TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 8, 2002
Securities and Exchange Commission
Washington, DC 20549
Ladies and 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 IV,
L.P. (the "Partnership") the Partnership's Quarterly Report on Form 10-Q for the
Second Quarter ended June 30, 2002.
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-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission file number 0-21228
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
A California Limited Partnership
(Exact name of Registrant as specified in its charter)
California 94-3147432
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 California Street, 16th Floor
San Francisco, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 2002
Table of Contents
- ----------------------------------------------------------------------------------------------------------
Page
Item 1. Financial Statements
Balance Sheets - June 30, 2002
and December 31, 2001 (unaudited)..................................................... 3
Statements of Operations for the three and six months
ended June 30, 2002 and 2001 (unaudited).............................................. 4
Statements of Partners' Capital for the six months
ended June 30, 2002 and 2001 (unaudited).............................................. 5
Statements of Cash Flows for the six months
ended June 30, 2002 and 2001 (unaudited).............................................. 6
Notes to Financial Statements (unaudited)............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................. 14
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 2002 and December 31, 2001
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------
2002 2001
---------------- ----------------
Assets
Container rental equipment, net of accumulated
depreciation of $51,831, (2001: $53,901) (note 4) $ 47,896 $ 53,612
Cash 1,963 1,841
Accounts receivable, net of allowance for doubtful
accounts of $221, (2001: $218) 2,634 3,021
Due from affiliates, net (note 2) 270 406
Prepaid expenses 6 18
---------------- ----------------
$ 52,769 $ 58,898
================ ================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 557 $ 690
Accrued liabilities 308 264
Accrued damage protection plan costs 207 199
Warranty claims 262 293
Accrued recovery costs 192 226
Deferred quarterly distributions 82 81
Container purchases payable 524 -
---------------- ----------------
Total liabilities 2,132 1,753
---------------- ----------------
Partners' capital:
General partners - -
Limited partners 50,637 57,145
---------------- ----------------
Total partners' capital 50,637 57,145
---------------- ----------------
$ 52,769 $ 58,898
================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Operations
For the three and six months ended June 30, 2002 and 2001
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Three months Three months Six months Six months
Ended Ended Ended Ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
Rental income $ 2,632 $ 3,464 $ 5,274 $ 7,343
------------- ------------- ------------- -------------
Costs and expenses:
Direct container expenses 1,155 1,483 2,201 3,076
Bad debt benefit (13) (41) (6) (47)
Depreciation 1,495 1,683 3,045 3,380
Write-down of containers (note 4) 367 50 1,302 87
Professional fees 16 8 28 18
Management fees to affiliates (note 2) 256 342 512 710
General and administrative costs to affiliates (note 2) 165 189 341 395
Other general and administrative costs 78 43 153 83
Loss (gain) on sale of containers (note 4) 116 (6) 800 22
------------- ------------- ------------- -------------
3,635 3,751 8,376 7,724
------------- ------------- ------------- -------------
Loss from operations (1,003) (287) (3,102) (381)
------------- ------------- ------------- -------------
Interest income 10 25 20 64
------------- ------------- ------------- -------------
Net loss $ (993) $ (262) $ (3,082) $ (317)
============= ============= ============= =============
Allocation of net (loss) earnings (note 2):
General partners $ 17 $ 25 $ 35 $ 50
Limited partners (1,010) (287) (3,117) (367)
------------- ------------- ------------- -------------
$ (993) $ (262) $ (3,082) $ (317)
============= ============= ============= =============
Limited partners' per unit share
of net loss $ (0.15) $ (0.04) $ (0.46) $ (0.05)
============= ============= ============= =============
Limited partners' per unit share
of distributions $ 0.25 $ 0.35 $ 0.50 $ 0.70
============= ============= ============= =============
Weighted average number of limited
partnership units outstanding 6,708,666 6,722,466 6,708,666 6,722,466
============= ============= ============= =============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
Partners' Capital
--------------------------------------------------------
General Limited Total
-------------- --------------- ----------------
Balances at January 1, 2001 $ - $ 67,788 $ 67,788
Distributions (50) (4,708) (4,758)
Redemptions (note 5) - (169) (169)
Net earnings (loss) 50 (367) (317)
-------------- --------------- ----------------
Balances at June 30, 2001 $ - $ 62,544 $ 62,544
============== =============== ================
Balances at January 1, 2002 $ - $ 57,145 $ 57,145
Distributions (35) (3,355) (3,390)
Redemptions (note 5) - (36) (36)
Net earnings (loss) 35 (3,117) (3,082)
-------------- --------------- ----------------
Balances at June 30, 2002 $ - $ 50,637 $ 50,637
============== =============== ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------
2002 2001
---------------- ----------------
Cash flows from operating activities:
Net loss $ (3,082) $ (317)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 3,045 3,380
Write-down of containers (note 4) 1,302 87
Increase (decrease) in allowance for doubtful accounts 3 (97)
Loss on sale of containers 800 22
Decrease (increase) in assets:
Accounts receivable 496 888
Due from affiliates, net (58) 164
Prepaid expenses 12 12
(Decrease) increase in liabilities:
Accounts payable and accrued liabilities (89) (13)
Accrued recovery costs (34) 23
Accrued damage protection plan costs 8 (103)
Warranty claims (31) (31)
---------------- ----------------
Net cash provided by operating activities 2,372 4,015
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of containers 2,311 703
Container purchases (1,136) (1,129)
---------------- ----------------
Net cash provided by (used in) investing activities 1,175 (426)
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units (36) (169)
Distributions to partners (3,389) (4,764)
---------------- ----------------
Net cash used in financing activities (3,425) (4,933)
---------------- ----------------
Net increase (decrease) in cash 122 (1,344)
Cash at beginning of period 1,841 3,183
---------------- ----------------
Cash at end of period $ 1,963 $ 1,839
================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 2002 and 2001
(Amounts in thousands)
(unaudited)
- --------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners, and proceeds from sale of containers which had not been paid or
received as of June 30, 2002 and 2001, and December 31, 2001 and 2000, resulting
in differences in amounts recorded and amounts of cash disbursed or received by
the Partnership, as shown in the Statements of Cash Flows for the six-month
periods ended June 30, 2002 and 2001.
