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TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
March 28, 2000
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 VI,
L.P. (the "Partnership") the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
The financial statements included in the enclosed Annual Report on Form 10-K do
not reflect a change from the preceding year in any accounting principles or
practices, or in the method of applying any such principles or practices.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-22337
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(Exact name of Registrant as specified in its charter)
California 94-3220152
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 California Street, 16th Floor
San Francisco, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code:
(415) 434-0551
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS (THE "UNITS")
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
Documents Incorporated by Reference
The Registrant's Prospectus as contained in Pre-Effective Amendment No. 4 to the
Registrant's Registration Statement, as filed with the Commission on May 10,
1996 and supplemented by Supplement No. 1, as filed with the Commission under
Rule 424(b) of the Securities Exchange Act of 1933 on March 24, 1997.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
For more detailed information about the Registrant's business, see "Business of
the Partnership" in the Prospectus as supplemented.
(a) General Development of Business
The Registrant is a California Limited Partnership formed on February
1, 1995 to purchase, own, operate, lease, and sell equipment used in
the containerized cargo shipping industry. The Registrant commenced
offering units representing limited partnership interests (Units) to
the public on May 10, 1996 in accordance with its Registration
Statement and ceased to offer such Units on April 30, 1997. The
Registrant raised a total of $36,967,940 from the offering and invested
a substantial portion of the money raised in equipment. The Registrant
has since engaged in leasing this and other equipment in the
international shipping industry.
See Item 10 herein for a description of the Registrant's General
Partners. See Item 7 herein for a description of current market
conditions affecting the Registrant's business.
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A container leasing company generally, and the Registrant
specifically, is an operating business comparable to a
rental car business. A customer can lease a car from a bank
leasing department for a monthly charge which represents the
cost of the car, plus interest, amortized over the term of the
lease; or the customer can rent the same car from a rental car
company at a much higher daily lease rate. The customer is
willing to pay the higher daily rate for the convenience and
value-added features provided by the rental car company, the
most important of which is the ability to pick up the car
where it is most convenient, use it for the desired period
of time, and then drop it off at a location convenient to
the customer. Rental car companies compete with one another
on the basis of lease rates, availability of cars, and the
provision of additional services. They generate revenues by
maintaining the highest lease rates and the highest
utilization factors that market conditions will allow, and
by augmenting this income with proceeds from sales of
insurance, drop-off fees, and other special charges. A
large percentage of lease revenues earned by car rental
companies are generated under corporate rate agreements
wherein, for a stated period of time, employees of a
participating corporation can rent cars at specific terms,
conditions and rental rates.
Container leasing companies and the Registrant operate in a
similar manner by owning a worldwide fleet of new and used
transportation containers and leasing these containers to
international shipping companies hauling various types of
goods among numerous trade routes. All lessees pay a daily
rental rate and in certain markets may pay special handling
fees and/or drop-off charges. In addition to these fees and
charges, a lessee must either provide physical damage and
liability insurance or purchase a damage waiver from the
Registrant, in which case the Registrant agrees to pay the
cost of repairing any physical damage to containers caused by
lessees. Container leasing companies compete with one another
on the basis of lease rates, availability of equipment and
services provided. To ensure the availability of equipment to
its customers, container leasing companies and the Registrant
may pay to reposition containers from low demand locations to
higher demand locations. By maintaining the highest lease
rates and the highest equipment utilization factors allowed by
market conditions, the Registrant attempts to generate revenue
and profit. The majority of the Registrant's equipment is
leased under master leases, which are comparable to the
corporate rate agreements used by rental car companies. The
master leases provide that the lessee, for a specified period
of time, may rent containers at specific terms, conditions and
rental rates. Although the terms of the master lease governing
each container under lease do not vary, the number of
containers in use can vary from time to time within the term
of the master lease. The terms and conditions of the master
lease provide that the lessee pays a daily rental rate for the
entire time the container is in his possession (whether or not
he is actively using it), is responsible for any damage, and
must insure the container against liabilities. For a more
detailed discussion of the leases for the Registrant's
equipment, see "Leasing Policy" under "Business of the
Partnership" in the Registrant's Prospectus as supplemented.
The Registrant also sells containers in the course of its
business as opportunities arise, at the end of the container's
useful life or if market and economic considerations indicate
that a sale would be beneficial. See "Business of the
Partnership" in Registrant's Prospectus, as supplemented.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) Inapplicable.
(c)(1)(vi) Inapplicable.
(c)(1)(vii) One lessee accounted for 12%, 12% and 13% of total revenue
of the Registrant for the years ended December 31, 1999, 1998
and 1997, respectively. No other single lessee accounted for
10% or more of the total revenue of the Registrant. The
Partnership has insurance that would cover loss of revenue as
a result of default under all its leases, as well as the
recovery cost or replacement value of all its containers,
including those of this lessee. The insurance covers loss of
lease revenues for a specified period of time, not
necessarily for the term of the lease. The insurance is
renewable annually, and the General Partners believe that
it is probable that the Partnership would be able to recover
insurance proceeds in the event of a default or loss by this
lessee. Because of this insurance and because the Partnership
would likely be able, over a period of time, to re-lease or
sell any containers that were returned to the Partnership,
the General Partners believe that the loss of this lessee
would not have a material adverse impact on the Partnership's
operating results. Because these are forward looking
statements, there can be no assurance that events will occur
as the General Partners have predicted. These statements
could be affected by material adverse events in the future,
such as the Partnership's loss of insurance or the
Partnership's inability to re-lease or sell containers that
are returned to the Partnership by the lessees.
(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 91% of the total
equipment held by all container leasing companies. The top
two container leasing companies combined control
approximately 36% of the total equipment held by all container
leasing companies. Textainer Equipment Management Limited,
an Associate General Partner of the Registrant and the
manager of its marine container equipment, is the third
largest container leasing company and manages approximately
13% of the equipment held by all container leasing companies.
The customers for leased containers are primarily
international shipping lines. The Registrant alone is not a
material participant in the worldwide container leasing
market. The principal methods of competition are price,
availability and the provision of worldwide service to the
international shipping community. Competition in the container
leasing market has increased over the past few years. Since
1996, shipping alliances and other operational consolidations
among shipping lines have allowed shipping lines to begin
operating with fewer containers, thereby decreasing the
demand for leased containers. Furthermore, primarily due
to lower new container prices and low interest rates,
shipping lines now own, rather than lease, a higher
percentage of containers. The decrease in demand from
shipping lines, along with the entry of new leasing company
competitors offering low container rental rates, has increased
competition among container lessors such as the Registrant.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Capital Corporation
(TCC), the Managing General Partner of the Registrant, is
responsible for the overall management of the business of the
Registrant and at December 31, 1999 had 4 employees. Textainer
Equipment Management Limited (TEM), an Associate General
Partner, is responsible for the management of the leasing
operations of the Registrant and at December 31, 1999 had a
total of 164 employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant is involved in leasing containers to international
shipping companies for use in world trade. Approximately 15%, 20% and
11% of the Registrant's rental revenue during the years ended December
31, 1999, 1998 and 1997, respectively, was derived from operations
sourced or terminated domestically. These percentages do not reflect
the proportion of the Partnership's income from operations generated
domestically or in domestic waterways. Substantially all of the
Partnership's income from operations is derived from assets employed in
foreign operations. See "Business of the Partnership", and for a
discussion of the risks of leasing containers for use in world trade,
see "Risk Factors" in the Registrant's Prospectus, as supplemented.
ITEM 2. PROPERTIES
As of December 31, 1999, the Registrant owned the following types and quantities
of equipment:
20-foot standard dry freight containers 4,376
40-foot standard dry freight containers 4,582
40-foot high cube dry freight containers 1,684
------
10,642
======
During December 1999, approximately 83% of these containers were on lease to
international shipping companies and the balance was being stored at a large
number of storage depots located worldwide.
For information about the Registrant's property, see "Business of the
Partnership" in the Registrant's Prospectus, as supplemented. See also Item 7,
"Results of Operations" regarding possible future write-downs of some of the
Registrant's property.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not subject to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 201:
(a) Market Information.
(a)(1)(i) The Registrant's limited partnership Units are not publicly
traded and there is no established trading market for such
Units. The Registrant has a program whereby limited partners
may redeem Units for a specified redemption price. The program
operates only when the Managing General Partner determines,
among other matters, that payment for redeemed Units will not
impair the capital or operations of the Registrant.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders.
(b)(1) As of January 1, 2000, there were 1,940 holders of record of
limited partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
For details of the distributions which are made monthly by the Registrant to its
limited partners, see Item 6 "Selected Financial Data".
ITEM 701: Inapplicable.
