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TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 27, 1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund IV,
L.P. (the "Partnership") the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
The financial statements included in the enclosed Annual Report on Form 10K do
not reflect a change from the preceding year in any accounting principles or
practices, or in the method of applying any such principles or practices.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-21228
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(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)
Registrant's telephone number, including area code:
(415) 434-0551
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNER INTERESTS (THE "UNITS")
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
Documents Incorporated by Reference
The Registrant's Prospectus as contained in Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement, as filed with the Commission on April 10,
1992, as supplemented by Post-Effective Amendment No. 3 filed with The
Securities Act of 1933 on May 25, 1993 and as supplemented by Supplement No. 8
as filed under Rule 424(b) of the Securities Act of 1933 on March 1, 1994.
PART I
ITEM 1 DESCRIPTION OF BUSINESS
For more detailed information about the Registrant's business, see "Business of
the Partnership" in the Registrant's Prospectus as supplemented.
(a) General Development of Business
The Registrant is a California Limited Partnership formed on October
30, 1991 with an initial capitalization of $100 to purchase, own,
operate, lease, and sell equipment (the Equipment) used in the
containerized cargo shipping industry. The Registrant commenced
offering units representing limited partnership interests (Units) to
the public on April 30, 1992 in accordance with its Registration
Statement and ceased to offer such Units as of April 30, 1994. The
Registrant raised a total of $136,918,060 from the offering.
See Item 10 herein for a description of the Registrant's General
Partners.
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A container leasing company generally, and the Registrant
specifically, is an operating business comparable to a
rental car business. A customer can lease a car from a bank
leasing department for a monthly charge which represents
the cost of the car, plus interest, amortized over the term of
the lease; or the customer can rent the same car from a rental
car company at a much higher daily lease rate. The customer
is willing to pay the higher daily rate for the convenience
and value-added features provided by the rental car company,
the most important of which is the ability to pick up the
car where it is most convenient, use it for the desired
period of time, and then drop it off at a location convenient
to the customer. Rental car companies compete with one
another on the basis of lease rates, availability of cars,
and the provision of additional services. They generate
revenues by maintaining the highest lease rates and the
highest utilization factors that market conditions will allow,
and by augmenting this income with proceeds from sales of
insurance, drop-off fees, and other special charges. A large
percentage of lease revenues earned by car rental companies
are generated under corporate rate agreements wherein, for a
stated period of time, employees of a participating
corporation can rent cars at specific terms, conditions and
rental rates. Buying the cars at fleet prices and selling them
in the secondary market are also key elements to the
successful operation of a rental car business.
Container leasing companies and the Registrant operate in a
similar manner by owning and leasing a worldwide fleet of new
and used transportation containers to international shipping
companies hauling various types of goods among numerous trade
routes. In addition to paying a daily rental rate, all lessees
must either provide physical damage and liability insurance or
purchase a damage waiver from the Registrant, in which case
the Registrant agrees to pay the cost of repairing any
physical damage to containers caused by lessees, special
handling fees and/or drop-off charges may also be charged in
certain markets. Container leasing companies compete with one
another on the basis of lease rates, availability of equipment
and services provided. Revenues and profits are generated by
maintaining the highest lease rates and the highest equipment
utilization factors allowed by market conditions. Rental
revenues from containers result primarily under master leases
which are comparable to the corporate rate agreements used by
rental car companies. The master leases provide that container
leasing customers, for a specified period of time, may rent
containers at specific terms, conditions and rental rates.
Although the terms of the master lease governing each
container do not vary, the number of containers in use can
vary from time to time within the term of the master lease.
The terms and conditions of the master lease provide that the
lessee pays a daily rental rate for the entire time the
container is in his possession (whether or not he is actively
using it), is responsible for any damage, and must insure the
container against liabilities. For a more detailed discussion
of the leases for the Partnership's Equipment, see "Leasing
Policy" under "Business of the Partnership" in the
Registrant's Prospectus, as supplemented. Rental car companies
usually purchase only new cars, but since containers are
completely standardized, a used container in serviceable
condition usually rents for the same rate as a new one
although the purchase price is lower. The Registrant also
sells containers in the course of its business if
opportunities arise or at the end of the container's useful
life. See "Business of the Partnership" in the Registrant's
Prospectus, as supplemented.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) Inapplicable.
(c)(1)(vi) Inapplicable.
(c)(1)(vii) No single lessee had rental billing for the year ended
December 31, 1996 which was 10% or more of the total rental
billing of the Registrant.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) There are approximately 80 container leasing companies
of which the top ten control approximately 93% of the total
equipment held by all container leasing companies. The top two
container leasing companies control approximately 28% each
of the total equipment held by all container leasing
companies. Textainer Equipment Management Limited, an
Associate General Partner of the Registrant and the manager
of its marine container equipment, is the third largest
container leasing company and controls approximately 9% of
the equipment held by all container leasing companies. The
Registrant alone is not a material participant in the
worldwide container leasing market. The principal methods
of competition are price and the provision of worldwide
service to the international shipping community. Additionally,
shipping alliances and other operational consolidations among
shipping lines have recently allowed shipping lines to
operate with fewer containers, thereby decreasing the demand
for leased containers. Competition among lessors such as the
Registrant has, therefore, increased.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Financial Services
Corporation (TFS), the Managing General Partner of the
Registrant, is responsible for the overall management of the
business of the Registrant and has 26 employees. Textainer
Equipment Management Limited (TEM), an Associate General
Partner, is responsible for the management of the leasing
operations of the Registrant and has a total of 138 employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant is involved in the leasing of shipping containers to
international shipping companies for use in world trade and
approximately 15.27%, 13.16% and 13.33% of the Registrant's rental
revenue during the years ended December 31, 1996, 1995, and 1994,
respectively, was derived from operations sourced or terminated
domestically. These percentages do not reflect the proportion of the
Partnership's income from operations generated in domestic waterways.
Substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations. See "Business of
the Partnership" and for discussion of the risks of leasing containers
for use in world trade, "Risk Factors" in the Registrant's Prospectus,
as supplemented.
ITEM 2 - PROPERTIES
As of December 31, 1996, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 13,422
40-foot standard dry freight containers 17,389
40-foot high cube dry freight containers 5,120
-------
35,931
During December 1996, approximately 78% of these shipping containers were on
lease to international shipping companies, and the balance were being stored at
shipping container manufacturers' locations and at a large number of storage
depots located worldwide.
For information about the Registrant's property, see "Business of the
Partnership" and "Risk Factors" in the Registrant's Prospectus, as supplemented.
ITEM 3 - LEGAL PROCEEDINGS
The Registrant is not subject to any legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Inapplicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information.
(a)(1)(i) The units of limited partnership in the Registrant are not
publicly traded and there is no established trading market for
such Units. The Registrant has a program whereby Limited
Partners may redeem Units for a specified redemption price.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders.
(b)(1) As of January 1, 1997, there were 8,326 holders of record of
limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data".
ITEM 6 - SELECTED FINANCIAL DATA
(Amounts in thousands except for per unit amounts)
October 31, 1991
(inception) to
Years Ended December 31: December 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------ ------ ------
Rental Income $ 23,664 26,797 24,948 17,962 2,382
Net Earnings (Loss) $ 8,329 11,463 8,242 2,681 (865)
Net Earnings (Loss) per Unit of
Limited Partnership Interest $ 1.20 1.65 1.25 0.55 (.80)
Distributions Per Unit of
Limited Partnership Interest $ 2.07 2.02 1.67 1.75 1.20
Distributions Per Unit of Limited
Partnership Interest representing
a return of capital $ 0.87 0.37 0.42 1.20 1.20
Total Assets $ 104,029 109,740 112,119 114,897 74,567
Outstanding Balance on
Revolving Credit Line $ - - - 10,000 -
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the years ended December 31, 1996,
1995 and 1994. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
Liquidity and Capital Resources
From April 30, 1992 until April 30, 1994 the Partnership was involved in the
offering of 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 has set up a program whereby limited partners may redeem units
for a specified redemption value. The redemption price is set by formula and
varies depending on length of time units are outstanding. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded, at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the years ended December 31, 1996, the
Partnership redeemed 4,690 units for a total dollar amount of $71.
The Partnership invests working capital and cash flow from operations prior to
its distribution or reinvestment in additional Equipment in short-term, highly
liquid investments. It is the policy of the Partnership to maintain a minimum
working capital reserve in an amount which is the lesser of (i) 1% of capital
contributions or (ii) $100. At December 31, 1996, the Partnership's cash of
$2,694 was primarily invested in a market-rate account.
During the year ended December 31, 1996, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1995
through November 1996, in the amount of $14,129. These distributions represent
10.5% of original capital (measured on an annualized basis) on each unit for the
months of December 1995 through September 1996 and 9.5% of original capital
(measured on an annualized basis) on each unit for the months of October and
November, 1996. The reduction in the Partnership's distribution rate is a result
of the decline in demand for leasing of the Partnership's container rental fleet
which is discussed in detail below. Of these distributions, on a GAAP basis,
$5,949 was a return of capital and the balance was from net earnings. On a cash
basis, all of these distributions were from operations.