June 30 Dec. 31 June 30 Dec. 31
2002 2001 2001 2000
----------- ----------- ----------- -----------
Container purchases included in:
Due to affiliates.............................. $ 12 $ 27 $ - $ -
Container purchases payable.................... 524 - - 1,098
Distributions to partners included in:
Due to affiliates.............................. 7 7 8 8
Deferred quarterly distributions............... 82 81 115 121
Proceeds from sale of containers included in:
Due from affiliates............................ 558 767 163 253
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers recorded by the Partnership and
the amounts paid or received as shown in the Statements of Cash Flows for the
six-month periods ended June 30, 2002 and 2001.
2002 2001
---- ----
Container purchases recorded...................................................... $1,645 $ 31
Container purchases paid.......................................................... 1,136 1,129
Distributions to partners declared................................................ 3,390 4,758
Distributions to partners paid.................................................... 3,389 4,764
Proceeds from sale of containers recorded......................................... 2,102 613
Proceeds from sale of containers received......................................... 2,311 703
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying value of containers transferred during the six-month periods ended
June 30, 2002 and 2001 was $112 and $50, respectively.
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Notes To Financial Statements
For the three and six months ended June 30, 2002 and 2001
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- --------------------------------------------------------------------------------
Note 1. General
Textainer Equipment Income Fund IV, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1991.
The Partnership owns a fleet of intermodal marine cargo containers, which
are leased to international shipping lines.
The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments) which are, in the
opinion of management, necessary to fairly present the financial position
of the Partnership as of June 30, 2002 and December 31, 2001 and the
results of its operations for the three and six-month periods ended June
30, 2002 and 2001 and changes in partners' capital and cash flows for the
six-month periods ended June 30, 2002 and 2001, have been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and other accompanying notes included
in the Partnership's annual audited financial statements as of and for the
year ended December 31, 2001, in the Annual Report filed on Form 10-K.
Certain estimates and assumptions were made by the Partnership's management
that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. The Partnership's management evaluates its estimates on
an on-going basis, including those related to the container rental
equipment, accounts receivable and accruals.
These estimates are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments regarding the carrying
values of assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions.
The Partnership's management believes the following critical accounting
policies affect its more significant judgments and estimates used in the
preparation of its financial statements.
The Partnership maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its lessees to make required
payments. These allowances are based on management's current assessment of
the financial condition of the Partnership's lessees and their ability to
make their required payments. If the financial condition of the
Partnership's lessees were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.
The Partnership depreciates its container rental equipment based on certain
estimates related to the container's useful life and salvage value. These
estimates are based upon assumptions about future demand for leased
containers and the estimated sales price at the end of the container's
useful life. If these estimates were subsequently revised based on
permanent changes in the container leasing market, the Partnership would
revise its depreciation policy.
Additionally, the recoverability of the recorded amounts of containers to
be held for continued use and identified for sale in the ordinary course of
business are evaluated to ensure that containers held for continued use are
not impaired and that containers identified for sale are recorded at
amounts that do not exceed the estimated fair value of the containers.
Containers to be held for continued use are considered impaired and are
written down to estimated fair value when the estimated future undiscounted
cash flows are less than the recorded values. Containers identified for
sale are written down to estimated fair value when the recorded value
exceeds the estimated fair value. In determining the estimated future
undiscounted cash flows and fair value of containers, assumptions are made
regarding future demand and market conditions for leased containers as well
as for used containers and the sales prices for used containers. If actual
market conditions are less favorable than those projected or if actual
sales prices are lower than those estimated by the Partnership, additional
write-downs may be required and/or losses may be realized.
