dudley R. Cottingham is Assistant Secretary, Vice President and a director
of TGH, TEM and TL. He is a partner with Arthur Morris and Company (1977 to
date) and a Vice President and director of Continental Management Limited (1978
to date), both in the Cayman Islands and Turks and Caicos Islands. Continental
Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Cottingham has over 20 years
experience in public accounting with responsibility for a variety of
international and local clients. Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.
Nadine Forsman is the Controller of TCC and TFS. Additionally, she is a
member of the Investment Advisory Committee and Equipment Investment Committee
(See "Committees" below). As controller of TCC and TFS, she is responsible for
accounting, financial management and reporting functions for TCC and TFS as well
as overseeing all communications with the Limited Partners and as such,
supervises personnel in performing these functions. Prior to joining Textainer
in August 1996, Ms. Forsman was employed by KPMG LLP, holding various positions,
the most recent of which was manager, from 1990 to 1996. Ms. Forsman is a
Certified Public Accountant and holds a B.S. in Accounting and Finance from San
Francisco State University.
Committees
The Managing General Partner has established the following three committees
to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of equipment for
the Partnership and for other programs organized by the Textainer Group:
Equipment Investment Committee. The Equipment Investment Committee reviews
the equipment leasing operations of the Partnership on a regular basis with
emphasis on matters involving equipment purchases, equipment remarketing issues,
and decisions regarding ultimate disposition of equipment. The members of the
committee are John A. Maccarone (Chairman), James E. Hoelter, Anthony C. Sowry,
Richard G. Murphy (Secretary), Alex M. Brown, Philip K. Brewer, Robert D.
Pedersen, Ernest J. Furtado and Nadine Forsman.
Credit Committee. The Credit Committee establishes credit limits for every
lessee and potential lessee of equipment and periodically reviews these limits.
In setting such limits, the Credit Committee considers such factors as customer
trade routes, country, political risk, operational history, credit references,
credit agency analyses, financial statements, and other information. The members
of the Credit Committee are John A. Maccarone (Chairman), Richard G. Murphy
(Secretary), Janet S. Ruggero, Anthony C. Sowry, Philip K. Brewer, Ernest J.
Furtado and Robert D. Pedersen.
Investment Advisory Committee. The Investment Advisory Committee reviews
investor program operations on at least a quarterly basis, emphasizing matters
related to cash distributions to investors, cash flow management, portfolio
management, and liquidation. The Investment Advisory Committee is organized with
a view to applying an interdisciplinary approach, involving management,
financial, legal and marketing expertise, to the analysis of investor program
operations. The members of the Investment Advisory Committee are John A.
Maccarone (Chairman), James E. Hoelter, Ernest J. Furtado (Secretary), Nadine
Forsman, Harold J. Samson, Alex M. Brown and Neil I. Jowell.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has no executive officers and does not reimburse TFS, TEM or TL
for the remuneration payable to their executive officers. For information
regarding reimbursements made by the Registrant to the General Partners, see
note 2 of the Financial Statements in Item 8.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
There is no person or "Group" who is known to the Registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership interest in the Registrant.
(b) Security Ownership of Management
As of January 1, 2001:
Number
Name of Beneficial Owner Of Units % All Units
------------------------ -------- -----------
James E. Hoelter................ 2,500 0.0409%
John A. Maccarone............... 2,520 0.0412%
Harold Samson................... 2,500 0.0409%
Anthony C. Sowry................ 274 0.0045%
----- -------
Officers and Management
as a Group..................... 7,794 0.1275%
===== =======
(c) Changes in control.
Inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Amounts in thousands)
(a) Transactions with Management and Others.
At December 31, 2000 and 1999, due from affiliates, net, is comprised
of:
2000 1999
---- ----
Due from affiliates:
Due from TEM........................... $ 755 $ 864
--- ---
Due to affiliates:
Due to TFS............................. 36 34
Due to TCC............................. 11 13
Due to TL.............................. 1 1
--- ---
48 48
--- ---
Due from affiliates, net $ 707 $ 816
=== ===
These amounts receivable from and payable to affiliates were incurred
in the ordinary course of business between the Partnership and its
affiliates and represent timing differences in the accrual and payment
of expenses and fees described above or in the accrual and remittance
of net rental revenues and container sales proceeds from TEM.