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands except for per unit amounts)
Year ended December 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Rental income........................... $ 5,413 $ 6,258 $ 5,798 $ 3,815 $ 732
Net earnings (loss)..................... $ 887 $ 1,717 $ 1,649 $ (580) $ (400)
Net earnings (loss) per unit of
limited partnership interest............ $ 0.34 $ 0.37 $ 0.84 $ (0.76) N/A
Distributions per unit of
limited partnership interest............ $ 1.30 $ 1.72 $ 1.74 $ 0.60 N/A
Distributions per unit of
limited partnership interest
representing a return of capital........ $ 0.96 $ 1.35 $ 0.90 $ 1.36 N/A
Total assets............................ $ 27,440 $ 29,126 $ 31,017 $ 30,528 $ 24,239
Outstanding balance on revolving
credit line............................. $ - $ - $ - $ 8,780 $ 21,282
Intercompany borrowings for container
purchases............................... $ - $ - $ 29 $ - $ 2,393
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
The Financial Statements contain information that will assist in evaluating the
financial condition of the Partnership for the years ended December 31, 1999,
1998 and 1997. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
Liquidity and Capital Resources
From May 10, 1996 until April 30, 1997, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $1,100 on June 17, 1996, and raised a total of $36,968
from the offering.
From time to time, the Partnership will redeem units from limited partners for a
specified redemption value, which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. Since inception, the Partnership has not redeemed
any units.
The Partnership invests working capital, cash flow from operations prior to its
distribution to the partners and proceeds from container sales that have not
been used to purchase containers in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
Limited partners are currently receiving monthly distributions in an annualized
amount equal to 6% of their original investment. During the year ended December
31, 1999, the Partnership declared cash distributions to limited partners
pertaining to the period from December 1998 through November 1999, in the amount
of $2,403. On a cash basis, all of these distributions were from operations. On
a GAAP basis, $1,780 of these distributions was a return of capital and the
balance was from net earnings.
At December 31, 1999, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the years ended December 31, 1999
and 1998, was $2,903 and $3,805, respectively. The decrease of $902, or 24%, is
primarily attributable to the decrease in net earnings, adjusted for non-cash
transactions, and fluctuations in accounts receivable, offset by fluctuations in
due from affiliates, net. Net earnings, adjusted for non-cash transactions,
decreased primarily due to the decline in rental income, which is discussed more
fully in "Results of Operations". The increase in accounts receivable of $35 in
the year ended December 31, 1999 was due to an increase in the average
collection period of accounts receivable, offset by the decrease in rental
income. The decrease in accounts receivable of $238 in the equivalent period in
1998 was primarily due to a decrease in the average collection period of
accounts receivable and to the resolution of payment issues with one lessee. The
increases in due from affiliates, net, resulted from timing differences in
payment of expenses and fees and in the remittance of net rental revenues from
TEM.
For the year ended December 31, 1999, net cash provided by investing activities
(the purchase and sale of containers) was $237 compared to net cash used in
investing activities of $10 for the year ended December 31, 1998. The increase
of $247 was due to an increase in proceeds from container sales, which increased
primarily due to an increase in the average sales price, and to a decrease in
container purchases. The Partnership sells containers when (i) a container
reaches the end of its useful life or (ii) an analysis indicates that the sale
is warranted based on existing market conditions and the container's age,
location and condition. Proceeds from container sales will fluctuate based on
the number of containers sold and the actual price received on the sale.
Consistent with its investment objectives, the Partnership intends to reinvest
available cash from operations, after distributions, and all or a significant
amount of the proceeds from container sales in additional containers. However,
during the year ended December 31, 1999, the Partnership did not reinvest any
cash from operations in new containers, after making distributions, due to the
effect of market conditions on the Partnership's financial results. Market
conditions have had and are expected to continue to have, an adverse effect on
the amount of cash provided by operations that is available for the purchase of
additional containers, after making distributions, which has resulted in lower
than anticipated reinvestment in containers. While market conditions have not
yet affected the price received by the Partnership when it has sold containers,
these conditions have affected the price received by TEM. If the average sales
price received by the Partnership also drops, this decrease would further
contribute to the lower than anticipated rate of reinvestment in containers.
The rate of reinvestment is also affected by distributions, which are determined
by the General Partners in accordance with the Partnership Agreement.
Furthermore, to the extent new containers are purchased with sales proceeds,
they are not likely to equal the number of containers sold, as new container
prices are likely to be greater than the average sales price of containers sold.
Market conditions are discussed more fully below under "Results of Operations".
A slower rate of reinvestment will, over time, affect the size of the
Partnership's container fleet.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during the years ended December 31, 1999, 1998 and 1997, as well
as certain other factors as discussed below. The following is a summary of the
container fleet (in units) available for lease during those periods:
1999 1998 1997
---- ---- ----
Beginning container fleet............... 10,718 10,728 9,099
Ending container fleet.................. 10,642 10,718 10,728
Average container fleet................. 10,680 10,723 9,914
The growth in the average container fleet during the years ended December 31,
1997 and 1998 was primarily due to the buildup of the Partnership's portfolio as
the initial gross proceeds from the offering were invested. Although the average
container fleet was comparable during 1999 and 1998, as noted above, when
containers are sold, sales proceeds are not likely to be sufficient to replace
all of the containers sold, which is likely to result in a trend towards a
smaller average container fleet. Other factors related to the Partnership's
ability to reinvest funds in new containers are discussed above under "Liquidity
and Capital Resources".
Rental income and direct container expenses are also affected by the average
utilization of the container fleet, which was 78%, 83% and 85% during the years
ended December 31, 1999, 1998 and 1997, 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, 1999, 1998 and 1997.
The Partnership's income from operations for the years ended December 31, 1999
and 1998 was $837 and $1,696, respectively, on rental income of $5,413 and
$6,258, respectively. The decrease in rental income of $845, or 14%, from the
year ended December 31, 1998 to the year ended December 31, 1999 was
attributable to decreases in income from container rentals and other rental
income, which is discussed below. Income from container rentals, the major
component of total revenue, decreased $745, or 13%, primarily due to decreases
in average on-hire utilization of 6% and average rental rates of 6%.
The Partnership's income from operations for the years ended December 31, 1998
and 1997 was $1,696 and $1,666, respectively, on rental income of $6,258 and
$5,798, respectively. The increase in rental income of $460 or 8%, from the year
ended December 31, 1997 to the year ended December 31, 1998 was attributable
to increases in income from container rentals and other rental income. Income
from container rentals, increased $180 or 3%. This increase was primarily due to
an increase in the average container fleet of 8%, offset by a decrease in
average rental rates of 3% and a decrease in average on-hire utilization of 2%.
Since 1996, the container leasing industry has been adversely affected by lower
demand for leased containers, increased competition and a trade imbalance, which
have resulted in declining utilization and rental rates and increased costs.
Demand for leased containers decreased due to changes in the business of
shipping line customers as a result of (i) over-capacity resulting from the
additions of new, larger ships to the existing container ship fleet at a rate in
excess of the growth rate in containerized cargo trade; (ii) shipping line
alliances and other operational consolidations that have allowed shipping lines
to operate with fewer containers; and (iii) shipping lines purchasing containers
to take advantage of low prices and favorable interest rates.
The entry of new leasing company competitors offering low container rental rates
to shipping lines resulted in downward pressure on rental rates, and caused
leasing companies to offer higher leasing incentives and other discounts to
shipping lines. The decline in the purchase price of new containers during this
period and excess industry capacity have also caused additional downward
pressure on rental rates.
The weakening of many Asian currencies in 1998 resulted in a significant
increase in exports from Asia to North America and Europe and a corresponding
decrease in imports into Asia from North America and Europe. This trade
imbalance created a weak demand for containers in North America and Europe and a
strong demand for containers in Asia, which resulted in a decline in leasing
incentives in Asia, but contributed to a further decline in average utilization
and rental rates for the fleet managed by TEM. This imbalance has also resulted
in an unusually high build-up of containers in lower demand locations. To
alleviate the container build-up, the Partnership has repositioned newer
containers to higher demand locations. However, as a result of this effort, the
Partnership has incurred increased direct container expenses during 1998 and
1999. This repositioning has been a significant component of direct container
expenses.
Current market conditions have also caused a decline in the economic value of
used containers, which has resulted in write-downs and losses being recorded on
certain older containers managed by TEM for other container owners. These
containers, located in lower demand locations, were identified as being for sale
as the expected economic benefit of continuing to own these containers was
significantly less than that of newer containers, primarily due to their shorter
remaining marine life, the cost to reposition containers and shipping lines'
preference for leasing newer containers. There have been no such losses or write
downs recorded by the Partnership primarily due to the young age of the
Partnership's container fleet. However, as the container fleet ages, the
Partnership may incur losses and/or write downs on the sale of its older
containers located in low demand locations if existing market conditions
continue. Additionally, should the decline in economic value of continuing to
own such containers turn out to be permanent, the Partnership may be required to
increase its depreciation rate or write-down the value for some or all it its
container rental equipment.