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed of," and elements of Accounting Principles Board Opinion 30,
"Reporting the Results of Operations - Reporting the Effects on Disposal of
a Segment of a Business and Extraordinary, Unusual or Infrequently
Occurring Events and Transactions."
SFAS No. 144 establishes a single-accounting model for long-lived assets to
be disposed of while maintaining many of the provisions relating to
impairment testing and valuation. The Partnership adopted this Statement on
January 1, 2002 and there was no material impact on the Partnership's
financial condition, operating results or cash flow.
In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statement No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS 145 rescinds FASB Statement 4, Reporting Gains and Losses
of Debt Extinguishments and an amendment of that Statement, FASB No. 64.
This Statement also rescinds FASB No. 44, Accounting for Intangible Assets
of Motor Carriers. FASB 145 also amends FASB Statement No. 13, Accounting
for Leases, to eliminate an inconsistency between the required accounting
for sale-leaseback transactions and the required accounting for certain
lease modifications that have economic effects similar to sale-leaseback
transactions. These rescissions and amendment are not anticipated to have a
material impact on the financial statements of the Partnership.
Note 2. Transactions with Affiliates
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership. TFS 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. The General Partners manage
and control the affairs of the Partnership.
In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings and creates a deficit
in a General Partner's capital account, the Partnership Agreement provides
for a special allocation of gross income equal to the amount of the deficit
to be made to the General Partners.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an acquisition fee, an equipment management fee, an
incentive management fee, and an equipment liquidation fee. These fees are
for various services provided in connection with the administration and
management of the Partnership. The Partnership capitalized $78 and $1 of
container acquisition fees as a component of container costs during the
six-month periods ended June 30, 2002 and 2001, respectively. The
Partnership incurred $71 and $141 of incentive management fees during the
three and six-month periods ended June 30, 2002, respectively, and $99 and
$198, respectively, for the comparable periods in 2001. There were no
equipment liquidation fees incurred during these periods.
The Partnership's container fleet is managed by TEM. In its role as
manager, TEM has authority to acquire, hold, manage, lease, sell and
dispose of the Partnership's containers. TEM holds, for the payment of
direct operating expenses, a reserve of cash that has been collected from
leasing operations; such cash is included in due from affiliates, net at
June 30, 2002 and December 31, 2001.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. These fees
totaled $185 and $371 for the three and six-month periods ended June 30,
2002, respectively, and $242 and $512, respectively, for the comparable
periods in 2001.
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 TFS and TEM. General and
administrative costs allocated to the Partnership during the three and
six-month periods ended June 30, 2002 and 2001 were as follows:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
Salaries $107 $108 $218 $226
Other 58 81 123 169
--- --- --- ---
Total general and
administrative costs $165 $189 $341 $395
=== === === ===
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 during the
three and six-month periods ended June 30, 2002 and 2001:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
TEM $141 $164 $290 $343
TFS 24 25 51 52
--- --- --- ---
Total general and
administrative costs $165 $189 $341 $395
=== === === ===
The General Partners may acquire containers in their own name and hold
title on a temporary basis for the purpose of facilitating the acquisition
of such containers for the Partnership. The containers may then be resold
to the Partnership on an all-cash basis at a price equal to the actual
cost, as defined in the Partnership Agreement. One or more General Partners
may also arrange for the purchase of containers in its or their names, and
the Partnership may then take title to the containers by paying the seller
directly. In addition, the General Partners are entitled to an acquisition
fee for containers acquired by the Partnership under any of these
arrangements.
At June 30, 2002 and December 31, 2001, due from affiliates, net was
comprised of:
2002 2001
---- ----
Due from affiliates:
Due from TEM........... $304 $458
--- ---
Due to affiliates:
Due to TFS............. 29 28
Due to TCC............. 4 23
Due to TL.............. 1 1
--- ---
34 52
--- ---
Due from affiliates, net $270 $406
=== ===
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and remittance of expenses,
fees and distributions described above and in the accrual and remittance of
net rental revenues and container sales proceeds from TEM.
Note 3. Lease Rental Income
Leasing income arises principally from the renting of containers to various
international shipping lines. Revenue is recorded when earned according to
the terms of the container rental contracts. These contracts are typically
for terms of five years or less. The following is the lease mix of the
on-lease containers (in units) at June 30, 2002 and 2001:
2002 2001
---- ----
On-lease under master leases 12,908 14,477
On-lease under long-term leases 6,392 5,206
------ ------
Total on-lease containers 19,300 19,683
====== ======
Under master lease agreements, the lessee is not committed to lease a
minimum number of containers from the Partnership during the lease term and
may generally return any portion or all the containers to the Partnership
at any time, subject to certain restrictions in the lease agreement. Under
long-term lease agreements, containers are usually leased from the
Partnership for periods of between three to five years. Such leases are
generally cancelable with a penalty at the end of each twelve-month period.
