TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
November 12, 2003
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
Third Quarter ended September 30, 2003.
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 September 30, 2003
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 2003
Table of Contents
- -----------------------------------------------------------------------------------------------------------------
Page
Part I Financial Information
Item 1. Financial Statements (unaudited)
Balance Sheets - September 30, 2003
and December 31, 2002............................................................................. 3
Statements of Operations for the three and nine months
ended September 30, 2003 and 2002................................................................. 4
Statements of Partners' Capital for the nine months
ended September 30, 2003 and 2002................................................................. 5
Statements of Cash Flows for the nine months
ended September 30, 2003 and 2002................................................................. 6
Notes to Financial Statements..................................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................... 22
Item 4. Controls and Procedures....................................................................... 22
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.............................................................. 23
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Balance Sheets
September 30, 2003 and December 31, 2002
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------
2003 2002
---------------- ----------------
Assets
Container rental equipment, net of accumulated
depreciation of $52,376, (2002: $51,768) (note 4) $ 36,302 $ 41,630
Cash 3,269 2,339
Accounts receivable, net of allowance for doubtful
accounts of $210, (2002: $164) 2,947 3,107
Due from affiliates, net (note 2) 247 84
Prepaid expenses - 40
---------------- ----------------
$ 42,765 $ 47,200
================ ================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 358 $ 296
Accrued liabilities 366 430
Accrued damage protection plan costs 357 246
Warranty claims 186 232
Accrued recovery costs 189 184
Deferred quarterly distributions 85 83
Container purchases payable 1,055 -
---------------- ----------------
Total liabilities 2,596 1,471
---------------- ----------------
Partners' capital:
General partners - -
Limited partners 40,169 45,729
---------------- ----------------
Total partners' capital 40,169 45,729
---------------- ----------------
$ 42,765 $ 47,200
================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Operations
For the three and nine months ended September 30, 2003 and 2002
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
---------------- ---------------- ---------------- ----------------
Rental income $ 3,236 $ 3,088 $ 9,947 $ 8,362
---------------- ---------------- ---------------- ----------------
Costs and expenses:
Direct container expenses 899 997 2,460 3,198
Bad debt expense 18 23 84 17
Depreciation (note 4) 1,825 1,975 5,590 5,020
Write-down of containers (note 4) 62 345 281 1,646
Professional fees 7 13 26 41
Management fees to affiliates (note 2) 298 235 901 748
General and administrative costs to
affiliates (note 2) 154 149 471 489
Other general and administrative costs 35 75 104 228
Loss on sale of containers (note 4) 348 266 431 1,065
---------------- ---------------- ---------------- ----------------
3,646 4,078 10,348 12,452
---------------- ---------------- ---------------- ----------------
Loss from operations (410) (990) (401) (4,090)
---------------- ---------------- ---------------- ----------------
Interest income 5 6 17 26
---------------- ---------------- ---------------- ----------------
Net loss $ (405) $ (984) $ (384) $ (4,064)
================ ================ ================ ================
Allocation of net loss (note 2):
General partners $ 17 $ 18 $ 51 $ 53
Limited partners (422) (1,002) (435) (4,117)
---------------- ---------------- ---------------- ----------------
$ (405) $ (984) $ (384) $ (4,064)
================ ================ ================ ================
Limited partners' per unit share
of net loss $ (0.07) $ (0.15) $ (0.07) $ (0.62)
================ ================ ================ ================
Limited partners' per unit share
of distributions $ 0.25 $ 0.25 $ 0.75 $ 0.75
================ ================ ================ ================
Weighted average number of limited
partnership units outstanding 6,505,846 6,568,245 6,511,252 6,661,859
================ ================ ================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the nine months ended September 30, 2003 and 2002
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------
Partners' Capital
-------------------------------------------------------
General Limited Total
-------------- -------------- --------------
Balances at January 1, 2002 $ - $ 57,145 $ 57,145
Distributions (53) (5,009) (5,062)
Redemptions (note 5) - (767) (767)
Net earnings (loss) 53 (4,117) (4,064)
-------------- -------------- --------------
Balances at September 30, 2002 $ - $ 47,252 $ 47,252
============== ============== ==============