Although average utilization during the year ended December 31, 1999 was lower
than the comparable period in 1998 for the reasons discussed above, utilization
has been steadily improving during the second half of 1999 and has remained
stable into the beginning of 2000. This improvement in utilization was due to
slight improvements in demand for leased containers and the trade imbalance
primarily as a result of the improvement in certain Asian economies and a
related increase in exports out of Europe. Although the General Partners do not
foresee material changes in existing market conditions for the near term, they
are cautiously optimistic that the current level of utilization might be
maintained during 2000. However, the General Partners caution that utilization,
lease rates and container sale prices could also 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 containers under short-term operating leases.
One lessee accounted for 12%, 12% and 13% of the total revenue of the
Partnership for the years ended December 31, 1999, 1998 and 1997, respectively.
No other single lessee had 10% or more of the total revenue of the Registrant.
Because of the Partnership's insurance and because the Partnership would likely
be able, over a period of time, to re-lease or sell any containers that were
returned to the Partnership, the General Partners believe that the loss of this
lessee would not have a material adverse impact on the Partnership's operating
results. Because these are forward looking statements, there can be no assurance
that events will occur as the General Partners have predicted. These statements
could be affected by material adverse events in the future, such as the
Partnership's loss of insurance or the Partnership's inability to re-lease or
sell containers that are returned to the Partnership by the lessees.
The balance of other rental income consists of other lease-related items,
primarily income from charges to lessees for dropping off containers in surplus
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income from charges to lessees for handling related
to leasing and returning containers (handling income) and income from charges to
lessees for a Damage Protection Plan (DPP). For the year ended December 31,
1999, the total of these other rental income items was $610, a decrease of $100
from the year ended December 31, 1998. This decrease was primarily due to a
decrease in location income of $112, which decreased primarily due to a decrease
in charges to lessees for dropping off containers in certain locations. This
decrease was in the lessees' favor and was driven by the market conditions
discussed above.
For the year ended December 31, 1998, the total of these other rental income
items was $710, an increase of $280 from the year ended December 31, 1997. This
increase was primarily due to increases in location and DPP income of $314 and
$44, respectively, offset by a decrease in handling income of $76. Location
income increased due to a decrease in credits given to lessees for picking up
containers from certain locations. DPP income increased primarily due to an
increase in the number of containers carrying DPP, offset by a decrease in the
average DPP price charged per container. Handling income decreased primarily due
to decreases in container movement and the average handling price charged per
container.
Direct container expenses increased $74, or 5%, from the year ended December 31,
1998 to the year ended December 31, 1999, primarily due to an increase in
storage expense of $134, partially offset by a decrease in repositioning expense
of $50. Storage expense increased primarily due to the decrease in utilization.
Repositioning expense decreased primarily due to lower average repositioning
costs per container.
Direct container expenses increased $429, or 38%, from the year ended December
31, 1997 to the year ended December 31, 1998, primarily due to increases in
repositioning and storage expenses of $368 and $64, respectively. Repositioning
expense increased due to an increase in the number of containers repositioned
and a higher average repositioning cost per container. Storage expense increased
due to the increase in average fleet size, the decrease in utilization and an
increase in the average storage cost per container.
Bad debt expense (benefit) was $61, ($15) and $60 for the years ended December
31, 1999, 1998 and 1997, respectively. The resolution of payment issues with one
lessee and lower reserve requirements during 1998 were primarily responsible for
the benefit recorded in 1998 and, therefore, the fluctuation in bad debt expense
(benefit) between the periods.
Depreciation expense decreased $12, or 1%, from the year ended December 31, 1998
to the same period in 1999 due to the decrease in average fleet size. The
increase in depreciation expense of $78, or 4%, from the year ended December 31,
1997 the comparable period in 1998 was primarily due to the increase in the
average fleet size due to the build-up of the container fleet.
New container prices have been declining since 1995, and the cost of purchasing
new containers at year-end 1998 and during 1999, was significantly less than the
cost of containers purchased in prior years. The Partnership has evaluated the
recoverability of the recorded amount of container rental equipment and
determined that a reduction to the carrying value of the containers was not
required during the years ended December 31, 1999, 1998 and 1997. The
Partnership will continue to evaluate the recoverability of recorded amounts
of container rental equipment and cautions that a write-down of container
rental equipment and/or an increase in its depreciation rate may be required in
future periods for some or all of its container rental equipment.
Management fees to affiliates decreased $96, or 16% from the year ended December
31, 1998 to the equivalent period in 1999 due to decreases in equipment
management fees and incentive management fees. Equipment management fees, which
are based on rental income, decreased due to the decrease in rental income and
were approximately 7% of rental income for the years ended December 31, 1999 and
1998. Incentive management fees, which are based on the Partnership's limited
and general partner distribution percentage and partners' capital, decreased due
to decreases in the limited partner distribution percentage from 9% to 8% of
partners' capital in July 1998 and from 8% to 6% of partners' capital in March
1999.
Management fees to affiliates increased $29, or 5%, from the year ended December
31, 1997 to the equivalent period in 1998, due to an increase in equipment
management fees, offset by a decrease in incentive management fees. Equipment
management fees increased due to the increase in rental income and were 7% of
rental income for both periods. Incentive management fees decreased due to the
decreases in the limited partner distribution percentage from 10% to 9% of
partners' capital in April 1997 and from 9% to 8% of partners' capital in July
1998, offset by the increase in total partners' capital.
General and administrative costs to affiliates decreased $62, or 18% from the
year ended December 31, 1998 to the equivalent period in 1999. The decrease was
primarily due to a decrease in the allocation of overhead costs from TEM, as the
Partnership represented a smaller portion of the total fleet managed by TEM.
General and administrative costs to affiliates decreased $20, or 6% from the
year ended December 31, 1997 to 1998, primarily due to decreases in the
allocation of overhead costs from TEM and TCC.
Other income was $50 for the year ended December 31, 1999 compared to $21 for
the comparable period in 1998. The increase was due to an increase in gain on
sale of containers of $24 and an increase in interest income of $5.
Other income provided $21 of additional income for the year ended December 31,
1998, an increase of $38, from the same period in 1997. The increase was due to
a decrease in interest expense, net of $110, offset by a decrease in gain on
sale of containers of $72. The decrease in interest expense, net, was primarily
due to the Partnership paying the credit facility in full on March 31, 1997.
Net earnings per limited partnership unit decreased from $0.37 to $0.34, and
from $0.84 to $0.37 from the years ended December 31, 1998 to 1999 and December
31, 1997 to 1998, respectively. These decreases reflect the decreases in net
earnings allocated to limited partners from $686 to $623 from the year ended
December 31, 1998 to 1999 and from $1,492 to $686 from December 31, 1997 to
1998. The allocation of net earnings for the years ended December 31, 1999 and
1998 included a special allocation of gross income of $180 and $868,
respectively, to the General Partners in accordance with the Partnership
Agreement.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines, which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the containers. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep its containers under lease, rather than the geographic location
of the containers or the domicile of the lessees. The containers are generally
operated on the international high seas rather than on domestic waterways. The
containers are subject to the risk of war or other political, economic or social
occurrence where the containers are used, which may result in the loss of
containers, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of December 31, 1999, which would result in such a
risk materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the containers, and the effect of world trade, industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented, for additional information on
risks of the Partnership's business.
Effect of Date Crossing to Year 2000
There has been no material effect on the Partnership's financial condition and
results of operations as a result of problems arising from computer systems'
abilities to process dates beyond January 1, 2000. The General Partners do not
currently expect any such problems to arise within their own computer systems.
The likelihood that a failure in a third party's system would occur and have a
significant adverse effect on the Partnership's operations seems increasingly
remote, but no assurance can be given that, due to unforeseen circumstances,
such an event could not occur. Therefore, the Partnership's contingency plan
remains in place; that is, the General Partners continue to remain capable of
switching temporarily to manual operations in the event of a computer system's
failure. There can be no assurance, however, that switching to manual operations
would prevent all adverse effects of any future year 2000 problem.
Forward Looking Statements
The foregoing includes forward-looking statements and predictions about possible
or future events, results of operations and financial condition. These
statements and predictions may prove to be inaccurate, because of the
assumptions made by the Partnership or the General Partners or the actual
development of future events. No assurance can be given that any of these
forward-looking statements or predictions will ultimately prove to be correct or
even substantially correct. The risks and uncertainties in these forward-looking
statements include, but are not limited to, changes in demand for leased
containers, changes in global business conditions and their effect on world
trade, future modifications in the way in which the Partnership's lessees
conduct their business or of the profitability of their business, increases or
decreases in new container prices or the availability of financing therefor,
alterations in the costs of maintaining and repairing used containers, increases
in competition, changes in the Partnership's ability to maintain insurance for
its containers and its operations, the effects of political conditions on
worldwide shipping and demand for global trade or of other general business and
economic cycles on the Partnership, as well as other risks detailed herein and
from time to time in the Partnership's filings with the Securities and Exchange
Commission. The Partnership does not undertake any obligation to update
forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached pages 13 to 24.