Under direct finance leases, the containers are usually leased from the
Partnership for the remainder of the container's useful life with a
purchase option at the end of the lease term.
The remaining containers are off-lease and are located primarily at a large
number of storage depots. At June 30, 2002, the Partnership's off lease
containers were in the following locations:
Americas 2,963
Europe 1,578
Asia 5,788
Other 150
-------
Total off-lease containers 10,479
=======
At June 30, 2002 approximately 10% of the Partnership's off-lease
containers had been specifically identified as for sale.
Note 4. Container Rental Equipment Write-Down
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, these prices declined again in 2001 and
have remained low during the first half of 2002. As a result, the cost of
new containers purchased in recent years is 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 June 30, 2002 and 2001 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 of sales. During the six-month
periods ended June 30, 2002 and 2001, the Partnership recorded write-down
expenses of $1,302 and $87, respectively, on 1,619 and 167 containers
identified as for sale and requiring a reserve. During the three-month
periods ended June 30, 2002 and 2001, the Partnership recorded write-down
expenses of $367 and $50, respectively, on 550 and 95 containers identified
as for sale and requiring a reserve. At June 30, 2002 and 2001, the net
book value of the 1,039 and 203 containers identified as for sale was $914
and $248, respectively.
The Partnership sold 1,435 previously written down containers for a loss of
$150 during the six-month period ended June 30, 2002 and sold 121
previously written down containers for a loss of $8 during the same period
in 2001. During the three-month period ended June 30, 2002, the Partnership
sold 805 of these previously written down containers for a loss of $93 and
sold 84 of these previously written down containers for a loss of $4 during
the same period in 2001. 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.
The Partnership also sold containers that had not been written down and
recorded losses of $650 and $14 during the six-month periods ended June 30,
2002 and 2001, respectively. During the three-month periods ended June 30,
2002 and 2001 the Partnership recorded a loss of $23 and a gain of $10,
respectively, on the sale of containers that had not been written down.
As more containers are subsequently identified for sale or if container
sales prices decline, the Partnership may incur additional write-downs on
containers and/or may incur losses on the sale of containers. The
Partnership will continue to evaluate the recoverability of the recorded
amounts of container rental equipment and cautions that a write-down of
container rental equipment and/or an increase in its depreciation rate may
be required in future periods for some or all of its container rental
equipment.
Note 5. Redemptions
The following redemptions were consummated by the Partnership during the
six-month periods ended June 30, 2002 and 2001:
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- -----------
Total Partnership redemptions as of
December 31, 2000........................ 103,775 $10.32 $1,071
Six-month period ended
June 30, 2001............................ 19,662 $ 8.57 169
------- -----
Total Partnership redemptions as of
June 30, 2001............................ 123,437 $10.05 $1,240
======= =====
Total Partnership redemptions as of
December 31, 2001........................ 131,937 $ 9.89 $1,305
Six-month period ended
June 30, 2002............................ 5,300 $ 6.79 36
------- -----
Total Partnership redemptions as of
June 30, 2002............................ 137,237 $ 9.77 $1,341
======= =====
The redemption price is fixed by formula
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the three and six-month periods ended
June 30, 2002 and 2001. Please refer to the Financial Statements and Notes
thereto in connection with the following discussion.
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 General
Partners manage and control the affairs of the Partnership.
Liquidity and Capital Resources
From May 1, 1992 until April 30, 1994, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $5,000 on June 11, 1992 and on April 30, 1994 the
Partnership had received a total subscription amount of $136,918.
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. Rental
income is the Partnership's principal source of liquidity and provides a major
source of funds for distributions. Rental income has been adversely affected by
current market conditions for leased containers, and these market conditions may
continue or worsen. Market conditions are discussed more fully in "Results of
Operations." 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 5% of their original investment. During the six-month period
ended June 30, 2002, the Partnership declared cash distributions to limited
partners pertaining to the period from December 2001 through May 2002 in the
amount of $3,355. On a cash basis, $2,301 of these distributions was from
current year operating activities and the remainder was from cash provided by
previous years' operating activities that had not been distributed or used to
purchase containers or redeem units. On a financial statement basis, all of
these distributions were a return of capital.
From time to time, the Partnership redeems units from limited partners for a
specified redemption value, which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the six-month period ended June 30, 2002,
the Partnership redeemed 5,300 units for a total dollar amount of $36. The
Partnership used cash flow from operations to pay for the redeemed units.
