10-Q 1 f5_3q01.txt TEXTAINER CAPITAL CORPORATION 650 California Street, 16th Floor San Francisco, CA 94108 November 13, 2001 Securities and Exchange Commission Washington, DC 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are submitting herewith for filing on behalf of Textainer Equipment Income Fund V, L.P. (the "Partnership") the Partnership's Quarterly Report on Form 10-Q for the Third Quarter ended September 30, 2001. This filing is being effected by direct transmission to the Commission's EDGAR System. Sincerely, Ernest J. Furtado Chief Financial Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 Commission file number 0-25946 TEXTAINER EQUIPMENT INCOME FUND V, L.P. A California Limited Partnership (Exact name of Registrant as specified in its charter) California 93-1122553 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 650 California Street, 16th Floor San Francisco, CA 94108 (Address of Principal Executive Offices) (ZIP Code) (415) 434-0551 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

TEXTAINER EQUIPMENT INCOME FUND V, L.P. (a California Limited Partnership) Notes To Financial Statements For the three and nine months ended September 30, 2001 and 2000 (Amounts in thousands except for unit and per unit amounts) (unaudited) -------------------------------------------------------------------------------- Note 1. General Textainer Equipment Income Fund V, L.P. (the Partnership), a California limited partnership with a maximum life of 20 years, was formed in 1993. The Partnership owns a fleet of intermodal marine cargo containers which are leased to international shipping lines. The accompanying interim financial statements have not been audited by an independent public accountant. However, all adjustments (which were only normal and recurring adjustments), which are, in the opinion of management, necessary to fairly present the financial position of the Partnership as of September 30, 2001 and December 31, 2000 and the results of its operations, changes in partners' capital, and cash flows for the nine-month periods ended September 30, 2001 and 2000, have been made. The financial information presented herein should be read in conjunction with the audited financial statements and other accompanying notes included in the Partnership's audited financial statements as of and for the year ended December 31, 2000, in the Annual Report filed on Form 10-K. Certain estimates and assumptions were made by the Partnership's management that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications, not affecting net earnings (loss), have been made to prior year amounts in order to conform to the 2001 financial statement presentation. Note 2. Transactions with Affiliates Textainer Capital Corporation (TCC) is the managing general partner, and Textainer Equipment Management Limited (TEM) and Textainer Limited (TL) are the associate general partners of the Partnership. The managing general partner and the associate general partners are collectively referred to as the General Partners and are commonly owned by Textainer Group Holdings Limited (TGH). The General Partners also act in this capacity for other limited partnerships. The General Partners manage and control the affairs of the Partnership. In accordance with the Partnership Agreement, sections 3.08 through 3.12, net earnings or losses and distributions are generally allocated 1% to the General Partners and 99% to the Limited Partners. If the allocation of distributions exceeds the allocation of net earnings and creates a deficit in a General Partner's capital account, the Partnership Agreement provides for a special allocation of gross income equal to the amount of the deficit to be made to the General Partners. As part of the operation of the Partnership, the Partnership is to pay to the General Partners an acquisition fee, an equipment management fee, an incentive management fee and an equipment liquidation fee. These fees are for various services provided in connection with the administration and management of the Partnership. The Partnership capitalized $39 and $102 of container acquisition fees as a component of container costs during the nine-month periods ended September 30, 2001 and 2000, respectively. The Partnership incurred $47 and $178 of incentive management fees during the three and nine-month periods ended September 30, 2001, respectively, and $65 and $197, respectively for the comparable periods in 2000. The Partnership's container fleet is managed by TEM. In its role as manager, TEM has authority to acquire, hold, manage, lease, sell and dispose of the Partnership's containers. TEM holds, for the payment of direct operating expenses, a reserve of cash that has been collected from leasing operations; such cash is included in due from affiliates, net at September 30, 2001 and December 31, 2000. Subject to certain reductions, TEM receives a monthly equipment management fee equal to 7% of gross revenues attributable to operating leases and 2% of gross revenues attributable to full payout net leases. These fees totaled $178 and $552 for the three and nine-month periods ended September 30, 2001, respectively, and $214 and $657, respectively, for the comparable periods in 2000. The Partnership's container fleet is leased by TEM to third party lessees on operating master leases, spot leases, term leases and direct finance leases. The majority of the container fleet is leased under operating master 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 TCC and TEM. General and