Balances at January 1, 2003 $ - $ 45,729 $ 45,729
Distributions (51) (4,887) (4,938)
Redemptions (note 5) - (238) (238)
Net earnings (loss) 51 (435) (384)
-------------- -------------- --------------
Balances at September 30, 2003 $ - $ 40,169 $ 40,169
============== ============== ==============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the nine months ended September 30, 2003 and 2002
(Amounts in thousands)
(unaudited)
- -------------------------------------------------------------------------------------------------------------------------
2003 2002
---------------- ----------------
Cash flows from operating activities:
Net loss $ (384) $ (4,064)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 5,590 5,020
Write-down of containers (note 4) 281 1,646
Increase (decrease) in allowance for doubtful accounts 46 (1)
Loss on sale of containers 431 1,065
Decrease (increase) in assets:
Accounts receivable 143 163
Due from affiliates, net 30 (195)
Prepaid expenses 40 18
(Decrease) increase in liabilities:
Accounts payable and accrued liabilities (2) (52)
Accrued recovery costs 5 (34)
Accrued damage protection plan costs 111 29
Warranty claims (46) (46)
---------------- ----------------
Net cash provided by operating activities 6,245 3,549
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of containers 1,453 3,224
Container purchases (1,595) (1,598)
---------------- ----------------
Net cash (used in) provided by investing activities (142) 1,626
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units (238) (767)
Distributions to partners (4,935) (5,062)
---------------- ----------------
Net cash used in financing activities (5,173) (5,829)
---------------- ----------------
Net increase (decrease) in cash 930 (654)
Cash at beginning of period 2,339 1,841
---------------- ----------------
Cash at end of period $ 3,269 $ 1,187
================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the nine months ended September 30, 2003 and 2002
(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 September 30, 2003 and 2002, and December 31, 2002 and 2001,
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
nine-month periods ended September 30, 2003 and 2002.
Sept. 30 Dec. 31 Sept. 30 Dec. 31
2003 2002 2002 2001
----------- ----------- ----------- -----------
Container purchases included in:
Due to affiliates.............................. $ 51 $ - $ - $ 27
Container purchases payable.................... 1,055 - - -
Distributions to partners included in:
Due to affiliates.............................. 6 5 6 7
Deferred quarterly distributions............... 85 83 82 81
Proceeds from sale of containers included in:
Due from affiliates............................ 563 318 552 767
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
nine-month periods ended September 30, 2003 and 2002.
2003 2002
---- ----
Container purchases recorded.................................................... $2,701 $1,571
Container purchases paid........................................................ 1,595 1,598
Distributions to partners declared.............................................. 4,938 5,062
Distributions to partners paid.................................................. 4,935 5,062
Proceeds from sale of containers recorded....................................... 1,698 3,009
Proceeds from sale of containers received....................................... 1,453 3,224
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 nine-month periods ended
September 30, 2003 and 2002 was $29 and $144, 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 nine months ended September 30, 2003 and 2002
(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 September 30, 2003 and December 31, 2002 and the
results of its operations for the three and nine-month periods ended
September 30, 2003 and 2002 and changes in partners' capital and cash flows
for the nine-month periods ended September 30, 2003 and 2002, 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, 2002, 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. The Partnership will evaluate the estimated residual values
and remaining estimated useful lives on an on-going basis and will revise
its estimates as needed. As a result, depreciation expense may fluctuate in
future periods based on fluctuations in these estimates.
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 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 June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
With Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The Partnership adopted SFAS No. 146 on January 1,
2003 and there was no material impact on the Partnership's financial
condition, operating results or cash flow.
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 $129 and $75 of
container acquisition fees as a component of container costs during the
nine-month periods ended September 30, 2003 and 2002, respectively. The
Partnership incurred $69 and $203 of incentive management fees during the
three and nine-month periods ended September 30, 2003, respectively, and
$20 and $162, respectively, for the comparable periods in 2002. 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
September 30, 2003 and December 31, 2002.