Net cash provided by operating activities for the six-month periods ended June
30, 2002 and 2001 was $2,372 and $4,015, respectively. The decrease of $1,643,
or 41%, was primarily attributable to the decrease in net earnings, adjusted for
non-cash transactions, and fluctuations in gross accounts receivable and due
from affiliates, net. Net earnings, adjusted for non-cash transactions,
decreased primarily due to the decrease in rental income, which is discussed
more fully in "Results of Operations." The decrease in gross accounts receivable
of $496 during the six-month period ended June 30, 2002 was primarily due to the
decrease in rental income, offset by the increase in the average collection
period of accounts receivable. The decrease in accounts receivable of $888 for
the six-month period ended June 30, 2001 was primarily due to the decrease in
rental income and a decline in the average collection period of accounts
receivable. The fluctuations in due from affiliates, net, resulted from timing
differences in payment of expenses, fees and distributions and the remittance of
net rental revenues and container sales proceeds, as well as in fluctuations in
these amounts.
At June 30, 2002, the Partnership had no commitments to purchase containers.
For the six-month period ended June 30, 2002, net cash provided by investing
activities (the purchase and sale of containers) was $1,175 compared to net cash
used in investing activities of $426 for the comparable period in 2001. Net cash
provided by investing activities increased $1,601 primarily due to the increase
in proceeds from container sales. Proceeds from container sales increased
primarily due to the Partnership selling more containers in low demand locations
during the six-month period ended June 30, 2002 than in the same period in 2001.
This increase was partially offset by the decrease in the average sales price
received on container sales. The sales prices received on container sales
continued to decrease as a result of current market conditions, which have
adversely affected the value of used containers. Until demand for containers
improves in certain low demand locations, the Partnership plans to continue
selling some of its containers that are off-lease in these locations. The number
of containers sold, both in low demand locations and elsewhere, as well as the
average sales price, 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 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.
Both cash from operations available for reinvestment and sales proceeds have
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, and the
majority of cash available for reinvestment is from sales proceeds.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income less costs and expenses (including container depreciation, direct
container expenses, management fees, and reimbursement of administrative
expenses) was directly related to the size of the container fleet during the
six-month periods ended June 30, 2002 and 2001, 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:
2002 2001
---- ----
Beginning container fleet............... 31,411 33,062
Ending container fleet.................. 29,779 32,674
Average container fleet................. 30,595 32,868
The average container fleet decreased 7% from the six-month period ended June
30, 2001 to the comparable period in 2002, primarily due to sales of containers.
Although, sales proceeds were used to purchase additional containers, fewer
containers were bought than sold as used container sales prices were lower than
new container prices. The Partnership's primary source of funds for container
purchases is these sales proceeds. The rate of decline in average fleet size may
fluctuate due to timing differences in the purchase and sale of containers and
fluctuations in container sale and purchase prices during each period.
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 54% and 66% on average during the six-month
periods ended June 30, 2002 and 2001, respectively. The remaining container
fleet is off-lease and is located primarily at a large number of storage depots.
At June 30, 2002, the Partnership's off-lease containers (in units) were in the
following locations:
Americas 2,963
Europe 1,578
Asia 5,788
Other 150
------
Total off-lease containers 10,479
======
At June 30, 2002 approximately 10% of the Partnership's off-lease containers had
been specifically identified as for sale.
In addition to utilization, rental income is affected by daily rental rates. The
average daily rental rate decreased 10% between the periods. The decrease in the
average rental rate was due to declines in master and long term lease rates.
Additionally, a higher percentage of the Partnership's containers are on lease
under long term leases, which generally have lower rental rates than master
leases. Rental rates for long term leases are generally lower because the
lessees have contracted to lease the containers for several years and cannot
return the containers prior to the termination date without a penalty.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 2002 and 2001.
The Partnership's loss from operations for the six-month periods ended June 30,
2002 and 2001 was $3,102 and $381, respectively, on rental income of $5,274 and
$7,343, respectively. The decrease in rental income of $2,069, or 28%, from the
six-month period ended June 30, 2001 to the comparable period in 2002 was
attributable to the decreases in container rental income and other rental
income, which is discussed below. Income from container rentals, the major
component of total revenue, decreased $2,029, or 31%, primarily due to the
decreases in the average on-hire utilization of 18%, average rental rates of 10%
and the average container fleet of 7%. The majority of the Partnership's rental
income was generated from leasing of the Partnership's containers under master
operating leases.
In the fourth quarter of 2000, utilization began to decline and continued to
decline during 2001 and the beginning of 2002. This decline was due to lower
overall demand by shipping lines for leased containers, which was primarily a
result of the worldwide economic slowdown. Two other factors reduced the demand
for leased containers. Shipping lines added larger vessels to their fleets
which, combined with lower cargo volume growth, made it easier for them to use
otherwise empty vessel space to reposition their own containers back to high
demand locations. Additionally, in anticipation of the delivery of these new,
larger vessels, many shipping lines placed large orders for new containers in
2000 and 2001, thus temporarily reducing their need to lease containers. These
orders for additional containers are part of a general increase in vessel
capacity for the shipping lines. This increase in vessel capacity amounted to
12% in 2001. An additional increase in vessel capacity of approximately 12% is
expected in 2002, because the shipping lines placed orders for additional ships
before recognizing the slowdown in world trade. To the extent that this
increased vessel capacity remains underutilized, shipping lines may seek to cut
costs in order to sustain profits or reduce losses, which may put further
downward pressure on demand for containers.