administrative costs allocated to the Partnership during the three and nine-month periods ended September 30, 2001 and 2000 were as follows: Three months Nine months ended Sept. 30, ended Sept. 30, --------------- --------------- 2001 2000 2001 2000 ---- ---- ---- ---- Salaries $ 81 $ 83 $246 $247 Other 46 87 170 235 --- --- --- --- Total general and administrative costs $127 $170 $416 $482 === === === === 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 during the three and nine-month periods ended September 30, 2001 and 2000: Three months Nine months ended Sept. 30, ended Sept. 30, --------------- --------------- 2001 2000 2001 2000 ---- ---- ---- ---- TEM $110 $141 $361 $409 TCC 17 29 55 73 --- --- --- --- Total general and administrative costs $127 $170 $416 $482 === === === === 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. In addition, the General Partners are entitled to an acquisition fee for any containers resold to the Partnership. At September 30, 2001 and December 31, 2000, due from affiliates, net is comprised of: 2001 2000 ---- ---- Due from affiliates: Due from TEM..................... $237 $533 Due from TL...................... 63 - --- --- 300 533 Due to affiliates: Due to TCC....................... 15 15 Due to TL........................ - 4 --- --- 15 19 --- --- Due from affiliates, net $285 $514 === === These amounts receivable from and payable to affiliates were incurred in the ordinary course of business between the Partnership and its affiliates and represent timing differences in the accrual and remittance of expenses, fees and distributions described above and in the accrual and remittance of net rental revenues and sales proceeds from TEM. Note 3. Container Rental Equipment New container prices declined from 1995 through 1999. Although container prices increased in 2000, these prices declined again in 2001. As a result, the cost of new containers purchased in recent years is significantly less than the average cost of containers purchased in prior years. The Partnership evaluated the recoverability of the recorded amount of container rental equipment for containers to be held for continued use as well as for containers identified for sale in the ordinary course of business. Based on this evaluation, the Partnership determined that reductions to the carrying value of these containers were not required during the nine-month periods ended September 30, 2001 and 2000. 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 or its container rental equipment.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Amounts in thousands except for unit and per unit amounts) -------------------------------------------------------------------------------- The Financial Statements contain information, which will assist in evaluating the financial condition of the Partnership as of and for the three and nine-month periods ended September 30, 2001 and 2000. Please refer to the Financial Statements and Notes thereto in connection with the following discussion. Liquidity and Capital Resources From May 1, 1994 until April 29, 1996, the Partnership offered limited partnership interests to the public. The Partnership received its minimum subscription amount of $5,000 on August 23, 1994 and on April 29, 1996 the Partnership's offering of limited partnership interests was closed at $89,305. From time to time, the Partnership redeems units from limited partners for a specified redemption value, which is set by formula. Up to 2% of the Partnership's outstanding units may be redeemed each year, although the 2% limit may be exceeded at the Managing General Partner's discretion. All redemptions are subject to the Managing General Partner's good faith determination that payment for the redeemed units will not (i) cause the Partnership to be taxed as a corporation, (ii) impair the capital or operations of the Partnership, or (iii) impair the ability of the Partnership to pay distributions in accordance with its distribution policy. During the nine-month period ended September 30, 2001, the Partnership redeemed 5,500 units for a total dollar amount of $55. The Partnership used cash flow from operations to pay for the redeemed units. The Partnership invests working capital, cash flow from operations prior to its distribution to the partners and proceeds from container sales that have not been used to purchase containers in short-term, liquid investments. The Partnership's cash is affected by cash provided by or used in operating, investing and financing activities. These activities are discussed in detail below. Limited partners are currently receiving monthly distributions in an annualized amount equal to 5% of their original investment. The limited partners' distribution percentage was reduced from 7% to 5% starting in July 2001. During the nine-month period ended September 30, 2001, the Partnership declared cash distributions to limited partners pertaining to the period from December 2000 through August 2001, in the amount of $4,380. On a cash basis, all of these distributions were from current year operating activities. On a GAAP basis, $4,307 of these distributions was a return of capital and the balance was from net earnings. At September 30, 2001, the Partnership had no commitments to purchase containers. Net cash provided by operating activities for the nine-month periods ended September 30, 2001 and 2000, was $4,659 and $6,518, respectively. The decrease of $1,859, or 29%, was attributable to the decrease in net earnings, adjusted for non-cash