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 $229 and $698 for the three and nine-month periods ended September
30, 2003, respectively, and $215 and $586, respectively, for the comparable
periods in 2002.
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
nine-month periods ended September 30, 2003 and 2002 were as follows:
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
Salaries $ 80 $100 $255 $318
Other 74 49 216 171
--- --- --- ---
Total general and
administrative costs $154 $149 $471 $489
=== === === ===
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 either
based on the ratio of the Partnership's investors to the total number of
investors of all limited partnerships managed by TFS or equally among all
the limited partnerships managed by TFS. The General Partners allocated the
following general and administrative costs to the Partnership during the
three and nine-month periods ended September 30, 2003 and 2002:
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
TEM $131 $131 $407 $420
TFS 23 18 64 69
--- --- --- ---
Total general and
administrative costs $154 $149 $471 $489
=== === === ===
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 September 30, 2003 and December 31, 2002, due from affiliates, net was
comprised of:
2003 2002
---- ----
Due from affiliates:
Due from TEM..................... $324 $174
--- ---
Due to affiliates:
Due to TFS....................... 67 71
Due to TCC....................... 9 18
Due to TL........................ 1 1
--- ---
77 90
--- ---
Due from affiliates, net $247 $ 84
=== ===
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 September 30, 2003 and 2002:
2003 2002
---- ----
On-lease under master leases 14,482 15,844
On-lease under long-term leases 8,123 6,773
------ ------
Total on-lease containers 22,605 22,617
====== ======
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 of 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 being stored primarily at a
large number of storage depots. At September 30, 2003 and 2002, the
Partnership's off lease containers were in the following locations:
2003 2002
---- ----
Americas 1,919 2,675
Europe 696 1,408
Asia 1,948 1,804
Other 137 131
----- -----
Total off-lease containers 4,700 6,018
===== =====
At September 30, 2003 approximately 5% of the Partnership's off-lease
containers had been specifically identified as for sale.
Note 4. Container Rental Equipment
Effective July 1, 2002, the Partnership revised its estimate for container
salvage value from a percentage of equipment cost to an estimated dollar
residual value. The effect of this change for both the three and nine-month
periods ended September 30, 2002 was an increase to depreciation expense of
$515. The Partnership will evaluate the estimated residual values and
remaining estimated useful lives on an on-going basis and will revise its
estimates as needed. As a result, depreciation expense may fluctuate in
future periods based on fluctuations in these estimates.
New container prices steadily declined from 1995 through 1999 and have
remained low through 2003. 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
September 30, 2003 and 2002 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 some of
these containers was required. The Partnership wrote down the value of
these containers to their estimated net realizable value, which was based
on recent sales prices less cost to sell. During the nine-month periods
ended September 30, 2003 and 2002, the Partnership recorded write-down
expenses of $281 and $1,646, respectively, on 568 and 2,015 containers
identified for sale and requiring a reserve. During the three-month periods
ended September 30, 2003 and 2002, the Partnership recorded write-down
expenses of $62 and $345, respectively, on 228 and 396 containers
identified for sale and requiring a reserve. Additionally, during the
nine-month periods ended September 30, 2003 and 2002, the Partnership
reclassified 30 and 226 containers from containers identified for sale to
containers held for continued use due to the improvement in demand for
leased containers in Asia. At September 30, 2003 and 2002, the net book
value of the 254 and 626 containers identified for sale was $230 and $543,
respectively.
The Partnership sold 541 previously written down containers for a loss of
$49 during the nine-month period ended September 30, 2003 and sold 2,005
previously written down containers for a loss of $96 during the same period
in 2002. During the three-month period ended September 30, 2003, the
Partnership sold 173 previously written down containers for a loss of $9
and sold 570 previously written down containers for a loss of $24 during
the same period in 2002. 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 $382 and $969 during the nine-month periods ended
September 30, 2003 and 2002, respectively. During the three-month periods
ended September 30, 2003 and 2002 the Partnership recorded losses of $339
and $242, 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.