Utilization improved steadily beginning in March 2002 due to:
o An increase in export cargo out of Asia
o Prior repositioning of containers to Asia which placed large quantities of
containers in areas of strong demand
o Fewer purchases of new containers by container lessors and shipping lines.
This utilization improvement has continued into the third quarter of 2002 but
the General Partners caution that market conditions could deteriorate again due
to global economic conditions. Demand for leased containers could therefore
decline again and result in a decline in utilization and further declines in
lease rates and container sale prices, adversely affecting the Partnership's
operating results.
Despite the improvement in utilization, the Partnership continues to sell
(rather than reposition) some containers located in low demand locations. For
the number of off-lease containers located in the lower demand locations in the
Americas and Europe, see the chart above. 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 are older containers. The
expected economic benefit of continuing to own these older containers is
significantly less than that of newer containers. This is due to their shorter
remaining marine life, the cost to reposition them, and the shipping lines'
preference for leasing newer containers when they have a choice.
Once the decision had been made to sell containers, the Partnership wrote down
the value of these specifically identified containers when the carrying value
was greater than the container's estimated fair value, which was based on recent
sales prices less cost of sales. Due to declines in container sales prices, 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 market conditions improve, 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 of some or all of its container
rental equipment.
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 six-month period ended June 30, 2002,
other rental income was $834, a decrease of $40 from the equivalent period in
2001. The decrease was primarily due to the decrease in DPP income of $99,
offset by increases in location and handling income of $30 and $28,
respectively. DPP income declined due to a decrease in the number of containers
covered under DPP, offset by an increase in the average DPP price charged per
container. The increase in location income was primarily due to the decline in
credits granted to lessees for picking up containers from surplus locations as
there were fewer leasing opportunities for which credits could be offered. The
increase in location income was partially offset by a decrease in charges to
lessees for dropping off containers in surplus locations. The increase in
handling income was primarily due to the increase in the average handling charge
per container.
Direct container expenses decreased $875, or 28% from the six-month period ended
June 30, 2001, to the same period in 2002. The decrease was primarily due to
decreases in repositioning, maintenance and DPP expenses of $722, $189 and $108,
respectively, offset by the increase in storage expense of $201. Repositioning
expense decreased due to decreases in the average cost to reposition containers
and in the number of containers repositioned from the six-month period ended
June 30, 2001 to the same period in 2002. Maintenance expense decreased due to
the decrease in the number of containers requiring maintenance and a decrease in
the average maintenance cost per container. DPP expense declined primarily due
to the decrease in the number of containers covered under DPP. Storage expense
increased primarily due to the decline in average utilization noted above.
Bad debt benefit was $6 and $47 for the six-month periods ended June 30, 2002
and 2001, respectively. Fluctuations in bad debt benefit/expense reflect the
adjustment to the bad debt reserve and are based on management's then current
estimates of the portion of accounts receivable that may not be collected, and
which will not be covered by insurance. These estimates are based primarily on
management's current assessment of the financial condition of the Partnership's
lessees and their ability to make their required payments. The benefits recorded
during the six-month periods ended June 30, 2002 and 2001 reflect lower reserve
requirements from December 31, 2001 and 2000, respectively.
Depreciation expense decreased $335, or 10% from the six-month period ended June
30, 2001 to the equivalent period in 2002, primarily due to the decline in the
average fleet size noted above.
New container prices steadily declined from 1995 through 1999. Although
container prices increased in 2000, these prices declined again in 2001 and have
remained low during the first half of 2002. As a result, the cost of new
containers purchased in recent years is 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 June 30,
2002 and 2001 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 of sales. During the
six-month periods ended June 30, 2002 and 2001, the Partnership recorded
write-down expenses of $1,302 and $87, respectively, on 1,619 and 167 containers
identified as for sale and requiring a reserve. At June 30, 2002 and 2001, the
net book value of the 1,039 and 203 containers identified as for sale was $914
and $248, respectively.
The Partnership sold 1,435 previously written down containers for a loss of $150
during the six-month period ended June 30, 2002 and sold 121 previously written
down containers for a loss of $8 during the same period in 2001. 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.
The Partnership also sold containers that had not been written down and recorded
losses of $650 and $14 during the six-month periods ended June 30, 2002 and
2001, respectively.