transactions and fluctuations in accrued damage protection plan costs, offset by the fluctuations in accounts receivable and due from affiliates, net. Net earnings, adjusted for non-cash transactions, decreased primarily due to the decrease in rental income and the increase in direct container expenses. The reasons for these fluctuations are discussed in "Results of Operations". The larger decrease in accrued damage protection plan costs of $132 during the nine-month period ended September 30, 2001, compared to the same period in 2000, was due to the decline in the estimated average repair cost per container and the decline in the number of containers covered under the damage protection plan. The decrease in accounts receivable of $661 for the nine-month period ended September 30, 2001, was primarily due to the decrease in rental income and a decrease in the average collection period of accounts receivable. The decrease in accounts receivable of $455 for the comparable period in 2000 was primarily due to the decrease in the average collection period of accounts receivable. The fluctuations in due from affiliates, net resulted from timing differences in payment of expenses and fees and the remittance of net rental revenues and sales proceeds, as well as in fluctuations in these amounts. For the nine-month period ended September 30, 2001, net cash used in investing activities (the purchase and sale of containers) was $580 compared to $1,165 for the same period in 2000. Net cash used in investing activities decreased $585 due to the decrease in cash used for container purchases. Cash used for container purchases decreased primarily as a result of timing differences in the accrual and payment of these purchases. Until market conditions improve in certain low demand locations, the Partnership plans to continue selling some of its containers that are off-lease in these locations. The number of containers sold, both in low demand locations and elsewhere, as well as the average sales price, will affect how much the Partnership can reinvest in new containers. Consistent with its investment objectives and subject to its distribution policy, the Partnership intends to continue to reinvest both cash from operations available for reinvestment and all, or a significant amount of, the proceeds from container sales in additional containers. Cash from operations available for reinvestment is generally equal to cash provided by operating activities, less distributions and redemptions paid, which are subject to the General Partners' authority to set these amounts (and modify reserves and working capital), as provided in the Partnership Agreement. The amount of sales proceeds will fluctuate based on the number of containers sold and the sales price received. The Partnership sells containers when (i) a container reaches the end of its useful life or (ii) an analysis indicates that the sale is warranted based on existing market conditions and the container's age, location and condition. Both cash from operations available for reinvestment and sales proceeds have been adversely affected by market conditions. These market conditions have resulted in a slower than anticipated rate of reinvestment. Market conditions are discussed more fully under "Results of Operations." A slower rate of reinvestment will, over time, affect the size of the Partnership's container fleet. Furthermore, even with reinvestment, the Partnership is not likely to be able to replace all the containers it sells, since new container prices are usually higher than the average sales price for a used container, and the majority of cash available for reinvestment is from sales proceeds. Results of Operations The Partnership's income from operations, which consists primarily of rental income net of container depreciation, direct container expenses, management fees, and reimbursement of administrative expenses was directly related to the size of the container fleet during the nine-month periods ended September 30, 2001 and 2000, 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: 2001 2000 ---- ---- Beginning container fleet............... 24,532 23,810 Ending container fleet.................. 24,762 24,416 Average container fleet................. 24,647 24,113 As noted above, when containers are sold in the future, sales proceeds are not likely to be sufficient to replace all of the containers sold, which is likely to result in a trend towards a smaller average container fleet. Other factors related to this trend and 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 utilization of the container fleet, which was 67% and 82% during the nine-month periods ended September 30, 2001 and 2000, respectively. In addition, rental income is affected by daily rental rates. The following is a comparative analysis of the results of operations for the nine-month periods ended September 30, 2001 and 2000. The Partnership's income from operations for the nine-month periods ending September 30, 2001 and 2000 was $106 and $2,401, on rental income of $7,884 and $9,421, respectively. The decrease in rental income of $1,537, or 16%, from the nine-month period ended September 30, 2000 to the comparable period in 2001 was attributable to a decrease in container rental income offset by an increase in other rental income. Income from container rentals, the major component of total revenue, decreased $1,714, or 20%, primarily due to the decrease in the average on-hire utilization of 18% between the periods. In the fourth quarter of 