On December 9, 1992, the Partnership was granted a revolving credit line with an
available limit of $5,000, subsequently increased to $10,000, which was
available for Equipment purchases. This credit facility was paid in full and
terminated by the Partnership in June of 1994.
At December 31, 1996, the Partnership had committed to purchase Equipment at an
approximate total purchase price of $160, which includes acquisition fees of $8.
The Partnership expects to fund the purchase of this Equipment with its cash on
hand. In the event Partnership decides not to purchase the Equipment, one of the
General Partners or its affiliates will retain the Equipment for its own
account.
For the year ended December 31, 1996, the Partnership had net cash provided by
operating activities of $16,578, compared with net cash provided by operating
activities of $20,487 for the year ended December 31, 1995. This decrease was
primarily attributable to a decrease in net earnings of $3,134 and an increase
in net due to affiliates of $1,313, offset slightly by an increase in warranty
claims of $512. Net earnings decreased by 27% in 1996 from 1995 due to a 12%
decrease in rental revenues and a 32% increase in direct container expenses. The
decrease in rental revenues between periods was due to a decline in utilization
and rental rates and the increase in direct container expenses between periods
was primarily due to the decline in utilization. The decline in net due to
affiliates reflects timing differences in the accrual and payment of net rental
revenues, fees and other expenses to or from TEM and affiliates. Warranty claims
increased due to a settlement with an equipment manufacturer recorded in 1996.
Certain factors have adversely affected and may continue to adversely affect the
Partnership's operations. Shipping lines, which are the Partnership's principal
lessees, continue to experience over-capacity which is directly related to: (i)
the delivery of new and much larger ships and, (ii) a general slow-down in the
growth of world containerized cargo trade. This over-capacity has led to lower
shipping rates, resulting in shipping lines' need to reduce operating costs. The
drive to reduce costs, coupled with the availability of inexpensive financing
and lower container prices, encouraged shipping lines to purchase, rather than
lease, a greater number of new containers in 1996 than in previous years. All of
these factors have led to: (i) a downward pressure on container lease rates;
(ii) an increase in leasing incentives and other discounts being granted to
shipping lines by container lessors; and (iii) a decline in utilization of
leased containers. Declining container utilization is discussed more fully below
under "Results of Operations".
Net cash used in investing activities (the purchase and sale of Equipment) for
the year ended December 31, 1996 was $696 compared with $6,688 for the year
ended December 31, 1995. This fluctuation is mostly due to the fact that, on a
cash basis, the Partnership bought less Equipment in 1996 than the same period
in 1995. The Partnership has certain used Equipment in its portfolio and expects
to sell this Equipment periodically when it reaches the end of its useful marine
life. Consistent with its investment objectives, and the General Partners'
determination that Equipment can be profitably sold or bought at any time, the
Partnership intends to reinvest all or a significant amount of proceeds from
future Equipment sales in additional Equipment.
Results of Operations
The Partnership's income from operations, which consists of rental income,
container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses were directly related to the size of
the container fleet ("inventory") during each of the years ended December 31,
1996, 1995 and 1994. The following is a summary of the size of the container
fleet (in units) available for lease during those periods:
1996 1995 1994
---- ---- ----
Opening Inventory.......... 36,297 35,132 34,282
Closing Inventory.......... 35,931 36,297 35,132
Average.................... 36,114 35,715 34,707
The average container fleet increased by 1% between 1995 and 1996 and by 3%
between 1994 and 1995. These increases were due in part to purchase of new
marine containers with proceeds from the sale of used Equipment and cash flow
from operations.
Rental income and direct container expenses are also affected by the lease
utilization percentages for the Equipment which were 83%, 92% and 90% on average
during the years ended December 31, 1996, 1995 and 1994, respectively. In
addition, rental income is affected by daily rental rates.
The following is a comparative analysis of the results of operations for the
years ended December 31, 1996, 1995 and 1994.
The Partnership's income from operations for the year ended December 31, 1996
was $7,882 on gross rental income of $23,664 compared to $11,007 on gross rental
income of $26,797 for the year ended December 31, 1995. The decrease in total
rental income from the year ended December 31, 1995 to the same period in 1996
was primarily attributable to income from container rentals, the major component
of total rental income, which decreased by $2,822, or 12%. Income from container
rentals is largely dependent upon three factors: average on-hire (utilization)
percentages, average daily rental rates and equipment available for lease
(average inventory). Average inventory increased 1%, average utilization
decreased 10%, and average daily rental rates decreased 3% from the year ended
December 31, 1995 to the year ended December 31, 1996.
The Partnership's income from operations for the year ended December 31, 1995
was $11,007 on gross rental income of $26,797 compared to $7,867 on gross rental
income of $24,948 for the year ended December 31, 1994. The increase in total
rental income from the year ended December 31, 1994 to the equivalent period in
1995 was primarily attributable to income from container rentals, the major
component of total rental income, which increased by $2,066, or 9%. Average
inventory increased by 3%, average utilization increased by 2%, and average
daily rental rates decreased slightly by 0.7% from the year ended December
31,1994 to the same period in 1995.
Container utilization began to decline in late 1995 and that decline has
persisted throughout 1996 and into 1997. The General Partners believe that this
decrease in demand for leased containers is the result of recent adverse changes
in the business of its shipping line customers. These changes consist
principally of: (i) a general slowdown in the growth of world containerized
cargo trade, particularly in the Asia-North America and Asia-Europe trade
routes; (ii) over-capacity resulting from the 1996 and 1997 additions of new,
larger ships to the existing container ship fleet at a rate in excess of the
growth rate in containerized cargo trade; (iii) shipping line alliances and
other operational consolidations that have allowed shipping lines to operate
with fewer containers thereby decreasing the demand for leased containers; and
(iv) as noted above, shipping lines' purchased, rather than leased a greater
number of containers. All of these factors have led to lower utilization of
leased containers, which in turn has led to downward pressure on container
rental rates and higher leasing incentives and other discounts for leased
containers, further eroding Partnership profitability. For the near term, the
General Partners do not foresee any changes in this outlook and caution that
both utilization and lease rates could continue to decline, adversely affecting
the Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's equipment under short-term operating leases.
The balance of total rental income consisted of other lease-related items,
primarily income from charges to the lessees for pick-up of containers from
prime locations less credits granted to lessees for leasing containers from less
desirable locations (location income), income for handling and returning
containers, and income from charges to the lessees for a damage protection plan
(DPP). For the year ended December 31, 1996, the total of these other rental
income items was $2,055, a decrease of $309 over the equivalent period in 1995.
This decline was primarily due to a decrease in location income of $362, partly
offset by an increase in charges to lessees under the damage protection plan of
$60. The decrease in location income is largely due to lower demand, which drove
drop-off charges to lessees down and increased credits to lessees for picking up
units at less desirable locations. The increase in DPP revenue is primarily due
to the increase in the number of lessees under the plan.
For the year ended December 31, 1995, the total of these other rental income
items was $2,364, a decrease of $218 over the equivalent period in 1994. This
decline was primarily due to a decrease in charges to lessees for handling and
returning containers of $300 and a decrease in charges to lessees under the
damage protection plan of $189, partially offset by an increase in location
income of $280. Handling income decreased primarily due to increased utilization
and to a decrease in per unit charges to lessees for handling and returning
containers. The decrease in revenue from lessees under the damage protection
plan was primarily due to a cancellation in this coverage by a large lessee.
Location income increased due to higher demand which resulted in fewer pick-up
incentives granted and higher pick-up charges on new units and higher drop-off
charges on returned units.
Direct container expenses (excluding bad debt expense) increased by $981, or
32%, from the year ended December 31, 1996, to the same period in 1995. The
primary components of this increase were increases in storage expense of $804
and costs incurred under the damage protection plan of $281. Storage costs
increased due to the decline in utilization. The increase in DPP cost is due to
an increase in the number of units requiring repair under the plan.
Direct container expenses (excluding bad debt expense) decreased by $1,381 or
31% from the year ended December 31, 1994, to the same period in 1995. The
primary components of this decline were decreases in storage of $278, handling
costs of $287, and accrued expenses under the damage protection plan of $507.
Storage and handling costs decreased due to improved utilization. The decrease
in the damage protection plan expenses was due in part to a cancellation of this
coverage by a significant lessee, as well as a reduction in the average repair
cost for Units covered under the plan.
Bad debt expense decreased by $488 for the year ended December 31, 1996, to the
same period in 1995. The decrease was primarily due to a reduction in reserve
requirements for a specific lessee during the year ended December 31, 1996.
Bad debt expense decreased by $236 for the year ended December 31, 1995, to the
same period in 1994, primarily due to lower specific reserve requirements in the
year ended December 31, 1995, (primarily for two specific lessees which did not
need significant additional reserves in 1995).
Management fees to affiliates as a percentage of gross revenue were 9.4% and
9.0% for the years ended December 31, 1996 and 1995, respectively. Incentive
management fees, which are based on the Partnership's distributions to the
limited and general partners, were 2.5% and 2.2% of gross revenue in the years
ended December 31, 1996 and 1995. Equipment management fees were 7% of gross
revenue for both periods.
Management fees to affiliates as a percentage of gross revenue were 9.0% and
9.1% for the years ended December 31, 1995 and 1994, respectively. Incentive
management fees increased to 2.2% from 2.1% of gross revenue in the years ended
December 31, 1995 and 1994 due to higher distribution rates in 1995 as compared
to 1994. Equipment management fees were 7% of gross revenue for both periods.