Independent Auditors' Report
The Partners
Textainer Equipment Income Fund VI, L.P.:
We have audited the accompanying balance sheets of Textainer Equipment Income
Fund VI, L.P. (a California limited partnership) as of December 31, 1999 and
1998 and the related statements of earnings, partners' capital and cash flows
for each of the years in the three-year period ended December 31, 1999. 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
VI, L.P. as of December 31, 1999 and 1998 and the results of its operations, its
partners' capital and its cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
San Francisco, California
February 18, 2000
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Balance Sheets
December 31, 1999 and 1998
(Amounts in thousands)
- -----------------------------------------------------------------------------------------------------------
1999 1998
---------------- ----------------
Assets
Container rental equipment, net of accumulated
depreciation of $7,793 (1998: $5,872) $ 25,174 $ 27,435
Cash 729 274
Accounts receivable, net of allowance
for doubtful accounts of $122 (1998: $70) 1,254 1,188
Due from affiliates, net (note 2) 278 221
Prepaid expenses 5 8
--------------- ---------------
$ 27,440 $ 29,126
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 143 $ 176
Accrued liabilities 203 117
Accrued recovery costs (note 1(i)) 78 60
Accrued damage protection plan costs (note 1(j)) 159 124
Deferred quarterly distributions (note 1(g)) 30 42
--------------- ---------------
Total liabilities 613 519
--------------- ---------------
Partners' capital:
General partners - -
Limited partners 26,827 28,607
--------------- ---------------
Total partners' capital 26,827 28,607
--------------- ---------------
$ 27,440 $ 29,126
=============== ===============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Earnings
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
Rental income $ 5,413 $ 6,258 $ 5,798
---------------- ---------------- ----------------
Costs and expenses:
Direct container expenses 1,620 1,546 1,117
Bad debt expense (benefit) 61 (15) 60
Depreciation 1,987 1,999 1,921
Professional fees 90 43 41
Management fees to affiliates (note 2) 487 583 554
General and administrative costs to affiliates (note 2) 281 343 363
Other general and administrative costs 50 63 76
---------------- ---------------- ----------------
4,576 4,562 4,132
---------------- ---------------- ----------------
Income from operations 837 1,696 1,666
---------------- ---------------- ----------------
Other income (expense):
Interest income (expense), net 24 19 (91)
Gain on sale of containers 26 2 74
---------------- ---------------- ----------------
50 21 (17)
---------------- ---------------- ----------------
Net earnings $ 887 $ 1,717 $ 1,649
================ ================ ================
Allocation of net earnings (note 1(g)):
General partners $ 264 $ 1,031 $ 157
Limited partners 623 686 1,492
---------------- ---------------- ----------------
$ 887 $ 1,717 $ 1,649
================ ================ ================
Limited partners' per unit share of
net earnings $ 0.34 $ 0.37 $ 0.84
================ ================ ================
Limited partners' per unit share
of distributions $ 1.30 $ 1.72 $ 1.74
================ ================ ================
Weighted average number of limited
partnership units outstanding (note 1(k)) 1,848,397 1,848,397 1,784,694
================ ================ ================
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- --------------------------------------------------------------------------------------------------------------------------
Partners' Capital
----------------------------------------------------------
General Limited Total
--------------- --------------- --------------
Balances at December 31, 1996 $ (499) $ 21,930 $ 21,431
Proceeds from sale of limited partnership units - 11,835 11,835
Syndication and offering costs - (1,065) (1,065)
Distributions (340) (3,098) (3,438)
Net earnings 157 1,492 1,649
-------------- -------------- -------------
Balances at December 31, 1997 (682) 31,094 30,412
-------------- -------------- -------------
Distributions (349) (3,173) (3,522)
Net earnings 1,031 686 1,717
-------------- -------------- -------------
Balances at December 31, 1998 - 28,607 28,607
-------------- -------------- -------------
Distributions (264) (2,403) (2,667)
Net earnings 264 623 887
-------------- -------------- -------------
Balances at December 31, 1999 $ - $ 26,827 $ 26,827
============== ============== =============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------
1999 1998 1997
------------- -------------- -------------
Cash flows from operating activities:
Net earnings $ 887 $ 1,717 $ 1,649
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 1,987 1,999 1,921
Increase (decrease) in allowance for doubtful accounts 52 (27) 59
Gain on sale of containers (26) (2) (74)
(Increase) decrease in assets:
Accounts receivable (35) 238 (562)
Due from affiliates, net (71) (321) 95
Prepaid expenses 3 48 (17)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 53 82 72
Accrued recovery costs 18 26 16
Accrued damage protection plan costs 35 45 2
------------ ------------- -------------
Net cash provided by operating activities 2,903 3,805 3,161
------------ ------------- -------------
Cash flows from investing activities:
Proceeds from sale of containers 237 131 210
Container purchases - (141) (4,131)
Cash collateral deposit - - 991
------------ ------------- -------------
Net cash provided by (used in) investing activities 237 (10) (2,930)
------------ ------------- -------------
Cash flows from financing activities:
Proceeds from sales of limited partnership units - - 11,972
Distributions to partners (2,685) (3,603) (3,327)
Syndication and offering costs - - (1,065)
Repayments under revolving credit line - - (8,780)
(Repayments to) borrowings from affiliates - (29) 29
------------ ------------- -------------
Net cash used in financing activities (2,685) (3,632) (1,171)
------------ ------------- -------------
Net increase (decrease) in cash 455 163 (940)
Cash at beginning of period 274 111 1,051
------------ ------------- -------------
Cash at end of period $ 729 $ 274 $ 111
============ ============= =============
Interest paid during the period $ - $ 1 $ 131
============ ============= =============
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Statements of Cash Flows--Continued
Years ended December 31, 1999, 1998 and 1997
(Amounts in thousands)
- -------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners, proceeds from sale of limited partnership units and proceeds from
sale of containers which had not been paid or received by the Partnership as of
December 31, 1999, 1998, 1997 and 1996, resulting in differences in amounts
recorded and amounts of cash disbursed or received by the Partnership, as shown
in the Statements of Cash Flows.
1999 1998 1997 1996
---------- --------- ---------- ----------
Container purchases included in:
Due to affiliates........................................ $ - $ - $ 1 $ 2
Container purchases payable.............................. - - - 24
Distributions to partners included in:
Due to affiliates........................................ 20 26 91 16
Deferred quarterly distributions......................... 30 42 58 22
Proceeds from sale of limited partnership units included in:
Accounts receivable...................................... - - - 137
Proceeds from sale of containers included in:
Due from affiliates...................................... 21 41 13 1
The following table summarizes the amounts of container purchases, distributions
to partners, proceeds from sale of limited partnership units and proceeds from
sale of containers recorded by the Partnership and the amounts paid or received
as shown in the Statements of Cash Flows for the years ended December 31, 1999,
1998, and 1997.
1999 1998 1997
---- ---- ----
Container purchases recorded.............................................. $ - $ 140 $ 4,106
Container purchases paid.................................................. - 141 4,131
Distributions to partners declared........................................ 2,667 3,522 3,438
Distributions to partners paid............................................ 2,685 3,603 3,327
Proceeds from sale of limited partnership units recorded................. - - 11,835
Proceeds from sale of limited partnership units received................. - - 11,972
Proceeds from sale of containers recorded................................. 217 159 222
Proceeds from sale of containers received................................. 237 131 210
The Partnership has entered into direct finance leases, resulting in the
transfer of containers from container rental equipment to accounts receivable.
The carrying values of containers transferred during the year ended December 31,
1999 were $83. The Partnership did not enter into direct finance leases in the
years ended December 31, 1998 and 1997.
See accompanying notes to financial statements
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
(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 VI, L.P. (TEIF VI or the Partnership), a
California limited partnership, with a maximum life of 21 years, was
formed on February 1, 1995. The Partnership was formed to engage in the
business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, trailers and other container
related equipment. TEIF VI offered units representing limited partnership
interests (Units) to the public from May 10, 1996 until April 30, 1997,
the close of the offering period, when a total of 1,848,397 Units had been
purchased for a total of $36,968.
Textainer Capital Corporation (TCC) is the managing general partner of the
Partnership. Textainer Equipment Management Limited (TEM) and Textainer
Limited (TL) are the associate general partners of the Partnership. The
managing general partner and associate general partners are collectively
referred to as the General Partners. The General Partners also act in this
capacity for other limited partnerships. Prior to its liquidation in
October 1998, Textainer Acquisition Services Limited (TAS), a former
affiliate of the General Partners, performed services related to the
acquisition of containers outside the United States on behalf of the
Partnership. Effective November 1998, these services are being performed
by TEM. 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. TSC was closed and
liquidated in December 1998. TCC, TEM and TL are subsidiaries of Textainer
Group Holdings Limited (TGH). The General Partners manage and control the
affairs of the Partnership.