As more containers are subsequently identified for sale or if container sales
prices decline, the Partnership may incur additional write-downs on containers
and/or may incur losses on the sale of containers. The Partnership will continue
to evaluate the recoverability of the recorded amounts of container rental
equipment and cautions that a write-down of container rental equipment and/or an
increase in its depreciation rate may be required in future periods for some or
all of its container rental equipment.
Management fees to affiliates decreased $198, or 28%, from the six-month period
ended June 30, 2001 to the comparable period in 2002. The decrease was due to
decreases in both equipment and incentive management fees. Equipment management
fees decreased due to the decrease in rental income, upon which equipment
management fees are primarily based. These fees were approximately 7% of rental
income for both periods. Incentive management fees, which are based on the
Partnership's limited and general partner distributions made from cash from
operations and partners' capital, decreased primarily due to (i) the decrease in
the limited partner distributions percentages from 7% to 5% of initial partners'
capital in July 2001 and (ii) decreases in partners' capital due to redemptions
of limited partners units.
General and administrative costs to affiliates decreased $54, or 14%, from the
six-month period ended June 30, 2001 to the same period in 2002 primarily due to
the decrease in the allocation of overhead costs from TEM, as the Partnership
represented a smaller portion of the total fleet managed by TEM.
The Partnership Agreement provides for the ongoing payment to the General
Partners of the management fees and the reimbursement of the expenses discussed
above. Since these fees and expenses are established by the Agreement, they
cannot be considered the result of arms' length negotiations with third parties.
The Partnership Agreement was formulated at the Partnership's inception and was
part of the terms upon which the Partnership solicited investments from its
limited partners. The business purpose of paying the General Partners these fees
is to compensate the General Partners for the services they render to the
Partnership. Reimbursement for expenses is made to offset some of the costs
incurred by the General Partners in managing the Partnership and its container
fleet. More details about these fees and expenses are included in footnote 2 to
the Financial Statements.
Loss on sale of containers increased $778 from the six-month period ended June
30, 2001 to the comparable period in 2002. The increase was primarily due to the
Partnership selling more containers at lower average sales prices during the
six-month period ended June 30, 2002 than in the comparable period in 2001.
Net loss per limited partnership unit increased from $0.05 to $0.46 from the
six-month period ended June 30, 2001 to the equivalent period in 2002,
respectively, reflecting the increase in net loss allocated to limited partners
from $367 to $3,117, respectively. The allocation of net loss for the six-month
periods ended June 30, 2002 and 2001 included a special allocation of gross
income to the General Partners of $66 and $53, respectively, in accordance with
the Partnership Agreement.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 2002 and 2001.
The Partnership's loss from operations for the three-month periods ending June
30, 2002 and 2001 was $1,003 and $287, respectively, on rental income of $2,632
and $3,464, respectively. The decrease in rental income of $832, or 24%, from
the three-month period ended June 30, 2001 to the comparable period in 2002 was
attributable to decreases in container rental income and other rental income.
Income from container rentals decreased $810, or 27%, primarily due to the
decreases in average rental rates of 13%, average fleet size of 9% and average
on-hire utilization of 8%.
Other rental income was $388 for the three-month period ended June 30, 2002, a
decrease of $22 from the equivalent period in 2001. The decrease was primarily
due to a decrease in DPP income of $71, offset by the increase in handling
income of $43. DPP income declined due to declines in the number of containers
carrying DPP and the average DPP price charged per container. Handling income
increased due to the increase in container movement.
Direct container expenses decreased $328, or 22%, from the three-month period
ending June 30, 2001, to the equivalent period in 2002. The decrease was
primarily due to decreases in repositioning, maintenance and DPP expenses of
$190, $88 and $49, respectively. Repositioning expense decreased due to the
decrease in the average repositioning cost per container, offset by the increase
in the number of containers repositioned. Maintenance expense decreased due to
the decrease in the number of containers requiring maintenance and a decrease in
the average maintenance cost per container. DPP expense declined due to the
decreases in the average DPP repair cost per container and in the number of
containers covered under DPP.
Bad debt benefit decreased from $41 for the three-month period ended June 30,
2001 to $13 for the comparable period in 2002. The decline was due to a lower
adjustment to bad debt reserve during the three-month period ended June 30, 2002
compared to the same period in 2001.
Depreciation expense decreased $188, or 11%, from the three-month period ended
June 30, 2001 to the comparable period in 2002 primarily due to the decrease in
fleet size.
During the three-month periods ended June 30, 2002 and 2001, the Partnership
recorded write-down expenses of $367 and $50, respectively, on 550 and 95
containers identified as for sale and requiring a reserve. During the
three-month period ended June 30, 2002, the Partnership sold 805 of these
previously written down containers for a loss of $93 and sold 84 of these
previously written down containers for a loss of $4 during the same period in
2001. During the three-month periods ended June 30, 2002 and 2001, the
Partnership also sold containers that had not been written down and recorded a
loss of $23 and a gain of $10, respectively.