2000, utilization began to decline and has continued to decline through the end of the third quarter of 2001. This decline was due to lower overall demand by shipping lines for leased containers, which is primarily a result of the worldwide economic slowdown. The effects of the economic slowdown on shipping have been heightened by the recent curtailment in world trade, caused by the after-effects of the September 11 terrorist attacks. This curtailment in world trade has caused some shipping lines to reduce service levels along certain routes which, of course, may further weaken demand for containers. Two other factors are currently reducing the demand for leased containers. Shipping lines have added larger vessels to their fleets, which combined with lower cargo volume growth, has made it easier for them to use otherwise empty vessel space to reposition their own containers back to high demand locations. Additionally, in anticipation of the delivery of these new, larger vessels, many shipping lines placed large orders for new containers in 2000 and 2001, thus temporarily reducing their need to lease containers. These orders for additional containers are part of a general increase in capacity for the shipping lines. This increase in capacity amounted to 12% this year, and an additional increase in capacity is expected next year, because the shipping lines placed orders for additional ships and containers before recognizing the slowdown in world trade. To the extent that this increased capacity remains underutilized, shipping lines may seek to cut costs in order to sustain profits, which may put further downward pressure on demand for containers and/or container rental rates. As a result of the lower demand, the trade imbalance between Asia and North America and Asia and Europe has eased slightly. Combined with the excess vessel capacity, these factors have made it easier, although not necessarily less expensive, to reposition containers. During the nine-month period ended September 30, 2001, the Partnership was able to reposition newer containers from low demand locations in North America to historically higher demand locations in Asia. As a consequence, the build-up of containers in North America, which persisted over the past several years, has eased. Nevertheless, the Partnership continues to sell (rather than reposition) some containers located in low demand locations, but primarily only those containers that were damaged. The decision to sell containers is based on the current expectation that the economic benefit of selling these containers is greater than the estimated economic benefit of continuing to own these containers. Current market conditions continue to cause a decline in the economic value of used containers. The average sales price for containers sold by other Partnerships managed by the General Partners has decreased. Additionally, other Partnerships managed by the General Partners have recorded write-downs and losses on certain older containers. Many of these containers have been located in low demand locations. 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. Sales by the Partnership in these low demand locations have been generally limited to damaged containers. 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 of some or all of its container rental equipment. Despite the decline in demand for leased containers discussed above and the decline in new container purchase prices, the stabilization of rental rates, which began during 2000, has continued in 2001. Until such time as the worldwide economies improve, particularly those of the United States and Europe, the uncertainties caused by the September 11 terrorist attacks have been diminished, and cargo volumes increase to the point where this year's 12% increase in worldwide vessel capacity is absorbed, there may be no significant improvements in utilization. The General Partners do not foresee material changes in existing market conditions for the near term. Should there be a worldwide recession, demand for leased containers could decline further and result in a decline in lease rates and further declines in utilization and container sale prices, adversely affecting the Partnership's operating results. Other rental income consists of other lease-related items, primarily income from charges to lessees for dropping off containers in surplus locations less credits granted to lessees for leasing containers from surplus locations (location income), income from charges to lessees for handling related to leasing and returning containers (handling income) and income from charges to lessees for a Damage Protection Plan (DPP). For the nine-month period ended September 30, 2001, the total of these other rental income items was $926, an increase of $177 from the equivalent period in 2000. The increase in other rental income was primarily due to increases in location and DPP income of $182 and $47, respectively, offset by a decrease in handling income of $52. Location income increased primarily due to an increase in charges to lessees for dropping off containers in certain locations, and offset by a decrease in credits granted to lessees for picking up containers from surplus locations. DPP income increased due to an increase in the average DPP price charged per container offset by a decline in the number of containers carrying DPP. Handling income declined due to handling not being charged on certain container movements and due to the decrease in container movement during the nine-month period ended