Note 5. Redemptions
The following redemptions were consummated by the Partnership during the
nine-month periods ended September 30, 2003 and 2002:
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- -----------
Total Partnership redemptions as of
December 31, 2001..................... 131,937 $9.89 $1,305
Nine-month period ended
September 30, 2002.................... 145,721 $5.26 767
------- -----
Total Partnership redemptions as of
September 30, 2002.................... 277,658 $7.46 $2,072
======= =====
Total Partnership redemptions as of
December 31, 2002..................... 295,555 $7.33 $2,165
Nine-month period ended
September 30, 2003.................... 44,502 $5.35 238
------- -----
Total Partnership redemptions as of
September 30, 2003.................... 340,057 $7.07 $2,403
======= =====
The redemption price is fixed by formula in accordance with the Partnership
Agreement.
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 nine-month periods
ended September 30, 2003 and 2002. 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 operating activities
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 is affected by market
conditions for leased containers. 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 nine-month period
ended September 30, 2003, the Partnership declared cash distributions to limited
partners pertaining to the period from December 2002 through August 2003 in the
amount of $4,887. On a cash basis, as reflected on the Statements of Cash Flows,
after paying redemptions and general partner distributions, all of these
distributions were from current year operating activities. On an accrual basis,
as reflected on the Statements of Partners' Capital, 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 nine-month period ended September 30,
2003, the Partnership redeemed 44,502 units for a total dollar amount of $238.
The Partnership used cash flow from operating activities to pay for the redeemed
units.
Net cash provided by operating activities for the nine-month periods ended
September 30, 2003 and 2002 was $6,245 and $3,549, respectively. The increase of
$2,696, or 76%, was primarily attributable to the fluctuations in net loss,
adjusted for non-cash transactions, in due from affiliates, net and accrued
damage protection plan costs. Net loss, adjusted for non-cash transactions,
decreased primarily due to the increase in rental income and decrease in direct
container expenses. These items are discussed more fully in "Results of
Operations." The fluctuations in due from affiliates, net, resulted from timing
differences in the payment of expenses, fees and distributions and the
remittance of net rental revenues and container sales proceeds, as well as
fluctuations in these amounts. The increase in accrued damage protection plan
costs during the nine month period ended September 30, 2003 was primarily due to
an increase in the number of containers covered under the plan.
At September 30, 2003, the Partnership had no commitments to purchase
containers.
For the nine-month period ended September 30, 2003, net cash used in investing
activities (the purchase and sale of containers) was $142 compared to net cash
provided by investing activities of $1,626 for the comparable period in 2002.
The decrease of $1,768 was due to decreases in proceeds from container sales.
Cash used for container purchases was comparable between the periods, primarily
due to timing differences in the accrual and payment of these purchases.
Proceeds from container sales decreased primarily due to the Partnership selling
fewer containers during the nine-month period ended September 30, 2003 than in
the same period in 2002. Some containers were sold in low demand locations.
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 rather than incurring the expense of repositioning them. 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. Reinvestment is expected
to continue until the Partnership begins its liquidation phase, which is
estimated to begin in 2004. 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. Although the Partnership had cash from operations
available to reinvest in additional containers during the nine-month period
ended September 30, 2003, there was no cash from operations available to
reinvest in additional containers during the years ended December 31, 2002 and
2001. Sales proceeds, rather than cash from operations available for
reinvestment, have been the primary source of funds for reinvestment in
additional containers. 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 in recent years. 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 has affected 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
nine-month periods ended September 30, 2003 and 2002, 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:
2003 2002
---- ----
Beginning container fleet............... 28,024 31,411
Ending container fleet.................. 27,305 28,635
Average container fleet................. 27,665 30,023
The average container fleet decreased 8% from the nine-month period ended
September 30, 2002 to the comparable period in 2003, primarily due to sales of
containers. As noted, above, when containers are sold, 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." 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.
