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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY --, 1998.
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One) FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-25774
ARCH LEASING CORPORATION TRUST
(ISSUER OF THE REGISTERED SECURITIES)
ARCH LEASING CORPORATION
(ORIGINATOR OF THE ABOVE ISSUER TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-1679795
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16144 WESTWOODS BUSINESS PARK
ELLISVILLE, MISSOURI 63021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 391-5152
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER YEAR, IF CHANGED SINCE LAST REPORT)
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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 TWELVE 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
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AS OF DECEMBER 31, 1997, THERE ARE TWO OWNERS OF THE ISSUER'S CERTIFICATES,
HOLDING, RESPECTIVELY, 79% AND 21% OF THE ISSUER'S AGGREGATE EQUITY.
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ARCH LEASING CORPORATION TRUST
BALANCE SHEET
DECEMBER 31, MARCH 31,
Assets 1997 1997
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Cash $ 364,674 $ 305,764
Accounts receivable 146,246 38,659
Inventory 458,905 34,729
Leased assets,less accumulated
depreciation 14,018,161 23,123,142
Purchased residual values 2,026,627 2,094,887
Deferred charges 980,043 1,508,750
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17,994,656 27,105,931
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Liabilities and Equity
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Liabilities:
Accrued interest 63,275 63,275
Due to related parties 66,194 25,971
Deferred income 0 191,344
Bonds payable 14,011,000 14,011,000
Nonrecourse discounted lease
rentals 5,106,973 13,091,129
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Total liabilities 19,247,442 27,382,719
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Equity:
Certificateholders' equity (deficit) (1,252,786) (276,788)
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$17,994,656 $27,105,931
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The accompanying notes are an integral part of these financial statements.
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ARCH LEASING CORPORATION TRUST
INCOME STATEMENT
NINE NINE THREE THREE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
12/31/97 12/31/96 12/31/97 12/31/96
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Revenues:
Leasing revenues $8,034,349 $12,460,370 $2,618,946 $4,419,547
Interest income 9,313 8,287 3,258 2,890
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Total revenues $8,043,662 $12,468,657 $2,622,204 $4,422,437
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Costs and expenses:
Interest 1,762,242 2,524,747 506,323 793,844
Depreciation and amortization 7,161,768 9,666,765 2,202,083 3,534,632
Fees 105,651 227,000 32,574 76,500
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Total costs and expenses 9,029,661 12,418,512 2,740,980 4,404,976
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Net income (loss) $ (985,999) $ 50,145 $ (118,776) $ 17,461
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The accompanying notes are an integral part of these financial statements.
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ARCH LEASING CORPORATION TRUST
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS
ENDED DECEMBER 31,
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1997 1996
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Cash flows from operating activities:
Net Income (loss) $ (985,999) $ 50,145
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,161,768 9,666,765
Loss on sale of leased equipment 1,299,062 (1,420,342)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (107,587) 99,878
(Increase) decrease in inventory (424,176) 40,670
(Increase) in due from related parties 40,223 726,560
(Increase) in deferred charges 0 (714,117)
(Decrease) in deferred income (191,344) (159,738)
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Net cash provided by operating activities 6,791,947 8,289,821
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Cash flows from investing activities:
Proceeds from sale of leased equipment 1,277,231 1,545,219
Purchase of residual values 0 (3,293,240)
Increase in marketing fee (36,112) (42,033)
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Net cash provided by investing activities 1,241,119 (1,790,054)
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Cash flows from financing activities:
Payment on notes payable (7,984,156) (6,489,788)
Sale of equity certificates 10,000 0
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Net cash used in financing activities (7,974,156) (6,489,788)
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Net increase in cash $ 58,910 $ 9,979
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Cash - beginning of period 305,764 287,132
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Cash - end of period $ 364,674 $ 297,111
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Supplemental disclosure of cash flow information
Interest paid $ 1,762,242 $ 2,524,747
The accompanying notes are an integral part of these financial statements.
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ARCH LEASING CORPORATION TRUST
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NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31,1997
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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GENERAL
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All adjustments which, in the opinion of management, are necessary to
fairly present the results of operation for the period ended December
31,1997, have been included in the accompanying financial statements.
LEASE ACCOUNTING
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The leases in which the Trust participates as lessor are accounted for
in accordance with Statement on Financial Accounting Standards No. 13.
DEFERRED CHARGES
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Deferred charges are being amortized over the term of each respective
Series of Bonds.
INCOME TAXES
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The Trust will be treated as a partnership for Federal income tax
purposes and consequently there is no provision for income taxes.
2. DEBT:
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Bonds payable consist of Series 1 Collateral Trust Bonds which bear
interest at 10.5% per annum and are due on dates ranging from May 1998
through November 1998.
The interest rate on nonrecourse discounted lease rentals ranges from
6.35% to 11%.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Sources of Capital and Liquidity
The Trust's primary sources of capital were (i) capital contributions
of investors purchasing equity interest in the Trust ("Certificateholders")
and (ii) net proceeds of the sale of the Bonds. The sale of Collateral
Trust Bonds was terminated on November 30, 1995. Currently the Trust's
primary sources of liquidity are payments on the Leases and disposition of
Equipment at the conclusion of Leases.
Results of Operation
1997
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For the nine month period ended December 31, 1997, the Trust recorded
leasing revenues in the amount of $8,034,349, a 35% decrease from 1996, due
to attrition caused by a maturing lease portfolio. Depreciation on the
leased equipment amounted to $6,595,439, a 27% decrease from 1996, due also
to a maturing lease portfolio. Operating expenses, namely service fee
expense, amortization and interest expense, amounted to $2,434,221. This
amounts to a 27% decrease from the previous period ended 1996. The period's
activity resulted in net loss in the amount of $985,999. The decrease in net
income from 1996 is mainly due to an increase in terminations of month to
month leases, which resulted in more costs this year from the sale of month
to month leased assets than last year. Per management's original
projections, net losses were anticipated in early years which should reverse
in later years due to decreasing interest expense.
1996
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For the nine month period ended December 31,1996 the Trust recorded
leasing revenues in the amount of $12,460,370. Depreciation on leased
equipment amounted to $9,039,406. Operating expenses, namely service fee
expense, amortization and interest expense amounted to $3,379,106. The
period's activity resulted in net income of $50,145.
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PART II. OTHER INFORMATION
Item 5. Other Information
On January 2, 1996 St. Louis Leasing Corporation, an affiliate of the
registrant and its marketing agent, filed for protection under Chapter 11 of
the United states Bankruptcy Code, Case #96-40001-293. The plan of
reorganization was accepted by the court effective August 9, 1996. On August
1, 1996 Varilease Capital Corporation assumed role as marketing and servicing
agent of the registrant.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARCH LEASING CORPORATION
Dated: February -----, 1998 By:--------------------------------
Lynnette Frownfelter, President
Dated: February -----, 1998 By:--------------------------------
Lynnette Frownfelter
Principal Financial Officer