September 30, 2001 compared to the equivalent period in 2000. Direct container expenses increased $865, or 42%, from the nine-month period ending September 30, 2000 to the equivalent period in 2001, primarily due to increases in storage and repositioning expenses of $660 and $214, respectively, offset by a decrease in handling expense of $38. Storage expense increased due to the decrease in average utilization noted above and an increase in the average storage cost per container. Repositioning expense increased due to a higher average repositioning cost per container, offset by a decline in the number of containers repositioned. Handling expense decreased due to a decline in the number of containers moved during the nine-month period ended September 30, 2001 compared to the equivalent period in 2000. Bad debt benefit decreased from $131 for the nine-month period ended September 30, 2000 to $3 for the comparable period in 2001. The decline was due to a lower required adjustment to bad debt reserve at September 30, 2001 compared to the same period at 2000. Depreciation expense increased $51, or 1%, from the nine-month period ended September 30, 2000 to the comparable period in 2001, due to the increase in fleet size. New container prices declined from 1995 through 1999. Although container prices increased in 2000, these prices declined again in 2001. As a result, the cost of new containers purchased in recent years is significantly less than the average cost of containers purchased in prior years. The Partnership evaluated the recoverability of the recorded amount of container rental equipment for containers to be held for continued use as well as for containers identified for sale in the ordinary course of business. Based on this evaluation, the Partnership determined that reductions to the carrying value of these containers were not required during the nine-month periods ended September 30, 2001 and 2000. 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 or its container rental equipment. Management fees to affiliates decreased $124, or 15%, from the nine-month period ended September 30, 2000 to the comparable period in 2001, due to decreases in equipment and incentive management fees. The decrease in equipment management fees, which are based primarily on gross revenue, resulted from the decrease in rental income. These were approximately 7% of rental income for both periods. Incentive management fees, which are based on the Partnership's limited and general partner distributions made from cash from operations and partners' capital, decreased $19 primarily due to a decrease in the limited partners distribution percentage from 7% to 5% of initial partners' capital starting in July 2001. General and administrative costs to affiliates decreased $66, or 14%, from the nine-month period ended September 30, 2000 to the comparable period in 2001 primarily due to a decrease in the allocation of overhead costs from TEM, as the Partnership represented a smaller portion of the total fleet managed by TEM. Loss on sale of containers decreased $51 or 93% from the nine-month period ended September 30, 2000 to the comparable period in 2001. The decrease was primarily due to a decrease in the average net book value per disposed container. Net earnings per limited partnership unit decreased from $0.55 to $0.03 from the nine-month period ended September 30, 2000 to the same period in 2001, reflecting the decrease in net earnings allocated to limited partners from $2,454 to $128, respectively. The allocation of net earnings for the nine-month periods ended September 30, 2001 and 2000 included a special allocation of gross income to the General Partners of $40 and $22, respectively, in accordance with the Partnership Agreement. The following is a comparative analysis of the results of operations for the three-month periods ended September 30, 2001 and 2000. The Partnership's (loss) income from operations for the three-month periods ending September 30, 2001 and 2000 was ($31) and $783, on rental income of $2,545 and $3,079, respectively. The decrease in rental income of $534, or 17%, from the three-month period ended September 30, 2000 to the comparable period in 2001 was attributable to a decrease in container rental income offset by the increase in other rental income. Income from container rentals decreased $842, or 28%, primarily due to the decrease in the average on-hire utilization of 27%. Other rental income was $427 for the three-month period ended September 30, 2001, an increase of $309 from the equivalent period in 2000. The increase was primarily due to increases in location and DPP income of $188 and $142, respectively, offset by a decrease in handling income of $21. Location income increased primarily due to an increase in charges to lessees for dropping off containers in certain locations, offset by a decrease in credits granted to lessees for picking up containers from surplus locations. DPP income was higher in 2001 primarily due to a refund of $137 to one lessee as a result of the lessee canceling their DPP coverage in July 2000. Handling income declined due to handling not being charged on certain container movements and due to the decrease in container movements. Direct container expenses increased $376, or 64%, from the three-month period ending September 30, 2000 to the equivalent period in 2001, primarily due to increases in storage and DPP expenses of $296 and $169, respectively, offset by a decrease in repositioning expense of $59. Storage expense