General and administrative costs to affiliates decreased by $432, or 24%, in the
year ended December 31, 1996 compared to 1995. This decrease was primarily the
result of a decline in overhead costs allocated from TEM.
General and administrative costs to affiliates increased by 5%, or $89, in the
year ended December 31, 1995 compared to 1994, due to a 3% increase in the
average container fleet during these periods.
Other income (expense) provided $447 of additional income for the year ended
December 31, 1996, representing a decrease of $9 or 2% over the equivalent
period in 1995. The decrease was due to a $43 decrease in gain from sales of
equipment, partly offset by an increase in interest income of $34.
Other income (expense) provided $456 of additional income for the year ended
December 31, 1995, representing an increase of $81 or 22% over the equivalent
period in 1994. The increase was primarily attributable to a $150 decrease in
interest expense due to the repayment of the credit facility in 1994, partially
offset by a $59 decrease in gain from sales of equipment.
Net earnings per limited partnership unit decreased from $1.65 to $1.20 from the
year ended December 31, 1995, to the year ended December 31, 1996, reflecting
the decrease in net earnings from $11,463 for the year ended December 31, 1995
to $8,329 for the same period in 1996.
Net earnings per limited partnership unit increased from $1.25 to $1.65 from the
year ended December 31, 1994, to the year ended December 31, 1995, reflecting
the increase in net earnings from $8,242 for the year ended December 31, 1994,
to $11,463 for the same period in 1995.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the Equipment. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep the Equipment under lease, rather than the geographic location
of the Equipment or the domicile of the lessees. The Equipment is generally
operated on the international high seas rather than on the domestic waterways.
The Equipment is subject to the risk of war or other political, economic or
social occurrence where the Equipment is used, which may result in the loss of
Equipment, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of December 31, 1996 which would result in such risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning Equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Equipment, and the effect of world trade, industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented, for additional information on
risks of the Partnership's business.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached pages 10 to 22.
Independent Auditors' Report
The Partners
Textainer Equipment Income Fund IV, L.P.:
We have audited the accompanying balance sheets of Textainer Equipment Income
Fund IV, L.P. (a California limited partnership) as of December 31, 1996 and
1995, the related statements of earnings, partners' capital and cash flows for
the year ended December 31, 1996, 1995 and 1994. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Textainer Equipment Income Fund
IV, L.P. as of December 31, 1996 and 1995, and the results of its operations,
its partners' capital and its cash flows for the years ended December 31, 1996,
1995 and 1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
February 17, 1997
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Balance Sheets
December 31, 1996 and 1995
(Amounts in thousands)
1996 1995
-------------- --------------
Assets
Container rental equipment, net of accumulated
depreciation of $29,128 (1995: $22,117) $ 95,626 102,147
Cash 2,694 1,293
Accounts receivable, net of allowance
for doubtful accounts of $1,391 (1995: $1,349) 5,647 6,191
Organization costs, net of accumulated
amortization of $220 (1995: $173) 16 63
Prepaid expenses 46 46
-------------- --------------
$ 104,029 109,740
============== ==============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 629 457
Accrued liabilities - 190
Accrued damage protection plan costs (note 1) 520 556
Warranty claims (note 1) 599 87
Due to affiliates (note 2) 815 941
Deferred quarterly distribution (note 1) 199 234
Equipment purchases payable 361 349
-------------- --------------
Total liabilities 3,123 2,814
-------------- --------------
Partners' capital:
General partners - -
Limited partners 100,906 106,926
-------------- --------------
Total partners' capital 100,906 106,926
-------------- --------------
Commitments (note 7) $ 104,029 109,740
============== ==============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
(Dollar amounts in thousands except for unit and per unit amounts)
1996 1995 1994
--------------- --------------- ---------------
Rental Income $ 23,664 26,797 24,948
--------------- --------------- ---------------
Costs and expenses:
Direct container expenses 4,043 3,062 4,443
Bad debt expense 234 722 958
Depreciation and amortization 7,587 7,495 7,435
Professional fees 35 42 37
Management fees to affiliates (note 2) 2,233 2,409 2,261
General and administrative costs to affiliates (note 2) 1,347 1,779 1,690
Other general and administrative costs 303 281 257
--------------- --------------- ---------------
15,782 15,790 17,081
--------------- --------------- ---------------
Income from operations 7,882 11,007 7,867
--------------- --------------- ---------------
Other income (expense):
Interest income 89 55 61
Interest expense - - (150)
Gain on sales of equipment (note 6) 358 401 460
Trading profit, net of cost of equipment sold
(1994: $23) - - 4
--------------- --------------- ---------------
447 456 375
--------------- --------------- ---------------
Net earnings $ 8,329 11,463 8,242
=============== =============== ===============
Allocation of net earnings (note 1):
General partners $ 149 155 109
Limited partners 8,180 11,308 8,133
--------------- --------------- ---------------
$ 8,329 11,463 8,242
=============== =============== ===============
Limited partners' per unit share
of net earnings $ 1.20 1.65 1.25
=============== =============== ===============
Limited partners' per unit share
of distributions $ 2.07 2.02 1.67
=============== =============== ===============
Weighted average number of limited
partnership units outstanding 6,837,104 6,845,440 6,525,886
=============== =============== ===============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Partners' Capital
Years ended December 31, 1996, 1995 and 1994
(Amounts in thousands)
Partners' Capital
------------------------------------------------------
General Limited Total
------------ ----------------- ----------------
Balances at December 31, 1993 $ - 102,325 102,325
Proceeds from sales of limited partnership units - 11,529 11,529
Syndication and offering costs - (1,506) (1,506)
Distributions (109) (10,907) (11,016)
Net earnings 109 8,133 8,242
------------ ----------------- ----------------
Balances at December 31, 1994 - 109,574 109,574
Distributions (155) (13,861) (14,016)
Redemptions (note 1) - (95) (95)
Net earnings 155 11,308 11,463
------------ ----------------- ----------------
Balances at December 31, 1995 - 106,926 106,926
Distributions (149) (14,129) (14,278)
Redemptions (note 1) - (71) (71)
Net earnings 149 8,180 8,329
------------ ----------------- ----------------
Balances at December 31, 1996 $ - 100,906 100,906
============ ================= ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(Amounts in thousands)
1996 1995 1994
--------------- --------------- ---------------
Cash flows from operating activities:
Net earnings $ 8,329 11,463 8,242
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 7,540 7,448 7,388
Increase (decrease) in allowance for doubtful accounts 42 (83) 931
Amortization of organization costs 47 47 47
Gain on sale of container rental equipment (358) (401) (460)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 500 525 (1,315)
Increase (decrease) in due to affiliates, net 20 1,333 (29)
(Decrease) increase in accounts payable & accrued liabilities (18) 183 (1,556)
(Decrease) increase in accrued damage protection plan costs (36) (118) 244
Increase in warranty claims 512 87 -
Decrease in equipment held for resale - - 23
Decrease (increase) in prepaid expenses - 3 (10)
--------------- --------------- ---------------
Net cash provided by operating activities 16,578 20,487 13,505
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from sale of equipment 1,497 1,768 4,435
Equipment purchases (2,193) (8,456) (7,584)
Decrease in value-added taxes receivable - - 145
--------------- --------------- ---------------
Net cash used in investing activities (696) (6,688) (3,004)
--------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units - - 11,529
Redemptions of limited partnership units (71) (95) -
Repayments of note payable to bank - - (10,000)
Distributions to partners (14,410) (13,958) (10,871)
Syndication and offering costs - - (1,762)
--------------- --------------- ---------------
Net cash used in financing activities (14,481) (14,053) (11,104)
--------------- --------------- ---------------
Net increase (decrease) in cash 1,401 (254) (603)
Cash at beginning of period 1,293 1,547 2,150
--------------- --------------- ---------------
Cash at end of period 2,694 1,293 1,547
=============== =============== ===============
Interest paid during the period $ - - 161
=============== =============== ===============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A California limited partnership)
Statements of Cash Flows - Continued
Years ended December 31, 1996, 1995 and 1994
(Amounts in thousands)
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of Equipment purchases, distributions
to partners, syndication and offering costs, and proceeds from sale of Equipment
which had not been paid or received by the Partnership as of December 31, 1996,
1995, 1994 and 1993 resulting in differences in amounts recorded and amounts
paid or received by the Partnership, as shown in the Statements of Cash Flows.
1996 1995 1994 1993
---- ---- ---- ----
Equipment purchases included in:
Due from affiliates................................... $ - - - 65
Due to affiliates..................................... 5 53 170 -
Equipment purchases payable........................... 361 349 1,191 915
Distributions to partners included in:
Due to affiliates..................................... 18 115 75 16
Deferred quarterly distribution....................... 199 234 216 130
Syndication and offering costs included in:
Due to affiliates..................................... - - - 256
Proceeds from sale of Equipment included in:
Due from affiliates................................... 361 360 272 403
Accounts receivable................................... - 2 212 -
The following table summarizes the amounts of Equipment purchases, distributions
to partners, syndications and offering costs, and proceeds from sale of
Equipment recorded by the Partnership and the amounts paid or received as shown
on the Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994.