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which was 81% and 59% on average during the nine-month
periods ended September 30, 2003 and 2002, respectively. The remaining container
fleet is off-lease and is being stored primarily at a large number of storage
depots. At September 30, 2003 and 2002, utilization was 83% and 79%,
respectively, and the Partnership's off-lease containers (in units) were located
in the following locations:
2003 2002
---- ----
Americas 1,919 2,675
Europe 696 1,408
Asia 1,948 1,804
Other 137 131
----- -----
Total off-lease containers 4,700 6,018
===== =====
At September 30, 2003 approximately 5% 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 for the Partnership's containers decreased 8% between
the periods. Average rental rates declined primarily due to the decline in long
term lease rates. The decline in average rental rates under master leases
between the periods was minor. The majority of the Partnership's rental income
was generated from leasing of the Partnership's containers under master
operating leases, but in the past several years an increasing percentage of the
Partnership's containers have been on lease under long term leases. At September
30, 2003 and 2002, 36% and 30%, respectively, of the Partnership's on-lease
containers were on lease under long term leases. Long term leases generally have
lower rental rates than master leases 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. Fluctuations in rental rates under
either type of lease generally will affect the Partnership's operating results.
The following is a comparative analysis of the results of operations for the
nine-month periods ended September 30, 2003 and 2002.
The Partnership's loss from operations for the nine-month periods ended
September 30, 2003 and 2002 was $401 and $4,090, respectively, on rental income
of $9,947 and $8,362, respectively. The increase in rental income of $1,585, or
19%, from the nine-month period ended September 30, 2002 to the comparable
period in 2003 was attributable to increases in container rental income and
other rental income, which is discussed below. Income from container rentals,
the major component of total revenue, increased $1,414, or 20%, primarily due to
an increase in the average on-hire utilization of 37%, offset by the decreases
in average rental rates of 8% and average fleet size of 8%.
Beginning in March 2002, utilization began to improve and improved steadily
through the end of 2002. Utilization declined slightly in the first quarter of
2003, which is traditionally a slow period for container demand, improved during
the second quarter and was stable in the third quarter of 2003. Utilization has
remained relatively strong due to a large volume of export cargo out of Asia, a
larger percentage of containers under long term lease and efforts by the General
Partners to reduce the quantities of containers that can be redelivered in low
demand locations. However, rental rates continued to slowly decline primarily
due to low new container prices, low interest rates and low rates offered by
competitors. The General Partners are cautiously optimistic that current
utilization levels can be maintained during the next several months. However,
the General Partners caution that market conditions could deteriorate again due
to global economic and political conditions. Demand for leased containers could
therefore weaken again and result in a decrease in utilization and further
declines in lease rates and container sale prices, adversely affecting the
Partnership's operating results.
Although demand for leased containers has improved, the trade imbalance between
Asia and the Americas continues. As a result, a large portion of the
Partnership's off-lease containers are located in low demand locations in the
Americas as detailed in the above chart. For these and other off-lease
containers, the Partnership determines whether these containers should be sold
or held for continued use. 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 is made to sell containers, the Partnership writes down the
value of these specifically identified containers when the carrying value is
greater than the container's estimated net realizable value, which is based on
recent sales prices less cost of sales. Container sales prices appear to have
stabilized as the average sales price for containers sold by TEM on behalf of
the Partnership as well as other container owners was comparable for the
nine-month periods ended September 30, 2003 and 2002. Fluctuations in average
sales prices between the periods are primarily due to the type of container sold
as well as the location of the container.
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 nine-month period ended September 30,
2003, other rental income was $1,494, an increase of $171 from the equivalent
period in 2002. The increase was primarily due to increases in DPP and location
income of $221 and $72, offset by the decrease in handling income of $147. DPP
income increased primarily due to an increase in the number of containers
covered under DPP. Location income increased primarily due to the increase in
charges to one lessee who required containers to be delivered to specific
locations. Handling income decreased primarily due to the decline in container
movement.
Direct container expenses decreased $738, or 23% from the nine-month period
ended September 30, 2002, to the same period in 2003. The decrease was primarily
due to decreases in storage and handling expenses of $1,170 and $105,
respectively, offset by increases in repositioning and DPP expenses of $381 and
$132, respectively. Storage expense decreased primarily due to the increase in
utilization noted above and the decrease in the average storage cost per
container. The decline in handling expense was primarily due to the decline in
container movement. Repositioning expense increased due to an increase in the
average repositioning cost due to (i) expensive repositioning moves related to
one lessee who required containers to be delivered to certain locations as
discussed above and (ii) longer average repositioning moves. The increase in DPP
expense was primarily due to an increase in the number of containers covered
under DPP.