The General Partners' interest in the Partnership is 9.5%, and the General
Partners were responsible for paying, out of their own corporate funds,
all organizational and certain offering expenses incurred in connection
with the offering and all acquisition costs incurred related to container
purchases. Such costs have not been recorded by the Partnership.
(b) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned according to the terms of the container rental
contracts. These contracts are classified as operating leases or direct
finance leases if they so qualify under Statement of Financial Accounting
Standards No. 13: "Accounting for Leases". Substantially all of the
Partnership's rental income was generated from the leasing of the
Partnership's containers under short-term operating leases.
(c) Use of Estimates
Certain estimates and assumptions were made by the Partnership's
management that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(d) Fair Value of Financial Instruments
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the Partnership
calculates the fair value of financial instruments and includes this
additional information in the notes to the financial statements when the
fair value is different than the book value of those financial
instruments. At December 31, 1999 and 1998, the fair value of the
Partnership's financial instruments approximates the related book value of
such instruments.
(e) Container Rental Equipment
Container rental equipment is recorded at the cost of the assets
purchased, less depreciation charged. Depreciation of new containers is
computed using the straight-line method over an estimated useful life of
12 years to a 28% salvage value. Used containers are depreciated based
upon their estimated remaining useful life at the date of acquisition
(from 2 to 11 years). When assets are retired or otherwise disposed of,
the cost and related accumulated depreciation are removed from the
equipment accounts and any resulting gain or loss is recognized in income
for the period.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" (SFAS 121), the Partnership periodically compares the
carrying value of its containers to expected future cash flows for the
purpose of assessing the recoverability of the recorded amounts. If the
carrying value exceeds expected future cash flows, the assets are written
down to estimated fair value. In addition, containers identified for
disposal are recorded at the lower of carrying amount or fair value less
cost to sell.
New container prices have been declining since 1995, and the cost of
purchasing new containers at year-end 1998 and during 1999, was
significantly less than the cost of containers purchased in prior years.
The Partnership has evaluated the recoverability of the recorded amount of
container rental equipment and determined that a reduction to the carrying
value of the containers was not required during the years ended December
31, 1999, 1998 and 1997. The Partnership will continue to evaluate the
recoverability of recorded amounts of container rental equipment and
cautions that a write-down of container rental equipment and/or an
increase in its depreciation rate may be required in future periods for
some or all of its container rental equipment.
(f) Nature of Income from Operations
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this
income is denominated in United States dollars. The Partnership's
customers are international shipping lines that transport goods on
international trade routes. The domicile of the lessee is not indicative
of where the lessee is transporting the containers. The Partnership's
business risk in its foreign operations lies with the creditworthiness of
the lessees rather than the geographic location of the containers or the
domicile of the lessees.
For the years ended December 31, 1999, 1998 and 1997, revenue from one
lessee accounted for more than 10% of the Partnership's revenues, with
revenues of 12%, 12% and 13%, respectively. No other single lessee
accounted for more than 10% of the Partnership's revenues during 1999,
1998 and 1997.
(g) Allocation of Net Earnings and Partnership Distributions
In accordance with the Partnership Agreement, sections 3.08 through 3.12,
net earnings or losses and distributions are generally allocated 9.5% to
the General Partners and 90.5% to the Limited Partners. If the allocation
of distributions exceeds the allocation of net earnings and creates a
deficit in a General Partner's capital account, the Partnership Agreement
provides for a special allocation of gross income equal to the amount of
the deficit, beginning in the year following the close of the offering
period. During the year ended December 31, 1998, the first special
allocation of gross income of $868 was made to the General Partners.
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 deferred distributions of $30 and $42, at
December 31, 1999 and 1998, respectively.
(h) Income Taxes
The Partnership is not subject to income taxes. Accordingly, no provision
for income taxes has been made. The Partnership files federal and state
information returns only. Taxable income or loss is reportable by the
individual partners.
(i) Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess of
estimated insurance proceeds. At December 31, 1999 and 1998, the amounts
accrued were $78 and $60, respectively.
(j) Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
containers. Under the terms of DPP, the Partnership earns additional
revenues on a daily basis and, in return, has agreed to bear certain
repair costs. It is the Partnership's policy to recognize these revenues
when earned and provide a reserve sufficient to cover the Partnership's
obligation for estimated future repair costs. DPP expenses are included in
direct container expenses on the Statements of Earnings and the related
reserve at December 31, 1999 and 1998 is $159 and $124, respectively.
(k) 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, 1999, 1998 and 1997, which were
1,848,397, 1,848,397 and 1,784,694, respectively.
(l) Reclassifications
Certain reclassifications, not affecting net earnings, have been made to
prior year amounts in order to conform with the 1999 financial statement
presentation.
Note 2. Transactions with Affiliates
During the offering period, the Partnership paid a managing sales agent
fee to TSC of up to 9% of the gross proceeds from the sale of limited
partnership units, from which TSC paid commissions to independent
participating broker/dealers who participated in the offering. The amounts
of the managing sales agent fee and the broker/dealers' commissions were
determined by the volume of Units sold to each investor by the
broker/dealers. These fees and commissions, which totaled $1,065 during
1997 were deducted as syndication and offering costs in the determination
of the net limited partners contribution. The General Partners or TSC have
paid, out of their own corporate funds, all other organization, offering
and Unit sales costs incurred by the General Partners or TSC.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an equipment management fee, an incentive management
fee and an equipment liquidation fee. These fees are for various services
provided in connection with the administration and management of the
Partnership. The Partnership incurred $108, $146 and $148 of incentive
management fees during each of the three years ended December 31, 1999,
1998 and 1997, respectively. No equipment liquidation fees were incurred
during these periods.
The Partnership's containers are managed by TEM. In its role as manager,
TEM has authority to acquire, hold, manage, lease, sell and dispose of the
containers. TEM holds, for the payment of direct operating expenses, a
reserve of cash that has been collected from leasing operations; such cash
is included in due from affiliates, net, at December 31, 1999 and 1998.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross lease revenues attributable to operating leases
and 2% of gross lease revenues attributable to full payout net leases. For
the years ended December 31, 1999, 1998 and 1997, these fees totaled $379,
$437 and $406, respectively. The Partnership's containers are leased by
TEM to third party lessees on operating master leases, spot leases, full
payout net leases and term leases. The majority of the Partnership's
leases are operating leases with limited terms and no purchase option.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are incurred and paid by TEM and TCC. Total general and
administrative costs allocated to the Partnership were as follows:
1999 1998 1997
---- ---- ----
Salaries $ 156 $ 186 $ 197
Other 125 157 166
--- --- ---
Total general and
administrative costs $ 281 $ 343 $ 363
=== === ===
TEM allocates these general and administrative costs based on the ratio of
the Partnership's interest in the managed containers to the total
container fleet managed by TEM during the period. TCC allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TCC. The General
Partners allocated the following general and administrative costs to the
Partnership:
1999 1998 1997
---- ---- ----
TEM $ 251 $ 311 $ 321
TCC 30 32 42
--- --- ---
Total general and
administrative costs $ 281 $ 343 $ 363
=== === ===
The General Partners may acquire containers in their own name and hold
title on a temporary basis for the purpose of facilitating the acquisition
of such containers for the Partnership. The containers may then be resold
to the Partnership on an all-cash basis at a price equal to the actual
cost, as defined in the Partnership Agreement.
At December 31, 1999 and 1998, amounts due from affiliates, net, is
comprised of:
1999 1998
---- ----
Due from affiliates:
Due from TEM................................ $303 $251
--- ---
Due to affiliates:
Due to TL................................... 20 26
Due to TCC.................................. 5 4
--- ---
25 30
--- ---
Due from affiliates, net $278 $221
=== ===
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and payment of expenses
and fees described above and in the accrual and remittance of net rental
revenues from TEM.
It is the policy of the Partnership and the General Partners to charge
interest on amounts due to the General Partners which are outstanding for
more than one month, to the extent such balances relate to loans for
container purchases. Interest is charged at a rate not greater than the
General Partners' or affiliates' own cost of funds. The Partnership
incurred $1 of interest expense on amounts due to the General Partners for
the year ended December 31, 1998. There was no interest expense incurred
on amounts due to the General Partners for the years ended December 31,
1999 or 1997.
Note 3. Rentals under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at December 31, 1999. Although the leases are
generally cancelable at the end of each twelve-month period with a
penalty, the following schedule assumes that the leases will not be
terminated.