1996 1995 1994
---- ---- ----
Equipment purchases recorded......................................... $ 2,157 7,497 8,095
Equipment purchases paid............................................. 2,193 8,456 7,584
Distributions to partners declared................................... 14,278 14,016 11,016
Distributions to partners paid....................................... 14,410 13,958 10,871
Syndication and offering costs incurred.............................. - - 1,506
Syndication and offering costs paid.................................. - - 1,762
Proceeds from sale of Equipment recorded............................. 1,496 1,646 4,516
Proceeds from sale of Equipment received............................. 1,497 1,768 4,435
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Notes to Financial Statements
Years ended December 31, 1996, 1995 and 1994
(Dollar amounts in thousands except for unit and per unit amounts)
Note 1. Summary of Significant Accounting Policies
(a) Nature of Operations
Textainer Equipment Income Fund IV, L.P. (TEIF IV or the Partnership), a
California limited partnership, was formed on October 30, 1991 to engage
in the business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, marine vessels, trailers and
other container related equipment (the Equipment). TEIF IV offered units
representing limited partnership interests (Units) to the public until
April 30, 1994, the close of the offering period, when a total of
6,845,903 Units had been purchased for a total of $136,918.
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership (prior to its name change on April 4, 1994, TFS
was known as Textainer Capital Corporation). TFS is a wholly-owned
subsidiary of Textainer Capital Corporation (TCC) (prior to its name
change on April 4, 1994, TCC was known as Textainer (Delaware) Inc.).
Textainer Equipment Management Limited (TEM) (prior to being redomiciled
on December 20, 1994, TEM was known as Textainer Equipment Management
N.V.) and Textainer Limited (TL) are the 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.
Textainer Acquisition Services Limited (TAS) is an affiliate of the
General Partners which performs services relative to the acquisition of
Equipment outside the United States on behalf of the Partnership. TCC
Securities Corporation (TSC), a licensed broker and dealer in securities
and an affiliate of the General Partners, was the managing sales agent for
the offering of Units for sale. The General Partners manage and control
the affairs of the Partnership.
(b) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned according to the terms of the container rental
contracts. These contracts are typically for a one-year term and are
classified as operating leases. Certain estimates and assumptions were
made by the Partnership's management that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
(c) Equipment
The Equipment is carried at the lower of cost of the assets purchased,
which includes acquisition fees, or the estimated recoverable value of
such assets. Depreciation of new equipment is computed using the
straight-line method over its estimated useful life of 12 years to a 28%
salvage value. Used equipment is depreciated based upon its estimated
remaining useful life at the date of acquisition (from 2 to 11 years).
When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income for the period.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of" (SFAS 121). The Partnership adopted
SFAS 121 during 1995. In accordance with SFAS 121, the Partnership
periodically compares the carrying value of the Equipment to expected
future market conditions for the purpose of assessing the recoverability
of the recorded amounts. There were no reductions to the carrying value of
the Equipment made during 1996 or 1995.
(d) Nature of Income from Operations
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this
income is denominated in United States dollars. The Partnership's
customers are international shipping lines that transport goods on
international trade routes. Once the Equipment is on-hire with a lessee,
the Partnership has no way of knowing its location. The domicile of the
lessee is not indicative of where the lessee is transporting the
Equipment. The Partnership's business risk in its foreign operations lies
with the creditworthiness of the lessees rather than the geographic
location of the Equipment or the domicile of the lessees.
For the years ended December 31, 1996, 1995 and 1994 no single lessee
accounted for more than 10% of the Partnership's revenues.
(e) Equipment Held for Resale and Trading Profit
The Partnership bought used Equipment for resale during 1994 which was
valued at the lower of cost or market value. When the Equipment held for
resale was sold, the cost of Equipment sold was specifically identified
and removed from the accounts and any resulting trading profit or loss was
recognized in income for the period. During the year ended December 31,
1994, the Partnership recognized trading profit of $4 on the sale of
resale equipment from proceeds of $27 with a carrying value of $23. No
such equipment was held or sold in 1996 or 1995.
(f) Allocation of Net Earnings and Partnership Distributions
In accordance with the Partnership Agreement, net earnings or losses, and
partnership distributions are allocated 1% to the General Partners and 99%
to the limited partners with the exception of gross income, as defined in
the Partnership agreement. Gross Income is allocated to the General
Partners to the extent that their partners' capital accounts deficits
exceed the portion of syndication and offering costs allocated to them. On
termination of the Partnership, the General Partners shall be allocated
gross income equal to their allocations of syndication and offering costs.
Actual cash distributions to the Limited Partners differ from the
allocated net earnings as presented in these financial statements because
cash distributions are based on cash available for distribution. Cash
distributions are paid to the general and limited partners on a monthly
basis in accordance with the provisions of the Partnership Agreement. Some
limited partners have elected to have their distributions paid quarterly.
The Partnership has recorded these distributions as an accrued liability
at December 31, 1996 and 1995.
(g) Income Taxes
The Partnership is not subject to income taxes. Accordingly, no provision
for income taxes has been made. The Partnership files federal and state
information returns only. Taxable income or loss is reportable by the
individual partners.
(h) Value Added Taxes Receivable
During 1993 and 1992, the Partnership purchased trailer equipment from
foreign manufacturers which was subject to value-added taxes. These
value-added taxes were fully refunded to the Partnership in 1994.
(i) Organization Costs
Organization costs are being amortized on a straight-line basis over five
years.
(j) Acquisition Fees
In accordance with the Partnership Agreement, acquisition fees are paid to
the General Partners or TAS equal to 5% of Equipment purchase price (see
note 2). These fees are capitalized as part of the cost of the Equipment.
(k) Damage Protection Plan
The Partnership offers a Damage Protection Plan (the Plan) to lessees of
its Equipment. Under the terms of the Plan, the Partnership earns
additional revenues on a daily basis and, as a result, has agreed to bear
certain repair costs. It is the Partnership's policy to recognize revenue
when earned and provide a reserve sufficient to cover the Partnership's
obligation for estimated future repair costs. At December 31, 1996 and
1995, this reserve was equal to $520 and $556, respectively.
(l) Warranty Claims
During 1996 and 1995, the Partnership settled warranty claims against two
equipment manufacturers. The Partnership is amortizing the settlement
amount over the remaining estimated useful life of the equipment (ten
years), reducing maintenance costs over that time. At December 31, 1996
and 1995, the unamortized portion of the settlement amount was $599 and
$87, respectively.
(m) Limited Partners' Per Unit Share of Net Earnings and Distributions
Limited partners' per unit share of both net earnings and distributions
were computed using the weighted average number of units outstanding
during the years ended December 31, 1996, 1995 and 1994, which was
6,837,104, 6,845,440 and 6,525,886, respectively.
(n) Redemptions
The following redemption offerings were consummated by the Partnership
during the years ended December 31, 1996 and 1995:
Average
Units Redeemed Redemption Price Amount Paid
Year ended December 31, 1995:
3rd quarter............. 6,025 $15.70 $ 95
----- ---
Year ended December 31, 1996:
1st quarter............. 2,068 $15.60 32
3rd quarter............. 2,622 $14.87 39
----- --
4,690 $15.19 71
----- ---
Partnership to date.......... 10,715 $15.48 $ 166
====== ===
There were no redemptions during the year ended December 31, 1994. The
redemption price is fixed by formula and varies depending on the length of
time the units have been outstanding.
(o) Fair Value of Financial Instruments
To meet the reporting requirements of Financial Accounting Standards Board
Statement No. 107, "Disclosures about Fair Value of Financial
Instruments," the Partnership calculates the fair value of financial
instruments and includes this additional information in the notes to the
financial statements when the fair value is different than the book value
of those financial instruments. At December 31, 1996 and 1995, the fair
value of the Partnership's financial instruments approximate the related
book value of such instruments.
(p) Reclassifications
Certain reclassifications, not affecting net earnings, have been made to
prior year amounts in order to conform with the 1996 financial statement
presentation.
Note 2. Transactions with Affiliates
During the offering period, the Partnership paid a managing sales agent
fee to TSC of up to 9% of the gross proceeds from the sale of limited
partnership units, from which TSC paid commissions to independent
participating broker/dealers who participated in the offering.
Additionally, the Partnership reimbursed the General Partners and TSC for
certain organizational and offering costs, incurred in connection with the
organization of the Partnership, up to maximum of 6% of gross proceeds
raised as allowed in the Partnership Agreement. These amounts, which
totaled $16,648, were deducted as syndication and offering costs in the
determination of net limited partnership contributions. Organization
expenses, which resulted from the formation of the Partnership, were
capitalized as organization costs.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an acquisition fee, an incentive management fee, an
equipment management fee and an equipment liquidation fee. These fees are
for various services provided in connection with the administration and
management of the Partnership. The Partnership capitalized $104, $397 and
$374 of equipment acquisition fees as part of Equipment costs during the
years ended December 31, 1996, 1995 and 1994, respectively, and incurred
$590, $592 and $516 of incentive management fees in the same periods. No
equipment liquidation fees were incurred in 1996, 1995 or 1994.