Bad debt expense was $84 and $17 for the nine-month periods ended September 30,
2003 and 2002, respectively. Fluctuations in bad debt expense reflect the
adjustments to the bad debt reserve, after deductions have been taken against
the 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 expenses recorded during the
nine-month periods ended September 30, 2003 and 2002 reflect higher reserve
estimates, after deductions had been taken against the reserve, from December
31, 2002 and 2001.
Depreciation expense increased $570, or 11% from the nine-month period ended
September 30, 2002 to the comparable period in 2003. The increase was primarily
due to an increase in the depreciation rate as a result of the Partnership
revising its estimate for container salvage value from a percentage of equipment
cost to an estimated dollar residual value effective July 1, 2002. The
Partnership will evaluate the estimated residual values and remaining estimated
useful lives on an on-going basis and will revise its estimates as needed. As a
result, depreciation expense may fluctuate in future periods based on
fluctuations in these estimates.
New container prices steadily declined from 1995 through 1999 and have remained
low through 2003. 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 September 30, 2003 and 2002 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 some of these containers was required. The Partnership wrote down the
value of these containers to their estimated net realizable value, which was
based on recent sales prices less cost to sell. During the nine-month periods
ended September 30, 2003 and 2002, the Partnership recorded write-down expenses
of $281 and $1,646, respectively, on 568 and 2,015 containers identified for
sale and requiring a reserve. Additionally, during the nine-month periods ended
September 30, 2003 and 2002, the Partnership reclassified 30 and 226 containers
from containers identified for sale to containers held for continued use due to
the improvement in demand for leased containers in Asia. At September 30, 2003
and 2002, the net book value of the 254 and 626 containers identified for sale
was $230 and $543, respectively.
The Partnership sold 541 previously written down containers for a loss of $49
during the nine-month period ended September 30, 2003 and sold 2,005 previously
written down containers for a loss of $96 during the same period in 2002. 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 $382 and $969 during the nine-month periods ended September 30, 2003
and 2002, 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.
Management fees to affiliates increased $153, or 20%, from the nine-month period
ended September 30, 2002 to the comparable period in 2003 due to increases in
both equipment and incentive management fees. Equipment management fees
increased due to the increase in rental income, upon which these 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, increased primarily due to the increase in these distributions.
General and administrative costs to affiliates decreased $18, or 4%, from the
nine-month period ended September 30, 2002 to the same period in 2003. The
decrease was primarily due to the decrease in the allocation of overhead costs
from TEM, which decreased 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.
Other general and administrative costs decreased $124 from the nine-month period
ended September 30, 2002 to the same period in 2003. The decrease was primarily
due to decreases in other service fees between the periods.
Loss on sale of containers decreased $634 from the nine-month period ended
September 30, 2002 to the same period in 2003. The decrease was due to the
decrease in the number of containers sold and a decrease in the average loss per
container.
Net loss per limited partnership unit decreased from $0.62 to $0.07 from the
nine-month period ended September 30, 2002 to the equivalent period in 2003,
respectively, reflecting the decrease in net loss allocated to limited partners
from $4,117 to $435, respectively. The allocation of net loss for the nine-month
periods ended September 30, 2003 and 2002, included a special allocation of
gross income to the General Partners of $55 and $94, respectively, in accordance
with the Partnership Agreement.
The following is a comparative analysis of the results of operations for the
three-month periods ended September 30, 2003 and 2002.
The Partnership's loss from operations for the three-month periods ended
September 30, 2003 and 2002 was $410 and $990, respectively, on rental income of
$3,236 and $3,088, respectively. The increase in rental income of $148, or 5%,
from the three-month period ended September 30, 2002 to the comparable period in
2003 was attributable to increases in container rental income and other rental
income. Income from container rentals increased $144, or 6%, primarily due to an
increase in average on-hire utilization of 17%, partially offset by the
decreases in average rental rates of 6% and average container fleet of 6%
between the periods.