Year ending December 31,
2000................................................... $ 757
2001................................................... 91
2002................................................... 79
2003................................................... 22
---
Total minimum future rentals receivable................ $ 949
===
Note 4. Note Payable
The Partnership had a short-term revolving credit facility (the Facility)
with an available limit of $25,000, which expired June 30, 1997, which was
used for container purchases. Balances borrowed under the credit facility
bore interest at either the Prime Rate plus .25%, or LIBOR plus 1.75%, and
were secured by all assets of the Partnership. The Partnership paid a
commitment fee of 1/2% per annum on the unused portion of the Facility.
This fee, as well as the interest on any amounts borrowed, was payable
quarterly in arrears. The Facility was repaid in full on March 31, 1997
and the restricted cash collateral deposit of $991 was returned to the
Partnership.
Note 5. Income Taxes
During the years ended December 31, 1999, 1998 and 1997, there were
temporary differences of $13,868, $10,546 and $7,058, 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, 1999, 1998 and 1997, is as follows:
1999 1998 1997
---- ---- ----
Net income per financial statements.......................... $ 887 $ 1,717 $ 1,649
Increase (decrease) in provision for bad debt................ 52 (27) 59
Depreciation for federal income tax purposes in excess
of depreciation for financial statement purposes.......... (3,536) (3,556) (3,308)
Gain on sale of fixed assets for federal income tax
purposes in excess of gain recognized for
financial statement purposes.............................. 127 50 25
Increase in damage protection plan reserve................... 35 45 2
------ ------- -------
Net loss for federal income tax purposes..................... $ (2,435) $ (1,771) $ (1,573)
======= ======= =======
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 general partners are TCC,
TEM and TL. TCC is the Managing General Partner of the Partnership and TEM and
TL are Associate General Partners. The Managing General Partner and Associate
General Partners are collectively referred to as the General Partners. TCC, TEM
and TL are wholly-owned or substantially-owned subsidiaries of Textainer Group
Holdings Limited (TGH). The General Partners act in this capacity for other
limited partnerships. Prior to its liquidation in October 1998, Textainer
Acquisition Services Limited (TAS) was an affiliate of the General Partners and
performed services related to the acquisition of equipment outside the United
States on behalf of the Partnership. Effective November 1998, these services are
performed by TEM. 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. TSC was closed and liquidated in
December 1998.
TCC, 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, 1999, all Section 16(a) filing requirements were complied
with. No member of management or beneficial owner owned more than 10 percent of
any interest in the Partnership. None of the individuals subject to Section
16(a) failed to file or filed late any reports of transactions in the Units.
The directors and executive officers of the General Partners are as follows:
Name Age Position
Neil I. Jowell 66 Director and Chairman of TGH, TEM, TL, TCC and TFS
John A. Maccarone 55 President, CEO and Director of TGH, TEM, TL, TCC and TFS
James E. Hoelter 60 Director of TGH, TEM, TL, TCC and TFS
Alex M. Brown 61 Director of TGH, TEM, TL, TCC and TFS
Harold J. Samson 78 Director of TGH and TL
Philip K. Brewer 43 Senior Vice President - Asset Management Group
Robert D. Pedersen 41 Senior Vice President - Leasing Group, Director of TEM
Ernest J. Furtado 44 Senior Vice President , CFO and Secretary of TGH, TEM, TL, TCC and TFS,
Director of TCC and TFS
Wolfgang Geyer 46 Regional Vice President - Europe
Mak Wing Sing 42 Regional Vice President - South Asia
Masanori Sagara 44 Regional Vice President - North Asia
John. A. Lore 46 Regional Vice President - Americas
Stefan Mackula 47 Vice President - Equipment Resale
Anthony C. Sowry 47 Vice President - Corporate Operations and Acquisitions
Richard G. Murphy 47 Vice President - Risk Management
Janet S. Ruggero 51 Vice President - Administration and Marketing Services
Jens W. Palludan 49 Regional Vice President - Logistics Division
Isam K. Kabbani 65 Director of TGH and TL
James A. C. Owens 60 Director of TGH and TL
S. Arthur Morris 66 Director of TGH, TEM and TL
Dudley R. Cottingham 48 Assistant Secretary, Vice President and Director of TGH, TEM and TL
Nadine Forsman 32 Controller of TCC and TFS
Neil I. Jowell is Director and Chairman of TGH, TEM, TL, TCC and TFS
and a member of the Investment Advisory Committee (see "Committees" below). He
has served on the Board of Trencor Ltd. since 1966 and as Chairman since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an affiliate
of Trencor, and a non-executive director of Forward Corporation Ltd. (1993 to
present). Trencor is a publicly traded diversified industrial group listed on
the Johannesburg Stock Exchange. Its business is the leasing, owning, managing
and financing of marine cargo containers worldwide and the manufacture and
export of containers for international markets. In South Africa, it is engaged
in manufacturing, trading and exports of general commodities. Trencor also has
an interest in Forward Corporation Ltd., a publicly traded holding company
listed on the Johannesburg Stock Exchange. It has interests in industrial and
consumer businesses operating in South Africa and abroad. Mr. Jowell became
affiliated with the General Partners and its affiliates when Trencor became,
through its beneficial ownership in two controlled companies, a major
shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience in the transportation industry. He holds an M.B.A. degree from
Columbia University and Bachelor of Commerce and L.L.B. degrees from the
University of Cape Town.
John A. Maccarone is President, CEO and Director of TGH, TEM, TL, TCC
and TFS. In this capacity he is responsible for overseeing the management of and
coordinating the activities of Textainer's worldwide fleet of marine cargo
containers and the activities of TCC and TFS. Additionally, he is Chairman of
the Equipment Investment Committee, the Credit Committee and the Investment
Advisory Committee (see "Committees", below). Mr. Maccarone was instrumental in
co-founding Intermodal Equipment Associates (IEA), a marine container leasing
company based in San Francisco, and held a variety of executive positions with
IEA from 1979 until 1987, when he joined the Textainer Group. Mr. Maccarone was
previously a Director of Marketing for Trans Ocean Leasing Corporation in Hong
Kong with responsibility for all leasing activities in Southeast Asia. From 1969
to 1977, Mr. Maccarone was a marketing representative for IBM Corporation. He
holds a Bachelor of Science degree in Engineering Management from Boston
University and an M.B.A. from Loyola University of Chicago.
James E. Hoelter is a director of TGH, TEM, TL, TCC and TFS. In
addition, Mr. Hoelter is a member of the Equipment Investment Committee and
the Investment Advisory Committee (see "Committees", below). Mr. Hoelter was
the President and Chief Executive Officer of TGH and TL from 1993 to 1998
and currently serves as a consultant to Trencor (1999 to present). Prior to
joining the Textainer Group in 1987, Mr. Hoelter was president of IEA. Mr.
Hoelter co-founded IEA in 1978 with Mr. Maccarone and was president from
inception until 1987. From 1976 to 1978, Mr. Hoelter was vice president
for Trans Ocean Ltd., San Francisco, a marine container leasing company,
where he was responsible for North America. From 1971 to 1976, he worked for
Itel Corporation, San Francisco, where he was director of financial leasing
for the container division. Mr. Hoelter received his B.B.A. in finance from
the University of Wisconsin, where he is an emeritus member of its Business
School's Dean's Advisory Board, and his M.B.A. from the Harvard Graduate School
of Business Administration.
Alex M. Brown is a director of TGH, TEM, TL, TCC and TFS.
Additionally, he is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Among other
directorships, Mr. Brown is a director of Trencor Ltd. (1996 to present) and
Forward Corporation (1997 to present). Both companies are publicly traded
and listed on the Johannesburg Stock Exchange. Mr. Brown became affiliated
with the Textainer Group in April 1986. From 1987 until 1993, he was
President and Chief Executive Officer of Textainer, Inc. and the Chairman of
the Textainer Group. Mr. Brown was the managing director of Cross County
Leasing in England from 1984 until it was acquired by Textainer in 1986. From
1993 to 1997, Mr. Brown was Chief Executive Officer of AAF, a company
affiliated with Trencor Ltd. Mr. Brown was also Chairman of WACO
International Corporation, based in Cleveland, Ohio until 1997.
Harold J. Samson is a director of TGH and TL and is a member of the
Investment Advisory Committee (see "Committees", below). Mr. Samson served
as a consultant to various securities firms from 1981 to 1989. From 1974 to
1981 he was Executive Vice President of Foster & Marshall, Inc., a New York
Stock Exchange member firm based in Seattle. Mr. Samson was a director of
IEA from 1979 to 1981. From 1957 to 1984 he served as Chief Financial Officer
in several New York Stock Exchange member firms. Mr. Samson holds a B.S.
in Business Administration from the University of California, Berkeley and is a
California Certified Public Accountant.