The Equipment of the Partnership is managed by TEM. Prior to sale of the
Partnership's trailer fleet in 1994 (note 6), TEM had an agreement with
its 50%-owned subsidiary Contrail International Services B.V. (CIS) to
manage these trailers. In its role as manager, TEM has authority to
acquire, hold, manage, lease, sell and dispose of the Partnership's
Equipment. Additionally, TEM holds, for the payment of direct operating
expenses, a reserve of cash that has been collected from Equipment leasing
operations; such cash is included in the net due to affiliates at December
31, 1996 and 1995.
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. Prior to the
sale of its trailer fleet in 1994, such fees allocable to CIS, if any,
were passed through by TEM for services rendered. In 1996, 1995 and 1994,
equipment management fees totaled $1,643, $1,817 and $1,745, respectively.
The Partnership's Equipment is or was leased by TEM and CIS to third party
lessees on operating master leases, spot leases, term leases and full
payout net leases. The majority of the Partnership's Equipment is leased
under operating leases with limited terms and no purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance, are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are borne by TFS, TEM, and, prior to the sale of its trailer
fleet, CIS. During 1996, 1995, and 1994, costs allocated to the
Partnership for salaries were $708, $847 and $909, respectively and other
general and administrative costs were $639, $932 and $781, respectively.
TEM and CIS allocate these costs based on the ratio of the Partnership's
interest in managed Equipment to the total Equipment managed by TEM and
CIS during the period. Indirect general and administrative costs allocated
to the Partnership by TEM and CIS were $1,173, $1,500 and $1,444 during
1996, 1995 and 1994, respectively.
TFS allocates indirect general and administrative costs to the Partnership
based on the ratio of the Partnership's Equipment to the total Equipment
of all limited partnerships managed by TFS. TFS allocated $174, $279 and
$246 of these indirect costs to the Partnership during 1996, 1995 and
1994, respectively.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may then
be resold to the Partnership on an all-cash basis at a price equal to the
actual cost, as defined in the Partnership Agreement. In addition, the
General Partners or TAS are entitled to an acquisition fee for any
Equipment resold to the Partnership.
At December 31, 1996 and 1995 due to affiliates is comprised of:
1996 1995
---- ----
Due to TL......................................... $ 1 11
Due to TFS........................................ 50 87
Due to TCC........................................ 36 16
Due to TAS........................................ 5 31
Due to TEM........................................ 723 795
Due to TGH........................................ - 1
------------- ------------
$ 815 941
============= ============
These amounts payable to affiliates were incurred in the ordinary course
of business between the Partnership and its affiliates and represent
timing differences in the accrual and payment of expenses and fees
described above or the accrual and remittance of net rental revenues from
TEM and CIS.
Prior to July 1994, it was the policy of the Partnership and the General
Partners to charge interest on intercompany balances outstanding for more
than one month. Interest was charged at the prime rate plus 2%. As of July
1994, this policy was changed so that the Partnership is not charged
interest on intercompany balances except for loans on equipment purchases.
Interest is charged at a rate not greater than the General Partners' or
affiliates' own cost of funds. The Partnership incurred interest expense
of $9 on intercompany balances payable to TFS and TEM for the year ended
December 31, 1994. There was no interest charged on intercompany balances
for 1996 or 1995.
Note 3. Rentals under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of December 31, 1996:
Year ending December 31:
1997............................................................... $ 1,313
1998............................................................... 174
1999............................................................... 10
2000............................................................... 1
---------
Total minimum future rentals receivable............................ $ 1,498
======
Note 4. Note Payable
On December 9, 1992, the Partnership was granted a revolving credit line
with an available limit of $5,000, subsequently increased to $10,000,
which was available for equipment purchases. In 1994, the credit line was
repaid in full and terminated.
Note 5. Income Taxes
At December 31, 1996, 1995 and 1994, there were temporary differences of
$44,247, $31,461, and $20,195, respectively, between the financial
statement carrying value of certain assets and liabilities and the federal
income tax basis of such assets and liabilities. The reconciliation of net
income for financial statement purposes to net loss for federal income tax
purposes for the years ended December 31, 1996, 1995, and 1994 is as
follows:
1996 1995 1994
---- ---- ----
Net income per financial statements $ 8,329 11,463 8,242
Increase (decrease) in provision for bad debt 42 (83) 931
Depreciation for income tax purposes in excess
of depreciation for financial statement purposes (13,198) (12,761) (11,841)
Gain on sale of fixed assets for financial statement
purposes in excess of gain recognized
for federal income tax purposes 362 242 495
(Decrease) increase in damage protection
plan reserve (36) (118) 244
Decrease in reserve for trailer maintenance
and repairs - - (193)
Increase in warranty claims 78 - -
Other 40 38 37
--------- ------- -------
Net loss for federal income tax purposes $ (4,383) (1,219) (2,085)
========= ======= =======
Note 6. Sale of Trailer Fleet
On September 30, 1994 and October 31, 1994, the Partnership sold its
trailer fleet, managed by CIS, to an unrelated purchaser. The proceeds
from this sale were $2,252 compared to the Partnership's cost basis in the
equipment of $2,370. (This cost basis does not include the repair reserve
of $200 which the Partnership maintained while it owned the equipment.)
The resulting loss from the sale was $118. The Partnership invested the
proceeds from this sale into additional marine container rental equipment.
Note 7. Commitments
At December 31, 1996, the Partnership has committed to purchase equipment
at an approximate total purchase price of $160 which includes acquisition
fees of $8. These commitments were made to TAS which, as the contracting
party, has in turn committed to purchase this equipment on behalf of the
Partnership.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been none.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no officers or directors.
As described in the Prospectus, the Registrant's three original general partners
were TCC, TEM and TI which have comprised the Textainer Group. Effective October
1, 1993, the Textainer Group streamlined its organization by forming a new
holding company, Textainer Group Holdings Limited (TGH), and the shareholders of
the underlying companies which include the General Partners have accepted shares
in TGH in exchange for their shares in the individual companies. Textainer
Financial Services Corporation (TFS) is the managing general partner of the
Partnership (prior to its name change on April 4, 1994, TFS was known as
Textainer Capital Corporation). TFS is a wholly-owned subsidiary of Textainer
Capital Corporation (TCC) (prior to its name change on April 4,1994, TCC was
known as Textainer (Delaware) Inc.). Textainer Equipment Management Limited
(TEM) is an associate general partner of the Partnership. Textainer Inc. (TI)
was an associate general partner of the Partnership through September 30, 1993
when it was replaced in that capacity by Textainer Limited (TL), pursuant to a
corporate reorganization effective October 1, 1993, which caused TFS, TEM and TL
to fall under the common ownership of TGH. (The managing general partner and
associate general partners are collectively referred to as the General
Partners). Pursuant to this restructuring, TI transferred substantially all of
its assets including all of its rights and duties as associate general partner
to TL. This transfer was effective from October 1, 1993. The end result was that
TFS, TEM and TL now serve as General Partners for the Registrant and are
wholly-owned or substantially-owned subsidiaries of TGH. The General Partners
also act in this capacity for other limited partnerships. Textainer Acquisition
Services Limited (TAS) is an affiliate of the General Partners which performs
services relative to the acquisition of Equipment outside the United States on
behalf of the Partnership. TCC Securities Corporation (TSC), a licensed broker
and dealer in securities and an affiliate of the General Partners, was the
managing sales agent for the offering of Units for sale.
TFS, as the Managing General Partner, is responsible for managing the
administration and operation of the Registrant, and for the formulation and
administration of investment policies.
TEM, an Associate General Partner, manages all aspects of the operation of the
Registrant's Equipment.
TL, an Associate General Partner, owns a fleet of container rental equipment
which is managed by TEM. TL provides advice to the Partnership regarding
negotiations with financial institutions, manufacturers and equipment owners,
and regarding the terms upon which particular items of Equipment are acquired.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Partnership's General Partners, policy-making officials and persons who
beneficially own more than ten percent of the Units to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Copies of these reports must also be furnished to the
Partnership.
Based solely on a review of the copies of such forms furnished to the
Partnership or on written representations that no forms were required to
be filed, the Partnership believes that with respect to its most recent
fiscal year ended December 31, 1996, all Section 16(a) filing requirements
were complied with, except that Philip K. Brewer filed his initial
statement of beneficial interest on Form 3 late. No director, officer, or
beneficial owner owned more than 10 percent of any interest in the
Partnership. None of the foregoing failed to file or filed late any
reports of transactions in the Units.