Management fees to affiliates decreased $86, or 25%, from the three-month period
ended June 30, 2001 to the comparable period in 2002, due to decreases in both
equipment and incentive management fees. Equipment management fees decreased due
to the decline in rental income, and were approximately 7% of rental income for
both periods. Incentive management fees decreased due to (i) the decrease in the
limited partner distribution percentage from 7% to 5% of initial partners'
capital in July 2001 and (ii) decreases in partners' capital due to redemptions
of limited partners units.
General and administrative costs to affiliates decreased $24, or 13%, from the
three-month period ended June 30, 2001 to the comparable period in 2002,
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 increased $122 from a gain of $6 for the three-month
period ended June 30, 2001 to a loss of $116 for the comparable period in 2002.
The fluctuation was primarily due to the Partnership selling more containers at
a lower average sales price during the three-month period ended June 30, 2002,
compared to the same period in 2001.
Net loss per limited partnership unit increased from $0.04 to $0.15 from the
three-month period ended June 30, 2001 to the equivalent period in 2002,
respectively, reflecting the increase in the net loss allocated to limited
partners from $287 to $1,010, respectively. The allocation of net loss included
a special allocation of gross income to the General Partners in accordance with
the Partnership Agreement.
Critical Accounting Policies and Estimates
The Partnership's discussion and analysis of its financial condition and results
of operations are based upon the Partnership's financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. 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. The Partnership's management evaluates its estimates on an
on-going basis, including those related to the container rental equipment,
accounts receivable and accruals.
These estimates are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments regarding the carrying
values of assets and liabilities. Actual results could differ from those
estimates under different assumptions or conditions.
The Partnership's management believes the following critical accounting policies
affect its more significant judgments and estimates used in the preparation of
its financial statements.
The Partnership maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its lessees to make required payments. These
allowances are based on management's current assessment of the financial
condition of the Partnership's lessees and their ability to make their required
payments. If the financial condition of the Partnership's lessees were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required, which would adversely affect the
Partnership's operating results.
The Partnership depreciates its container rental equipment based on certain
estimates related to the container's useful life and salvage value. These
estimates are based upon assumptions about future demand for leased containers
and the estimated sales price at the end of the container's useful life. If
these estimates were subsequently revised based on permanent changes in the
container leasing market, the Partnership would revise its depreciation policy,
which could adversely affect the Partnership's operating results.
Additionally, the recoverability of the recorded amounts of containers to be
held for continued use and identified for sale in the ordinary course of
business are evaluated to ensure that containers held for continued use are not
impaired and that containers identified for sale are recorded at amounts that do
not exceed the estimated fair value of the containers. Containers to be held for
continued use are considered impaired and are written down to estimated fair
value when the estimated future undiscounted cash flows are less than the
recorded values. Containers identified for sale are written down to estimated
fair value when the recorded value exceeds the estimated fair value. In
determining the estimated future undiscounted cash flows and fair value of
containers, assumptions are made regarding future demand and market conditions
for leased containers as well as for used containers and the sales prices for
used containers. If actual market conditions are less favorable than those
projected or if actual sales prices are lower than those estimated by the
Partnership, additional write-downs may be required and/or losses may be
realized. Any additional write-downs or losses would adversely affect the
Partnership's operating results.
Accounting Pronouncement
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of," and
elements of Accounting Principles Board Opinion 30, "Reporting the Results of
Operations - Reporting the Effects on Disposal of a Segment of a Business and
Extraordinary, Unusual or Infrequently Occurring Events and Transactions."
SFAS No. 144 establishes a single-accounting model for long-lived assets to be
disposed of while maintaining many of the provisions relating to impairment
testing and valuation. The Partnership adopted this Statement on January 1, 2002
and there was no material impact on the Partnership's financial condition,
operating results or cash flow.
In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statement No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS 145
rescinds FASB Statement 4, Reporting Gains and Losses of Debt Extinguishments
and an amendment of that Statement, FASB No. 64. This Statement also rescinds
FASB No. 44, Accounting for Intangible Assets of Motor Carriers. FASB 145 also
amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects similar to sale-leaseback transactions. These rescissions and amendment
are not anticipated to have a material impact on the financial statements of the
Partnership.
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.
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. See "Critical
Accounting Policies and Estimates" above for information on the Partnership's
critical accounting policies and how changes in those estimates could adversely
affect the Partnership's results of operations.
The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By ________________________________________
Ernest J. Furtado
Senior Vice President
Date: August 8, 2002
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, August 8, 2002
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
___________________________________ President (Principal Executive August 8, 2002
John A. Maccarone Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND IV, 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: August 8, 2002
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, August 8, 2002
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
/s/John A. Maccarone
___________________________________ President (Principal Executive August 8, 2002
John A. Maccarone Officer)