Other rental income was $492 for the three-month period ended September 30,
2003, an increase of $4 from the equivalent period in 2002. The increase was
primarily due to an increase in DPP income of $102, offset by the decrease in
handling income of $94. DPP income increased primarily due to an increase in the
number of containers covered under DPP while handling income decreased primarily
due to the decline in container movement.
Direct container expenses decreased $98, or 10%, from the three-month period
ended September 30, 2002, to the same period in 2003. The decrease was primarily
due to decreases in storage and handling expenses of $229 and $62, respectively,
offset by increases in repositioning and DPP expenses of $148 and $53,
respectively. Storage expense decreased due to the increase in utilization noted
above and the decrease in the average storage costs per container. The decline
in handling expense was primarily due to the decline in container movement.
Repositioning expense increased due to an increase in the average repositioning
costs due to longer average repositioning moves and an increase in the number of
containers repositioned. The increase in DPP expense was primarily due to an
increase in the number of containers covered under DPP.
Bad debt expense was $18 and $23 for the three-month periods ended September 30,
2003 and 2002, respectively. The expenses recorded during the three-month
periods ended September 30, 2003 and 2002, reflect higher reserve estimates,
after deductions had been taken against the reserve, from June 30, 2003 and
2002.
Depreciation expense decreased $150, or 8%, from the three-month period ended
September 30, 2002 to the comparable period in 2003 primarily due to decline in
average fleet size between the periods.
During the three-month periods ended September 30, 2003 and 2002, the
Partnership recorded write-down expenses of $62 and $345, respectively, on 228
and 396 containers identified for sale and requiring a reserve. During the
three-month period ended September 30, 2003, the Partnership sold 173 previously
written down containers for a loss of $9 and sold 570 previously written down
containers for a loss of $24 during the same period in 2002. During the
three-month periods ended September 30, 2003 and 2002, the Partnership also sold
containers that had not been written down and recorded losses of $339 and $242,
respectively.
Management fees to affiliates increased $63, or 27%, from the three-month period
ended September 30, 2002 to the comparable period in 2003, due to increases in
both incentive and equipment management fees. Incentive management fees, which
are based on the Partnership's limited and general partner distributions made
from cash from operations and partners' capital, increased primarily due to the
increase in these distributions. Equipment management fees increased due to the
increase in rental income and were 7% of rental income for both periods.
General and administrative costs to affiliates were comparable at $154 and $149
for the three-month periods ended September 30, 2003 and 2002, respectively.
Other general and administrative costs decreased $40 from the three-month period
ended September 30, 2002 to the same period in 2003. The decrease was primarily
due to decreases in other service fees between the periods.
Loss on sale of containers increased $82 from the three-month period ended
September 30, 2002 to the same period in 2003. Although the Partnership sold
fewer containers during the three-month period ended September 30, 2003, the
average loss incurred on these sales increased, resulting in the increase in
loss on container sales between the periods.
Net loss per limited partnership unit decreased from $0.15 to $0.07 from the
three-month period ended September 30, 2002 to the equivalent period in 2003,
respectively, reflecting the decrease in net loss allocated to limited partners
from $1,002 to $422, respectively. The allocation of loss for the three-month
periods ended September 30, 2003 and 2002, 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.
Effective July 1, 2002, the Partnership revised its estimate for container
salvage value from a percentage of equipment cost to an estimated dollar
residual value. The Partnership will evaluate the estimated residual values and
remaining estimated useful lives on an on-going basis and will revise its
estimates as needed. As a result, depreciation expense may fluctuate in future
periods based on fluctuations in these estimates. If the estimates regarding
residual value and remaining useful life of the containers were to decline,
depreciation expense would increase, adversely affecting 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 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.
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 for them,
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 3. Quantitative and Qualitative Disclosures about Market Risk.
Inapplicable.
Item 4. Controls and Procedures.