The directors and executive officers of the General Partners are as follows:
Name Age Position
Neil I. Jowell 63 Director and Chairman of TGH, TEM, TL, TFS and TCC
James E. Hoelter 57 President and CEO of TGH, TL, TFS and TCC, Director of TGH, TEM, TL, TFS,
TCC and TSC
John A. Maccarone 52 President and CEO of TEM, Vice President of TGH, Director of TGH, TEM, TL,
TFS, TCC and TSC
Cara D. Smith 34 President and CEO of TSC and Director of TCC and TFS
John R. Rhodes 47 Executive Vice President, CFO, and Secretary of TGH, TEM, TL, TFS and TCC
and Director of TEM, TFS and TCC
Alex M. Brown 58 Director of TGH, TEM, TL, TCC and TSC
Harold J. Samson 75 Director of TGH, TL and TSC
Philip K. Brewer 40 Senior Vice President - Capital Markets for TGH and TL
Robert D. Pedersen 38 Senior Vice President - Marketing for TEM
Anthony C. Sowry 44 Vice President - Operations and Acquisitions for TEM
Jens W. Palludan 46 Vice President - Americas/Africa/Australia for TEM
Robert S.A. Goodall 39 Vice President - Europe/Middle East/India for TEM
Wing Sing Mak 39 Vice President - South Asia for TEM
Masanori Sagara 41 Vice President - North Asia for TEM
Stefan Mackula 44 Vice President - Equipment Resale for TEM
Ernest J. Furtado 41 Vice President, Finance and Assistant Secretary of TGH, TEM and TL
Richard G. Murphy 44 Vice President - Risk Management for TEM
Janet S. Ruggero 48 Vice President - Administration and Marketing Services for TEM
Adnan Z. Abou Ayyash 52 Director of TGH and TL
Isam K. Kabbani 62 Director of TGH and TL
S. Arthur Morris 63 Director of TGH, TEM and TL
Dudley R. Cottingham 45 Assistant Secretary, Vice President and Director of TGH, TEM and TL
James S. McCaffrey 41 Executive Vice President, Chief Operating Officer, Assistant Secretary and
Director for TFS and TCC
Jeanene K. Gomes 43 Assistant Secretary of TFS and TCC, Secretary and Compliance Officer of TSC
Neil I. Jowell is Director and Chairman of TGH, TEM, TL, TFS and TCC
and a member of the Investment Advisory Committee and Equipment Investment
Committee (see "Committees" below). He has served on the Board of Trencor Ltd.
since 1966 and as Chairman since 1973. He is also a director of Mobile
Industries, Ltd. (1969 to present), an Affiliate of Trencor, and a non-executive
director of Forward Corporation Ltd. (1993 to present). Trencor is a publicly
traded diversified industrial group listed on the Johannesburg Stock Exchange.
Its business is the leasing, owning, managing and financing of marine cargo
containers worldwide and the manufacture and export of containers for
international markets. In South Africa, it is engaged in manufacturing,
transport, trading and exports of general commodities. Trencor also has an
interest in Forward Corporation Ltd., a publicly traded holding company listed
on the Johannesburg Stock Exchange. It has interests in industrial and consumer
businesses operating in South Africa and abroad. Mr. Jowell became affiliated
with the General Partners and its affiliates when Trencor became, through its
beneficial ownership in two controlled companies, a major shareholder of the
Textainer Group in 1992. Mr. Jowell has over 36 years' experience in the
transportation industry. He holds an M.B.A. degree from Columbia University and
a B.Com.L.L.B. from the University of Cape Town.
James E. Hoelter is President and Chief Executive Officer of TGH, TL,
TFS and TCC and a director of TGH, TEM, TL, TFS, TCC and TSC. As President and
Chief Executive Officer of TGH, Mr. Hoelter is responsible for overseeing the
management of, and coordinating the activities of, TEM, TL, TFS and TCC. He is
also responsible for overseeing TEM's equipment management operations. In
addition, Mr. Hoelter is Chairman of the Credit Committee, the Investment
Advisory Committee and the Equipment Investment Committee (see "Committees",
below). Prior to joining the Textainer Group in 1987, Mr. Hoelter was president
of Intermodal Equipment Associates ("IEA") in San Francisco, California, from
the company's inception in 1979 until 1987. Mr. Hoelter co-founded IEA and
directed its sponsorship of ten public and private investment programs, which
provided more than $100 million of equity from 10,000 investors. From 1976 to
1978, Mr. Hoelter was Vice President - North America for Trans Ocean Ltd., San
Francisco, a marine container leasing company, where he was responsible for all
leasing operations in that area. From 1971 to 1976, he was associated with Itel
Corporation, San Francisco, where he held a number of positions, the most recent
of which was director of financial leasing for Itel's Container Division. Mr.
Hoelter received his B.B.A. in business administration from the University of
Wisconsin, where he currently serves as a member of its Business School's Dean's
Advisory Board, and his M.B.A. from the Harvard Graduate School of Business
Administration.
John A. Maccarone is President and CEO of TEM, Vice President of TGH
and a director of TGH, TEM, TL, TFS, TCC and TSC. In this capacity he is
responsible for the performance of TEM's worldwide fleet of marine cargo
containers. Additionally, he is a member of the Equipment Investment Committee,
the Credit Committee and the Investment Advisory Committee (see "Committees",
below). Mr. Maccarone was instrumental in co-founding IEA with Mr. Hoelter and
held a variety of executive positions with IEA from 1979 until 1987, when he
joined the Textainer Group. Mr. Maccarone was previously a Director of Marketing
for Trans Ocean Leasing Corporation in Hong Kong with responsibility for all
leasing activities in Southeast Asia. From 1969 to 1977, Mr. Maccarone was a
marketing representative for IBM Corporation. He holds a B.S. degree in
Engineering Management from Boston University and an M.B.A. from Loyola
University of Chicago.
Cara D. Smith is President and Chief Executive Officer of TSC, a
director of TFS and TCC and a member of the Investment Advisory Committee (see
"Committees", below). In this capacity Ms. Smith is responsible for the
organization, marketing and after-market support of TSC's investment programs.
Ms. Smith joined Textainer in 1992, and prior to 1996, was Vice President of
Marketing. Ms. Smith has worked in the securities industry for the past 13
years. Ms. Smith's extensive experience ranges from compliance and investor
relations to administration and marketing of equipment leasing, multi-family
housing and tax credit investment programs. She holds five securities licenses
and is a registered principal. Ms. Smith is also a member of the International
Association of Financial Planners.
John R. Rhodes is Executive Vice President, Chief Financial Officer
and Secretary of TGH, TEM, TL, TFS and TCC and a director of TEM, TFS and TCC.
In this capacity he is responsible for all accounting, financial management, and
reporting functions for the Textainer Group. He is also a member of the Credit
Committee, the Equipment Investment Committee and Investment Advisory Committee
(see "Committees", below). Prior to joining Textainer in November 1987, Mr.
Rhodes was Vice President of Finance for Greenbrier Capital Corporation in San
Francisco, a trailer leasing and management company, from 1986 to 1987; from
1981 to 1985, he was employed by Gelco Rail Services, an intermodal refrigerated
trailer company in San Francisco, first in the capacity of Vice President and
Controller and then as Senior Vice President and General Manager. Mr. Rhodes'
earlier business affiliations include serving as Vice President and General
Manager of Itel Capital Corporation and as senior accountant with Arthur
Andersen & Co., both in San Francisco. He is a Certified Public Accountant and
holds a B.A. in economics from Stanford University and an M.B.A. in accounting
from Golden Gate University.
Alex M. Brown is a director of TGH, TEM, TL, TCC and TSC.
Additionally, he is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Mr. Brown became
affiliated with the Textainer Group in April 1986. From August 4, 1987 until
October 1993, he was President and Chief Executive Officer of Textainer, Inc.
and the Chairman of the Textainer Group. From June 1993 to present, Mr. Brown
has been Chief Executive Officer of AAF, a company affiliated with Trencor Ltd.
AAF is a publicly listed company on the London Stock Exchange and is involved in
manufacturing and leasing modular buildings and construction scaffolding. Mr.
Brown is Chairman of WACO International Corporation, which is based in
Cleveland, Ohio. WACO manufactures, rents and erects scaffolding and other
associated construction products throughout the USA. Mr. Brown was the managing
director of Cross County Leasing in England from 1984 until it was acquired by
Textainer in 1986.
Harold J. Samson is a director of TGH, TL and TSC and is a member of
the Investment Advisory Committee (see "Committees", below). Mr. Samson
served as a consultant to various securities firms since 1981 to 1989. From
1974 to 1981 he was Executive Vice President of Foster & Marshall, Inc., a New
York Stock Exchange member firm based in Seattle. Mr. Samson was a director
of IEA from 1979 to 1981. From 1957 to 1984 he served as Chief Financial Officer
in several New York Stock Exchange member firms. Mr. Samson holds a B.S.
in Business Administration from the University of California, Berkeley and is a
California Certified Public Accountant.
Philip K. Brewer is Senior Vice President - Capital Markets for TGH
and TL. Mr. Brewer is responsible for optimizing the capital structure of and
identifying new sources of finance for Textainer. Prior to joining Textainer
in 1996, Mr. Brewer worked at Bankers Trust from 1990 to 1996, starting
as a Vice President in Corporate Finance and ending as Managing Director and
Country Manager for Indonesia; from 1989 to 1990, he was Vice President in
Corporate Finance at Jarding Fleming; from 1987 to 1989, he was Capital Markets
Advisor to the United States Agency for International Development; and from 1984
to 1987 he was an Associate with Drexel Burnham Lambert in New York. Mr. Brewer
holds an M.B.A. in Finance from the Graduate School of Business at Columbia
University, and a B.A. in Economics and Political Science from Colgate
University.