increased due to the decrease in average utilization noted above and an increase in the average storage cost per container. DPP expense was higher in 2001 primarily due to a reduction of $187 in the DPP reserve as a result of a lessee canceling their DPP coverage in July 2000 as described above. Repositioning expense decreased due to a decline in the number of containers repositioned, offset by a higher average repositioning cost per container. Bad debt expense increased from $8 for the three-month period ended September 30, 2000 to $21 for the comparable period in 2001. The increase was due to a higher required adjustment to bad debt reserve at September 30, 2001 compared to the same period at 2000. Depreciation expense was comparable at $1,194 and $1,198 during both periods ended September 30,2001 and September 30, 2000. Management fees to affiliates decreased $54, or 19%, from the three-month period ended September 30, 2000 to the comparable period in 2001, due to the decreases in equipment and incentive management fees. Equipment management fees decreased due to the decline in rental income. These fees were approximately 7% of rental income for both periods. Incentive management fees, which are based on the Partnership's limited and general partner distributions made from cash from operations and partners' capital, decreased $18 primarily due to a decrease in the limited partner distribution percentage from 7% to 5% of initial partners' capital starting in July 2001. General and administrative costs to affiliates decreased $43, or 25%, from the three-month period ended September 30, 2000 to the comparable period in 2001. 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. Loss on sale of containers increased from $10 for the three-month period ended September 30, 2000 to $16 for the equivalent period in 2001. The increase was primarily due to an increase in the average net book value per disposed container. Net earnings (loss) per limited partnership unit decreased from earnings of $0.18 for the three-month period ended September 30, 2000 to a loss of ($0.01) for the same period in 2001, reflecting the decrease in net earnings allocated to limited partners from earnings of $805 to a loss of $(28), respectively. The allocation of net earnings (loss) included a special allocation of gross income to the General Partners made in accordance with the Partnership Agreement. Risk Factors and Forward Looking Statements Although substantially all of the Partnership's income from operations is derived from assets employed in foreign operations, virtually all of this income is denominated in United States dollars. The Partnership's customers are international shipping lines, which transport goods on international trade routes. The domicile of the lessee is not indicative of where the lessee is transporting the containers. The Partnership's business risk in its foreign operations lies with the creditworthiness of the lessees, and the Partnership's ability to keep its containers under lease, rather than the geographic location of the containers or the domicile of the lessees. The containers are generally operated on the international high seas rather than on domestic waterways. The containers are subject to the risk of war or other political, economic or social occurrence where the containers are used, which may result in the loss of containers, which, in turn, may have a material impact on the Partnership's results of operations and financial condition. Other risks of the Partnership's leasing operations include competition, the cost of repositioning containers after they come off-lease, the risk of an uninsured loss, including bad debt, increases in maintenance expenses or other costs of operating the containers, and the effect of world trade, industry trends and/or general business and economic cycles on the Partnership's operations. See "Risk Factors" in the Partnership's Prospectus, as supplemented, for additional information on risks of the Partnership's business. The foregoing includes forward-looking statements and predictions about possible or future events, results of operations and financial condition. These statements and predictions may prove to be inaccurate, because of the assumptions made by the Partnership or the General Partners or the actual development of future events. No assurance can be given that any of these forward-looking statements or predictions will ultimately prove to be correct or even substantially correct. The risks and uncertainties in these forward-looking statements include, but are not limited to, changes in demand for leased containers, changes in global business conditions and their effect on world trade, future modifications in the way in which the Partnership's lessees conduct their business or of the profitability of their business, increases or decreases in new container prices or the availability of financing therefor, alterations in the costs of maintaining and repairing used containers, increases in competition, changes in the Partnership's ability to maintain insurance for its containers and its operations, the effects of political conditions on worldwide shipping and demand for global trade or of other general business and economic cycles on the Partnership, as well as other risks detailed herein and from time to time in the Partnership's filings with the Securities and Exchange Commission. The Partnership does not undertake any obligation to update forward-looking statements.

TEXTAINER EQUIPMENT INCOME FUND V LP 10-Q