Based on an evaluation of the Partnership's disclosure controls and procedures
(as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934),
the managing general partner's principal executive officer and principal
financial officer have found those controls and procedures to be effective as of
the end of the period covered by the report. There has been no change in the
Partnership's internal control over financial reporting that occurred during the
Partnership's most recent fiscal quarter, and which has materially affected, or
is reasonably likely materially to affect, the Partnership's internal control
over financial reporting.
Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 31.1 and 31.2 Certifications pursuant to Rules 13a-14 or
15d-14 of the Securities and Exchange Act of 1934.
Exhibits 32.1 and 32.2 Certifications pursuant to 18 U.S.C. Section
1350, as adopted, and regarding Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Not applicable.
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
Chief Financial Officer
Date: November 12, 2003
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
________________________________ Chief Financial Officer, Senior November 12, 2003
Ernest J. Furtado Vice President and Secretary
________________________________ President November 12, 2003
John A. Maccarone
Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 31.1 and 31.2 Certifications pursuant to Rules 13a-14 or
15d-14 of the Securities and Exchange Act of 1934.
Exhibits 32.1 and 32.2 Certifications pursuant to 18 U.S.C. Section
1350, as adopted, and regarding Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) Not applicable.
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
Chief Financial Officer
Date: November 12, 2003
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
_____________________________ Chief Financial Officer, Senior November 12, 2003
Ernest J. Furtado Vice President and Secretary
/s/John A. Maccarone
_____________________________ President November 12, 2003
John A. Maccarone
EXHIBIT 31.1
CERTIFICATIONS
I, John A. Maccarone, certify that:
1. I have reviewed this quarterly report on form 10-Q of Textainer Equipment
Income Fund IV, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a.) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c.) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a.) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
November 12, 2003
/s/ John A. Maccarone
___________________________________
John A. Maccarone
President and Director of TFS
EXHIBIT 31.2
CERTIFICATIONS
I, Ernest J. Furtado, certify that:
1. I have reviewed this quarterly report on form 10-Q of Textainer Equipment
Income Fund IV, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a.) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c.) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a.) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
November 12, 2003
/s/ Ernest J. Furtado
____________________________________________________
Ernest J. Furtado
Chief Financial Officer, Senior Vice President,
Secretary and Director of TFS
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED, REGARDING SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Textainer Equipment Income Fund IV,
L.P., (the "Registrant") on Form 10-Q for the quarterly period ended September
30, 2003, as filed on November 12, 2003 with the Securities and Exchange
Commission (the "Report"), I, John A. Maccarone, the President and Director of
Textainer Financial Services Corporation ("TFS") and Principal Executive Officer
of TFS, the Managing General Partner of the Registrant, certify, pursuant to 18
U.S.C. ss. 1350, as adopted, regarding Section 906 of the Sarbanes-Oxley Act of
2002, that:
(i) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all material
respects, the financial condition, results of operations and cash flows of
the Registrant.
November 12, 2003
By /s/ John A. Maccarone
_______________________________________
John A. Maccarone
President and Director of TFS
A signed original of this written statement required by Section 906 has been
provided to the Registrant and will be retained by the Registrant and furnished
to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED, REGARDING SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Textainer Equipment Income Fund IV,
L.P., (the "Registrant") on Form 10-Q for the quarterly period ended September
30, 2003, as filed on November 12, 2003 with the Securities and Exchange
Commission (the "Report"), I, Ernest J. Furtado, Chief Financial Officer, Senior
Vice President, Secretary and Director of Textainer Financial Services
Corporation ("TFS") and Principal Financial and Accounting Officer of TFS, the
Managing General Partner of the Registrant, certify, pursuant to 18 U.S.C. ss.
1350, as adopted, regarding Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all material
respects, the financial condition, results of operations and cash flows of
the Registrant.
November 12, 2003
By /s/ Ernest J. Furtado
_______________________________________________
Ernest J. Furtado
Chief Financial Officer, Senior Vice President,
Secretary and Director of TFS
A signed original of this written statement required by Section 906 has been
provided to the Registrant and will be retained by the Registrant and furnished
to the Securities and Exchange Commission or its staff upon request.