Robert D. Pedersen is based in San Francisco and is Senior Vice
President - Marketing for TEM, responsible for worldwide sales and marketing
related activities. Mr. Pedersen is a member of the Credit Committee (see
"Committees" below). He joined TEM in 1991 as Regional Vice President for the
Americas Region. Mr. Pedersen has extensive experience in the industry having
held a variety of positions with Maersk Line, a container shipping line (from
1978 to 1984), XTRA, a container lessor (1985 to 1988) and Klinge Cool, a
manufacturer of refrigerated container cooling units (1989 to 1991), where he
was worldwide sales and marketing director. Mr. Pedersen is a graduate of the
A.P. Moller shipping and transportation program and Merkonom Business School in
Copenhagen, majoring in Company Organization.
Anthony C. Sowry is Vice President - Operations and Acquisitions for
TEM. Mr. Sowry supervises all international container operations and maintenance
and technical functions for the fleets under management. In addition, he is
responsible for the acquisition of all new and used containers for the Textainer
Group. He began his affiliation with TEM in 1988 and previously served as Fleet
Quality Control Manager for Textainer Inc. from 1982 through March 1988. He is
also a member of the Credit Committee and the Equipment Investment Committee
(see "Committees", below). From 1980 to 1982, he was operations manager for
Trans Container Services in London; and from 1978 to 1982, he was a technical
representative for Trans Ocean Leasing, also in London. He received his B.A.
degree in business management from the London School of Business. Mr. Sowry is a
member of the Technical Committee of the International Institute of Container
Lessors and a certified container inspector.
Jens W. Palludan is based in New York and is Vice President -
Americas/Africa/Australia for TEM, responsible for coordinating all leasing
activities in North and South America, Africa and Australia/New Zealand.
Mr. Palludan spent his career from 1969 through 1992 with Maersk Line of
Copenhagen, Denmark in a variety of key management positions in both Denmark
and overseas. Prior to joining TEM in 1993 Mr. Palludan was General Manager,
Equipment and Terminals, where he was responsible for a fleet of over
200,000 TEUs. Mr. Palludan holds an M.B.A. from the Centre European D'Education
Permanente, Fontainebleau, France.
Robert S.A. Goodall is based in London and is Vice President -
Europe/Middle East/India for TEM, in which capacity he is responsible for
coordinating all leasing activities in these three areas of operation. Mr.
Goodall joined TEM in September 1994. Previously, Mr. Goodall spent his career
from July 1990 until August 1994 with Tiphook Container Rental, during which
time he held numerous senior marketing positions within the company. He
was responsible for setting up their green field operation in North America,
which he successfully ran from inception for three years. Mr. Goodall also
spearheaded a quality program within the company which received ISO
accreditation for the Tank Container operation and associated business areas.
Mr. Goodall has spent nearly sixteen years in the container leasing and
transport industry. Mr. Goodall graduated from Bloxham College, Oxfordshire
and Business Studies at West London College.
Wing Sing Mak is based in Singapore and is the Regional Vice
President - South Asia. Mr. Mak is responsible for container leasing activities
in North/Central People's Republic of China (PRC), Hong Kong and South China
(PRC), and Southeast Asia. Mr. Mak most recently was the Regional Manager,
Southeast Asia, for Trans Ocean Leasing, working there from 1994 to 1996. From
1987 to 1994, Mr. Mak worked with Tiphook as their Regional General Manager, and
with OOCL from 1976 to 1987 in a variety of positions, most recently as their
Logistics Operations Manager.
Masanori Sagara is the Regional Vice President - North Asia of TEM.
Mr. Sagara is responsible for Textainer's marketing activities in Japan,
Korea, and Taiwan. Mr. Sagara joined Textainer in 1990 and was the company's
Marketing Director in Japan through 1996. From 1987 to 1990, he was the
Marketing Manager with IEA. Mr. Sagara's other experience in the container
leasing business includes marketing management at Genstar from 1984 to 1987
and various container operations positions with Thoresen & Company from 1979
to 1984. Mr. Sagara holds a Bachelor of Science degree in Economics from Aoyama
Bakuin University.
Stefan Mackula is Vice President - Equipment Resale for TEM, in which
capacity he coordinates the worldwide sale of equipment into secondary markets.
Mr. Mackula also served as Vice President - Marketing for TEM, in which capacity
he was responsible for coordinating all leasing activities in Europe, Africa,
and the Middle East. He joined TEM in 1983 as Leasing Manager for the United
Kingdom. Prior to joining TEM, Mr. Mackula held, beginning in 1972, a variety of
positions in the international container shipping industry.
Ernest J. Furtado is Vice President, Finance and Assistant Secretary
of TGH, TEM and TL, in which capacity he is responsible for all accounting,
financial management, and reporting functions for TGH, TEM and TL. Prior to
joining Textainer in May 1991, Mr. Furtado was Controller for Itel Instant Space
and manager of accounting for Itel Containers International Corporation, both in
San Francisco, from 1984 to 1991. Mr. Furtado's earlier business affiliations
include serving as audit manager for Wells Fargo Bank and as senior accountant
with John F. Forbes & Co., both in San Francisco. He is a Certified Public
Accountant and holds a B.S. in business administration from the University of
California at Berkeley and an M.B.A. in information systems from Golden Gate
University.
Richard G. Murphy is Vice President, Risk Management for TEM. Mr.
Murphy is responsible for all credit and risk management functions for TEM and
supervises the administrative aspects of equipment acquisitions. He is a member
of and acts as secretary to the Credit and Equipment Investment Committees (see
"Committees", below). He previously served as Director of Credit and Risk
Management from 1989 to 1991 and as Controller from 1988 to 1989. Prior to the
takeover of the management of the Interocean Leasing Ltd. fleet by TEM in 1988,
Mr. Murphy held various positions in the accounting and financial areas with
that company from 1980, acting as Chief Financial Officer from 1984 to 1988.
Prior to 1980, he held various positions with firms of public accountants in the
U.K. Mr. Murphy is an Associate of the Institute of Chartered Accountants in
England and Wales and holds a Bachelor of Commerce degree from the National
University of Ireland.
Janet S. Ruggero is Vice President, Administration and Marketing
Services for TEM. Ms. Ruggero is responsible for the tracking and billing of
fleets under TEM management, including direct responsibility for ensuring that
all data is input in an accurate and timely fashion. She assists the marketing
and operations departments by providing statistical reports and analyses and
serves on the Credit Committee (see "Committees", below). Prior to joining
Textainer in 1986, Ms. Ruggero held various positions with Gelco CTI over the
course of 15 years, the last one as Director of Marketing and Administration for
the North American Regional office in New York City. She has a B.A. in education
from Cumberland College.
Dr. Adnan Z. Abou Ayyash is a director of TGH and TL. Since 1974 he
has been General Manager and Chief Executive Officer of one of the largest
firms of consulting engineers in Saudi Arabia, Rashid Engineering. Dr. Adnan
Abou Ayyash holds a B.S. degree in Civil Engineering from the American
University of Beirut, as well as M.S. and Ph.D. degrees in Civil Engineering
from the University of Texas.
Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal stockholder of the IKK Group, Jeddah, Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and internationally. In
1959 Sheikh Isam Kabbani joined the Saudi Arabian Ministry of Foreign Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum Exporting Countries
(OPEC). After a period as Chief Economist of OPEC, in 1967 he became the Saudi
Arabian member of OPEC's Board of Governors. In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 17 years. Sheikh Kabbani holds
a B.A. degree from Swarthmore College, Pennsylvania, and an M.A. degree in
Economics and International Relations from Columbia University.
S. Arthur Morris is a director of TGH, TEM and TL. He is a founding
partner in the firm of Morris and Kempe, Chartered Accountants (1962-1977) and
currently functions as a correspondent member of a number of international
accounting firms through his firm Arthur Morris and Company (1978 to date). He
is also President and director of Continental Management Limited (1977 to date).
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Morris has over 30 years
experience in public accounting and serves on numerous business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr. Morris
became a director of TL and TGH in 1993, and TEM in 1994.
Dudley R. Cottingham is Assistant Secretary, Vice President and a
director of TGH, TEM and TL. He is a partner with Arthur Morris and Company
(1977 to date) and a Vice President and director of Continental Management
Limited (1978 to date), both in the Cayman Islands and Turks and Caicos Islands.
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Cottingham has over 20 years
experience in public accounting with responsibility for a variety of
international and local clients. Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.
James S. McCaffrey is Executive Vice President, Chief Operating
Officer, Assistant Secretary and a director of TFS and TCC. In this capacity he
is responsible for all accounting, financial management, and reporting functions
for TFS and TCC. He is a member of and acts as secretary to the Investment
Advisory Committee and serves on the Equipment Investment Committee (see
"Committees" below). Prior to joining Textainer in July 1993, Mr. McCaffrey was
Vice President of Finance for Meridian Point Properties, a real estate
syndication and management company, from 1985 to 1993; from 1983 to 1985 he was
employed by Trans-west Capital as Controller and Chief Financial Officer. Mr.
McCaffrey's earlier business affiliations include serving as manager of
financial reporting for Fox and Carskadon Financial Corporation and as a senior
accountant with Arthur Andersen & Co. Mr. McCaffrey is a Certified Public
Accountant and holds a B.S. in business administration and mathematics from
Southern Oregon State College and two securities licenses.