In addition, the Registrant paid or will pay the following amounts to
the General Partners and TAS:
Acquisition fees in connection with the purchase of containers on
behalf of the Registrant:
2000 1999 1998
---- ---- ----
TAS.................... $ - $ - $ 39
TEM.................... 239 172 16
--- --- --
Total.................. $ 239 $ 172 $ 55
=== === ==
Management fees in connection with the operations of the Registrant:
2000 1999 1998
---- ---- ----
TEM.................... $1,122 $1,154 $1,364
TFS.................... 282 320 354
----- ----- -----
Total.................. $1,404 $1,474 $1,718
===== ===== =====
Reimbursement for administrative costs in connection with of the
operations of the Registrant:
2000 1999 1998
---- ---- ----
TEM.................... $ 641 $ 701 $ 914
TFS.................... 95 84 95
--- --- -----
Total.................. $ 736 $ 785 $1,009
=== === =====
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Management" and "Compensation of General Partners and Affiliates"
sections of the Registrant's Prospectus, as supplemented, and the Notes to 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, 2000 are contained in Item 8 of this
Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary
Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference.
(i) The Registrant's Prospectus as contained in Pre-
Effective Amendment No. 2 to the Registrant's
Registration Statement (No. 33-36255), as filed with
the Commission December 21, 1990, as supplemented by
Post-Effective Amendments No. 1, 2 and 3 filed with
the Commission under Section 8(c) of the Securities
Act of 1933 on March 1, 1991, January 13, 1992 and
February 4, 1992, respectively.
(ii) The Registrant's limited partnership agreement,
Exhibit A to the Prospectus.
(b) During the year ended 2000, no reports on Form 8-K have been filed by
the Registrant.
Independent Auditors' Report on Supplementary Schedule
The Partners
Textainer Equipment Income Fund III, L.P.:
Under the date of February 16, 2001, we reported on the balance sheets of
Textainer Equipment Income Fund III, L.P. (the Partnership) as of December 31,
2000 and 1999, and the related statements of operations partners' capital and
cash flows for each of the years in the three-year period ended December 31,
2000, which are included in the 2000 annual report on Form 10-K. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule as listed in Item 14. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
San Francisco, California
February 16, 2001
TEXTAINER EQUIPMENT INCOME FUND III, 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, 2000:
Allowance for
doubtful accounts $ 756 $ (23) $ - $ (268) $ 465
------- ------- ------- -------- -------
Recovery cost reserve $ 165 $ 119 $ - $ (91) $ 193
------- ------- ------- -------- -------
Damage protection
plan reserve $ 436 $ 331 $ - $ (488) $ 279
------- ------- ------- -------- -------
For the year ended December 31, 1999:
Allowance for
doubtful accounts $ 439 $ 353 $ - $ (36) $ 756
------- ------- ------- -------- -------
Recovery cost reserve $ 116 $ 149 $ - $ (100) $ 165
------- ------- ------- -------- -------
Damage protection
plan reserve $ 291 $ 692 $ - $ (547) $ 436
------- ------- ------- -------- -------
For the year ended December 31, 1998:
Allowance for
doubtful accounts $ 1,534 $ (244) $ (680) $ (171) $ 439
------- ------- ------- -------- -------
Recovery cost reserve $ 119 $ 232 $ - $ (235) $ 116
------- ------- ------- -------- -------
Damage protection
plan reserve $ 351 $ 299 $ - $ (359) $ 291
------- ------- ------- -------- -------
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 III, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By____________________________
Ernest J. Furtado
Senior Vice President
Date: March 20, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
_________________________________ Senior Vice President, CFO March 20, 2001
Ernest J. Furtado (Principal Financial and
Accounting Officer),
Secretary and Director
_________________________________ President (Principal Executive March 20, 2001
John A. Maccarone Officer), and Director
_________________________________ Chairman of the Board and Director March 20, 2001
Neil I. Jowell
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By /s/Ernest J. Furtado
_____________________________
Ernest J. Furtado
Senior Vice President
Date: March 20, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
/s/Ernest J. Furtado
___________________________________ Senior Vice President, CFO March 20, 2001
Ernest J. Furtado (Principal Financial and
Accounting Officer),
Secretary and Director
/s/John A. Maccarone
___________________________________ President (Principal Executive March 20, 2001
John A. Maccarone Officer), and Director
/s/Neil I. Jowell March 20, 2001
___________________________________ Chairman of the Board and Director
Neil I. Jowell