Philip K. Brewer was President of TCC and TFS from January 1, 1998 to
December 31, 1998 until his appointment as Senior Vice President - Asset
Management Group. As President of TCC, Mr. Brewer was responsible for overseeing
the management of, and coordinating the activities of TCC and TFS. As Senior
Vice President, he is responsible for optimizing the capital structure of and
identifying new sources of finance for Textainer, as well as overseeing the
management of and coordinating the activities of Textainer's risk management,
logistics and the resale divisions. Mr. Brewer is a member of the Equipment
Investment Committee, the Credit Committee and was a member of the Investment
Advisory Committee through December 31, 1998 (see "Committees" below). Prior to
joining Textainer in 1996, as Senior Vice President - Capital Markets for TGH
and TL, Mr. Brewer worked at Bankers Trust from 1990 to 1996, starting as a Vice
President in Corporate Finance and ending as Managing Director and Country
Manager for Indonesia; from 1989 to 1990, he was Vice President in Corporate
Finance at Jarding Fleming; from 1987 to 1989, he was Capital Markets Advisor to
the United States Agency for International Development; and from 1984 to 1987 he
was an Associate with Drexel Burnham Lambert in New York. Mr. Brewer holds an
M.B.A. in Finance from the Graduate School of Business at Columbia University,
and a B.A. in Economics and Political Science from Colgate University.
Robert D. Pedersen is Senior Vice-President - Leasing Group and a
Director of TEM, responsible for worldwide sales and marketing related
activities and operations. Mr. Pedersen is a member of the Equipment Investment
Committee and the Credit Committee (see "Committees" below). He joined Textainer
in 1991 as Regional Vice President for the Americas Region. Mr. Pedersen has
extensive experience in the industry having held a variety of positions with
Klinge Cool, a manufacturer of refrigerated container cooling units (from 1989
to 1991), where he was worldwide sales and marketing director, XTRA, a container
lessor (from 1985 to 1988) and Maersk Line, a container shipping line (from 1978
to 1984). Mr. Pedersen is a graduate of the A.P. Moller shipping and
transportation program and the Merkonom Business School in Copenhagen, majoring
in Company Organization.
Ernest J. Furtado is Senior Vice President, CFO and Secretary of TGH,
TEM, TL, TCC and TFS and a Director of TCC and TFS, in which capacity he is
responsible for all accounting, financial management, and reporting functions
for TGH, TEM, TL, TCC and TFS. Additionally, he is a member of the Investment
Advisory Committee for which he serves as Secretary, the Equipment Investment
Committee and the Credit Committee (see "Committees", below). Prior to these
positions, he held a number of accounting and financial management positions at
Textainer, of increasing responsibility. Prior to joining Textainer in May 1991,
Mr. Furtado was Controller for Itel Instant Space and manager of accounting for
Itel Containers International Corporation, both in San Francisco, from 1984 to
1991. Mr. Furtado's earlier business affiliations include serving as audit
manager for Wells Fargo Bank and as senior accountant with John F. Forbes & Co.,
both in San Francisco. He is a Certified Public Accountant and holds a B.S. in
business administration from the University of California at Berkeley and an
M.B.A. in information systems from Golden Gate University.
Wolfgang Geyer is based in Hamburg, Germany and is Regional Vice
President - Europe, responsible for coordinating all leasing activities in this
area of operation. Mr. Geyer joined Textainer in 1993 and was the Marketing
Director in Hamburg through July 1997. From 1991 to 1993, Mr. Geyer most
recently was the Senior Vice President for Clou Container Leasing, responsible
for its worldwide leasing activities. Mr. Geyer spent the remainder of his
leasing career, 1975 through 1991, with Itel Container, during which time he
held numerous positions in both operations and marketing within the company.
Mak Wing Sing is based in Singapore and is the Regional Vice President
- - South Asia, responsible for container leasing activities in North/Central
People's Republic of China, Hong Kong, South China (PRC), and Southeast Asia.
Mr. Mak most recently was the Regional Manager, Southeast Asia, for Trans Ocean
Leasing, working there from 1994 to 1996. From 1987 to 1994, Mr. Mak worked with
Tiphook as their Regional General Manager, and with OOCL from 1976 to 1987 in a
variety of positions, most recently as their Logistics Operations Manager.
Masanori Sagara is based in Yokohama, Japan and is the Regional Vice
President - North Asia, responsible for container leasing activities in Japan,
Korea, and Taiwan. Mr. Sagara joined Textainer in 1990 and was the company's
Marketing Director in Japan through 1996. From 1987 to 1990, he was the
Marketing Manager at IEA. Mr. Sagara's other experience in the container leasing
business includes marketing management at Genstar from 1984 to 1987 and various
container operations positions with Thoresen & Company from 1979 to 1984. Mr.
Sagara holds a Bachelor of Science degree in Economics from Aoyama Bakuin
University.
John A. Lore is based in Hackensack, New Jersey and is the Regional
Vice President - Americas, responsible for container leasing activities in
North/South America, Australia/New Zealand, Africa, the Middle East and Persian
Gulf. Prior to joining Textainer in 1999, Mr. Lore was the America's Vice
President for Xtra International Limited from 1996 to 1999 and Area Director
from 1990 to 1996. He has held various positions within the container leasing
industry since 1978. Mr. Lore holds a B.B.A. in Marketing Management from Baruch
College and an M.B.A. in Executive Management from St. John's University.
Stefan Mackula is Vice President - Equipment Resale, responsible for
coordinating the worldwide sale of equipment into secondary markets. Mr. Mackula
also served as Vice President - Marketing from 1989 to 1991 where he was
responsible for coordinating all leasing activities in Europe, Africa, and the
Middle East. Mr. Mackula joined Textainer in 1983 as Leasing Manager for the
United Kingdom. Prior to joining Textainer, Mr. Mackula held, beginning in 1972,
a variety of positions in the international container shipping industry.
Anthony C. Sowry is Vice President - Corporate Operations and
Acquisitions. He is also a member of the Equipment Investment Committee and the
Credit Committee (see "Committees", below). Mr. Sowry supervises all
international container operations and maintenance and technical functions for
the fleets under Textainer's management. In addition, he is responsible for the
acquisition of all new and used containers for the Textainer Group. He began his
affiliation with Textainer in 1982, when he served as Fleet Quality Control
Manager for Textainer Inc. until 1988. From 1980 to 1982, he was operations
manager for Trans Container Services in London; and from 1978 to 1982, he was a
technical representative for Trans Ocean Leasing, also in London. He received
his B.A. degree in business management from the London School of Business. Mr.
Sowry is a member of the Technical Committee of the International Institute of
Container Lessors and a certified container inspector.
Richard G. Murphy is Vice President, Risk Management, responsible for
all credit and risk management functions. He also supervises the administrative
aspects of equipment acquisitions. He is a member of and acts as secretary to
the Equipment Investment and Credit Committees (see "Committees", below). He
previously served as TEM's Director of Credit and Risk Management from 1989 to
1991 and as Controller from 1988 to 1989. Prior to the takeover of the
management of the Interocean Leasing Ltd. fleet by TEM in 1988, Mr. Murphy held
various positions in the accounting and financial areas with that company from
1980, acting as Chief Financial Officer from 1984 to 1988. Prior to 1980, he
held various positions with firms of public accountants in the U.K. Mr. Murphy
is an Associate of the Institute of Chartered Accountants in England and Wales
and holds a Bachelor of Commerce degree from the National University of Ireland.
Janet S. Ruggero is Vice President, Administration and Marketing
Services. Ms. Ruggero is responsible for the tracking and billing of fleets
under TEM management, including direct responsibility for ensuring that all data
is input in an accurate and timely fashion. She assists the marketing and
operations departments by providing statistical reports and analyses and serves
on the Credit Committee (see "Committees", below). Prior to joining Textainer in
1986, Ms. Ruggero held various positions with Gelco CTI over the course of 15
years, the last one as Director of Marketing and Administration for the North
American Regional office in New York City. She has a B.A. in education from
Cumberland College.
Jens W. Palludan is based in Hackensack, New Jersey and is the
Regional Vice President - Logistics Division, responsible for coordinating
container logistics. He joined Textainer in 1993 as Regional Vice President
- - Americas/Africa/Australia, responsible for coordinating all leasing
activities in North and South America, Africa and Australia/New Zealand. Mr.
Palludan spent his career from 1969 through 1992 with Maersk Line of Copenhagen,
Denmark in a variety of key management positions in both Denmark and overseas.
Mr. Palludan's most recent position at Maersk was that of General Manager,
Equipment and Terminals, where he was responsible for the entire managed fleet.
Mr. Palludan holds an M.B.A. from the Centre European D'Education
Permanente, Fontainebleau, France.
Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal stockholder of the IKK Group, Jeddah, Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and internationally. In
1959 Sheikh Isam Kabbani joined the Saudi Arabian Ministry of Foreign Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum Exporting Countries
(OPEC). After a period as Chief Economist of OPEC, in 1967 he became the Saudi
Arabian member of OPEC's Board of Governors. In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 18 years. Sheikh Kabbani holds
a B.A. degree from Swarthmore College, Pennsylvania, and an M.A. degree in
Economics and International Relations from Columbia University.