Jeanene K. Gomes is Assistant Secretary of TFS and TCC and Secretary
and Compliance Officer of TSC. Ms. Gomes is responsible for administering the
public partnerships sponsored by the Textainer Group. She is responsible for
ensuring that all data relating to investor accounts is input, monitored, and
stored in a timely manner and in accordance with the limited partnership
agreement for each of the partnerships as well as state and federal securities
regulations. Ms. Gomes oversees all communications with the limited partners and
as such directly supervises all personnel in performing this function. As
compliance officer for TSC, Ms. Gomes is responsible for ensuring compliance
with all securities regulations. Ms. Gomes also serves on the Investment
Advisory Committee (see "Committees" below). Ms. Gomes holds five securities
licenses and was, prior to joining Textainer in 1989, the compliance officer for
CIS Investment Corporation, a broker-dealer.
Committees
The Managing General Partner has established the following three
committees to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of Equipment for
the Partnership and for other programs organized by the Textainer Group:
Equipment Investment Committee. The Equipment Investment Committee
will review the equipment leasing programs of the Partnership on a regular
basis with emphasis on matters involving equipment purchases, the equipment
mix in the Partnership's portfolio, equipment remarketing issues, and
decisions regarding ultimate disposition of equipment. The members of the
committee are James E. Hoelter (Chairman), John A. Maccarone, John R. Rhodes,
Anthony C. Sowry, James S. McCaffrey, Richard G. Murphy (Secretary), Alex M.
Brown and Neil I. Jowell.
Credit Committee. The Credit Committee will establish credit
limits for every lessee and potential lessee of Equipment and periodically
review these limits. In setting such limits, the Credit Committee will
consider such factors as customer trade routes, country, political risk,
operational history, credit references, credit agency analyses, financial
statements, and other information. The members of the Credit Committee are
James E. Hoelter (Chairman), John A. Maccarone, Richard G. Murphy (Secretary),
Janet S. Ruggero, John R. Rhodes, Anthony C. Sowry and Robert D. Pedersen.
Investment Advisory Committee. The Investment Advisory Committee
will review investor program operations on at least a quarterly basis,
emphasizing matters related to cash distributions to investors, cash flow
management, portfolio management, and liquidation. The Investment Advisory
Committee is organized with a view to applying an interdisciplinary approach,
involving management, financial, legal and marketing expertise, to the analysis
of investor program operations. The members of the Investment Advisory
Committee are James E. Hoelter (Chairman), John A. Maccarone, Cara D. Smith,
Jame S. McCaffrey (Secretary), John R. Rhodes, Jeanene K. Gomes, Harold J.
Samson, Alex M. Brown and Neil I. Jowell.
ITEM 11 - EXECUTIVE COMPENSATION
The Registrant has no executive officers and does not reimburse TFS, TEM or TL
for the remuneration payable to their executive officers.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Security ownership of certain beneficial owners
There is no person or "Group" who is known to the registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership interest in the Registrant.
b) Security Ownership of Management
As of January 1, 1997:
Number
Name of Beneficial Owner Of Units % All Units
James E. Hoelter....................... 10,995 .1608%
John A. Maccarone...................... 5,000 .0731%
Robert D. Pedersen..................... 500 .0073%
-------- ------
Officers and Management
as a Group.......................... 16,495 .2412%
====== ======
c) Changes in control.
Inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Dollar amounts in thousands)
(a) Transactions with Management and Others.
At December 31, 1996 and 1995 due to affiliates are comprised of:
1996 1995
---- ----
Due to TL......................................... $ 1 11
Due to TFS........................................ 50 87
Due to TCC........................................ 36 16
Due to TAS........................................ 5 31
Due to TEM........................................ 723 795
Due to TGH........................................ - 1
------------- ------------
$ 815 941
============= ============
These amounts payable to affiliates were incurred in the ordinary
course of business between the Partnership and its affiliates and
represent timing differences in the accrual and payment of expenses and
fees described above, the accrual and remittance of expenses and fees
described above or the accrual and collection of net rental revenues
from TEM and Contrail International Services, B.V. (CIS) which is a 50%
owned subsidiary of TEM.
In addition, the Registrant paid or will pay the following amounts to
the General Partners and to TCC Securities Corporation (TSC), which was
the managing sales agent for the offering of Units for sale and is a
licensed broker and dealer in securities and an affiliate of TFS, TEM
and TL:
Syndication fees and organization and offering expense reimbursements:
1996 1995 1994
---- ---- ----
TCC...................... $ - - 293
TSC...................... - - 1,213
------ ------ -----
Total.................... $ - - 1,506
====== ====== =====
Acquisition Fees in connection with the purchase of equipment on behalf
of the Registrant:
1996 1995 1994
---- ---- ----
TAS.................... $ 104 397 265
TI..................... - - 109
----- ----- ---
Total.................. $ 104 397 374
=== === ===
Management fees in connection with the operations of the Registrant:
1996 1995 1994
---- ---- ----
TCC.................... $ 460 462 403
TEM and CIS............ 1,773 1,947 1,848
TI..................... - - 10
-------- --------- -------
Total.................. $ 2,233 2,409 2,261
===== ===== =====
Reimbursement for administrative costs in respect of the operations of
the Registrant:
1996 1995 1994
---- ---- ----
TCC.................... $ 174 279 246
TEM and CIS ........... 1,173 1,500 1,444
----- ----- -----
Total.................. $ 1,347 1,779 1,690
===== ===== =====
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Compensation of Affiliates" section of the Registrant's Prospectus, as
supplemented, and the Notes to the Financial Statements in Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Audited financial statements of the Registrant for the
year ended December 31, 1996 are contained in Item 8 of
this Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary
Financial Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference.
(i) The Registrant's Prospectus as contained in Pre-
Effective Amendment No. 2 to the Registrant's
Registration Statement (No. 33-44687), as filed with
the Commission April 10, 1992, as supplemented by
Post-Effective Amendment No. 3 filed with the
Commission under Section 8(c) of the Securities Act
of 1993 on May 25, 1993, and as supplemented by
Supplement No. 8 as filed under Rule 424(b) of the
Securities Act of 1933 on March 1, 1994.
(ii) The Registrant's limited partnership agreement,
Exhibit A to the Prospectus.
(b) During the year ended 1996, no reports on Form 8-K have been filed by
the Registrant.
Independent Auditors' Report on Supplementary Schedule
The Partners
Textainer Equipment Income Fund IV, L.P.:
Under the date of February 17, 1997, we reported on the balance sheets of
Textainer Equipment Income Fund IV, L.P. (the Partnership) as of December 31,
1996 and 1995, and the related statements of earnings, partners' capital and
cash flows for the year ended December 31, 1996, 1995 and 1994, which are
included in the 1996 annual report on Form 10-K. In connection with our audits
of the aforementioned financial statements, we also audited the related
financial statement schedule as listed in Item 14. This financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
San Francisco, California
February 17, 1997
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A California limited partnership)
Schedule II - Valuation and Qualifying Accounts
(Dollar amounts in thousands)
Charged Balance
Balance at to Costs Charged at End
Beginning and to Other of
of Period Expenses Accounts Deduction Period
For the year ended December 31, 1996:
Allowance for
doubtful accounts $ 1,349 234 - (192) 1,391
----- ------ --------- ------- -----
Damage protection
plan reserve $ 556 513 - (549) 520
------ ------ --------- ------- ------
Warranty claims $ 87 (13) 525 - 599
------- --------- ------- --------- ------
For the year ended December 31, 1995:
Allowance for
doubtful accounts
$ 1,432 722 - (805) 1,349
----- ----- --------- ------ -----
Damage protection
plan reserve
$ 673 232 - (349) 556
------ ----- --------- ------ ------
Warranty claims $ - - 87 - 87
-------- --------- -------- --------- -------
For the year ended December 31, 1994:
Allowance for
doubtful accounts $ 501 958 - (27) 1,432
----- ----- --------- ------- -----
Damage protection
plan reserve $ 429 739 - (495) 673
----- ----- --------- ------ ------
Reserve for trailer
maintenance and repairs $ 193 105 - (298) -
----- ----- ---------- ------- ------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By
John R. Rhodes
Executive Vice President
Date: March 26, 1997
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
Executive Vice President March 26, 1997
John R. Rhodes (Principal Financial and
Accounting Officer), and
Secretary
President (Principal Executive March 26, 1997
James E. Hoelter Officer) and Director
Executive Vice President, Chief March 26, 1997
James S. McCaffrey Operating Officer and Director
March 26, 1997
John A. Maccarone Director
Director March 26, 1997
Cara D. Smith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By /s/John R. Rhodes
John R. Rhodes
Executive Vice President
Date: March 26, 1997
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/John R. Rhodes Executive Vice President March 26, 1997
- ------------------------------------------------ (Principal Financial and
John R. Rhodes Accounting Officer), and
Secretary
/s/James E. Hoelter President (Principal Executive March 26, 1997
- ------------------------------------------------ Officer) and Director
James E. Hoelter
/s/James S. McCaffrey Executive Vice President, Chief March 26, 1997
- ---------------------------------------------- Operating Officer and Director
James S. McCaffrey
/s/James A. Maccarone Director March 26, 1997
- ----------------------------------------------
James A. Maccarone
/s/Cara D. Smith Director March 26, 1997
- ------------------------------------------------
Cara D. Smith