James A. C. Owens is a director of TGH and TL. Mr. Owens has been
associated with the Textainer Group since 1980. In 1983 he was appointed to
the Board of Textainer Inc., and served as President of Textainer Inc. from
1984 to 1987. From 1987 to 1998, Mr. Owens served as an alternate director
on the Boards of TI, TGH and TL. Apart from his association with the Textainer
Group, Mr. Owens has been involved in insurance and financial brokerage
companies and captive insurance companies. He is a member of a number of
Boards of Directors. Mr. Owens holds a Bachelor of Commerce degree from the
University of South Africa.
S. Arthur Morris is a director of TGH, TEM and TL. He is a founding
partner in the firm of Morris and Kempe, Chartered Accountants (1962-1977) and
currently functions as a correspondent member of a number of international
accounting firms through his firm Arthur Morris and Company (1977 to date). He
is also President and director of Continental Management Limited (1977 to date).
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Morris has over 30 years
experience in public accounting and serves on numerous business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr.
Morris became a director of TL and TGH in 1993, and TEM in 1994.
Dudley R. Cottingham is Assistant Secretary, Vice President and a
director of TGH, TEM and TL. He is a partner with Arthur Morris and Company
(1977 to date) and a Vice President and director of Continental Management
Limited (1978 to date), both in the Cayman Islands and Turks and Caicos Islands.
Continental Management Limited is a Bermuda corporation that provides corporate
representation, administration and management services and corporate and
individual trust administration services. Mr. Cottingham has over 20 years
experience in public accounting with responsibility for a variety of
international and local clients. Mr. Cottingham became a director of TL and TGH
in 1993, and TEM in 1994.
Nadine Forsman is the Controller of TCC and TFS. Additionally, she is a
member of the Investment Advisory Committee and Equipment Investment Committee
(See "Committees" below). As controller of TCC and TFS, she is responsible for
accounting, financial management and reporting functions for TCC and TFS as well
as overseeing all communications with the Limited Partners and as such,
supervises personnel in performing these functions. Prior to joining Textainer
in August 1996, Ms. Forsman was employed by KPMG LLP, holding various positions,
the most recent of which was manager, from 1990 to 1996. Ms. Forsman holds a
B.S. in Accounting and Finance from San Francisco State University and holds a
general securities license and a financial and operations principal securities
license.
Committees
The Managing General Partner has established the following three
committees to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of equipment for
the Partnership and for other programs organized by the Textainer Group:
Equipment Investment Committee. The Equipment Investment Committee
will review the equipment leasing operations 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 John A. Maccarone (Chairman), James E. Hoelter, Anthony C.
Sowry, Richard G. Murphy (Secretary), Alex M. Brown, Philip K. Brewer, Robert
D. Pedersen, Ernest J. Furtado and Nadine Forsman.
Credit Committee. The Credit Committee 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 John A. Maccarone
(Chairman), Richard G. Murphy (Secretary), Janet S. Ruggero, Anthony C.
Sowry, Philip K. Brewer, Ernest J. Furtado and Robert D. Pedersen.
Investment Advisory Committee. The Investment Advisory Committee
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 John A. Maccarone (Chairman), James E. Hoelter, Ernest J. Furtado
(Secretary), Nadine Forsman, Harold J. Samson, Alex M. Brown and Neil I. Jowell.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has no executive officers and does not reimburse TCC, TEM or TL
for the remuneration payable to their executive officers. For information
regarding reimbursements made by the Registrant to the General Partners, see
note 2 of the Financial Statements in Item 8.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
There is no person or "Group" who is known to the Registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership interest in the Registrant.
(b) Security Ownership of Management
As of January 1, 2000, no Units were owned by any executive officers or
directors.
(c) Changes in Control.
Inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others.
(Amounts in thousands)
At December 31, 1999 and 1998, amounts due from affiliates, net, is
comprised of:
1999 1998
---- ----
Due from affiliates:
Due from TEM....................... $303 $251
--- ---
Due to affiliates:
Due to TL.......................... 20 26
Due to TCC......................... 5 4
--- ---
25 30
--- ---
Due from affiliates, net $278 $221
=== ===
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and payment of expenses
and fees described above and in the accrual and remittance of net rental
revenues from TEM.
It is the policy of the Partnership and the General Partners to charge
interest on amounts due to the General Partners which are outstanding for
more than one month, to the extent such balances relate to loans for
container purchases. Interest is charged at a rate not greater than the
General Partners' or affiliates' own cost of funds. The Partnership
incurred $1 of interest expense on amounts due to the General Partners for
the year ended December 31, 1998. There was no interest expense incurred
on amounts due to the General Partners for the years ended December 31,
1999 or 1997.
In addition, the Registrant paid or will pay the following amounts to the
General Partners:
Management fees in connection with the operations of the Registrant:
1999 1998 1997
---- ---- ----
TEM.................. $ 487 $ 583 $ 554
=== === ===
Reimbursement for administrative costs in connection with the
operations of the Registrant:
1999 1998 1997
---- ---- ----
TEM.................. $ 251 $ 311 $ 321
TCC.................. 30 32 42
--- --- ---
Total................ $ 281 $ 343 $ 363
=== === ===
(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Management" and the "Compensation of the General Partners and
Affiliates" sections of the Registrant's Prospectus, as supplemented, and the
Notes to the Financial Statements in Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Audited financial statements of the Registrant for the year
ended December 31, 1999 are contained in Item 8 of this
Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary
Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference.
(i) The Registrant's Prospectus as contained in Pre-
Effective Amendment No. 4 to the Registrant's
Registration Statement (No. 33-99534), as filed
with the Commission on May 10, 1996, and supplemented
by Supplement No. 1, as filed with the Commission
under Rule 424(b) of the Securities Exchange Act of
1933 on March 24, 1997.
(ii) The Registrant's limited partnership agreement,
Exhibit A to the Prospectus.
(b) During the year ended 1999, no reports on Form 8-K have been filed by
the Registrant.
Independent Auditors' Report on Supplementary Schedule
The Partners
Textainer Equipment Income Fund VI, L.P.:
Under the date of February 18, 2000, we reported on the balance sheets of
Textainer Equipment Income Fund VI, L.P. (the Partnership) as of December 31,
1999 and 1998, and the related statements of earnings, partners' capital and
cash flows for each of the years in the three-year period ended December 31,
1999, which are included in the 1999 annual report on Form 10-K. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule as listed in Item 14. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG LLP
San Francisco, California
February 18, 2000
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Schedule II - Valuation and Qualifying Accounts
(Amounts in thousands)
- -----------------------------------------------------------------------------------------------------------------------------
Charged Balance
Balance at to Costs at End
Beginning and of
of Period Expenses Deduction Period
------------ ---------- --------- --------
For the year ended December 31, 1999:
Allowance for doubtful accounts $ 70 $ 61 $ (9) $ 122
------ ------ ------ -----
Recovery cost reserve $ 60 $ 53 $ (35) $ 78
------ ------ ------ -----
Damage protection plan reserve $ 124 $ 192 $ (157) $ 159
------ ------ ------ -----
For the year ended December 31, 1998:
Allowance for doubtful accounts $ 97 $ (15) $ (12) $ 70
------ ------ ------ -----
Recovery cost reserve $ 34 $ 79 $ (53) $ 60
------ ------ ------ -----
Damage protection plan reserve $ 79 $ 143 $ (98) $ 124
------ ------ ------ -----
For the year ended December 31, 1997:
Allowance for doubtful accounts $ 38 $ 60 $ (1) $ 97
------ ------ ------ -----
Recovery cost reserve $ 18 $ 77 $ (61) $ 34
------ ------ ------ -----
Damage protection plan reserve $ 77 $ 81 $ (79) $ 79
------ ------ ------ -----
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 VI, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By_____________________________
Ernest J. Furtado
Senior Vice President
Date: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
Signature Title Date
Senior Vice President, CFO March 28, 2000
____________________________ (Principal Financial and
Ernest J. Furtado Accounting Officer),
Secretary and Director
____________________________ President (Principal Executive March 28, 2000
John A. Maccarone Officer), and Director
___________________________ Chairman of the Board and Director March 28, 2000
Neil I. Jowell
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By /s/Ernest J. Furtado
__________________________________
Ernest J. Furtado
Senior Vice President
Date: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
Signature Title Date
/s/Ernest J. Furtado Senior Vice President, CFO March 28, 2000
___________________________ (Principal Financial and
Ernest J. Furtado Accounting Officer),
Secretary and Director
/s/John A. Maccarone President (Principal Executive March 28, 2000
___________________________ Officer), and Director
John A. Maccarone
/s/Neil I.Jowell
___________________________ Chairman of the Board and Director March 28, 2000
Neil I. Jowell