UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 1999
------------------
Commission File Number 333-29015
MERRILL LYNCH DEPOSITOR, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3891329
- ------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization Identification No.)
World Financial Center
New York, New York 10281-1323
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 449-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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] Yes [ ] No.
The Registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
MERRILL LYNCH DEPOSITOR, INC.
TABLE OF CONTENTS
Page No.
--------
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1 Financial Statements
Balance Sheet as of September 24, 1999
and December 25, 1998 3
Statements of Operations and Retained
Earnings for the three month period
ended September 24, 1999 and September 25, 1998 4
Statements of Cash Flows for the three
month period ended September 24, 1999 and
September 25, 1998. 5
Notes to Financial Statements 6-7
PART II OTHER INFORMATION
- ------- -----------------
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
Item 3 Defaults upon Senior Securities 9
Item 4 Submission of Matters to a Vote of
Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 10
Page 2
<PAGE>
MERRILL LYNCH DEPOSITOR, INC.
BALANCE SHEET AS OF
September 24, 1999 and December 25,1998
1999 1998
------ ------
ASSET
Cash 0 0
------ ------
STOCKHOLDER'S EQUITY
Common Stock 0 0
------ ------
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
MERRILL LYNCH DEPOSITOR, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTH PERIOD ENDED
September 24, 1999 and September 25, 1998
1999 1998
------ ------
Revenues - Interest Income $ - -
Expenses - Interest Expense - -
Earnings Before Taxes - -
Provision For Income Taxes - -
Net Earnings - -
Retained earnings, beginning of year - -
Retained earnings, end of year $ - -
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
MERRILL LYNCH DEPOSITOR, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED
September 24, 1999 and September 25, 1998
1999 1998
------ ------
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $ - -
CASH FLOWS FROM FINANCING ACTIVITIES - -
CASH FLOWS FROM INVESTING ACTIVITIES - -
------ ------
CHANGE IN CASH - -
CASH, BEGINNING OF YEAR - -
------ ------
CASH, END OF YEAR $ - -
------ ------
SUPPLEMENTAL INFORMATION:
Cash payments for interest and taxes $ - -
------ ------
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
MERRILL LYNCH DEPOSITOR, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Description of Business
Merrill Lynch Depositor, Inc.(the "Company") was incorporated in the state
of Delaware on August 13, 1993 under the name Merrill Lynch Asset Backed
Securities, Inc. and changed its name to the present one on June 3, 1997. The
Company is a wholly owned, limited purpose subsidiary of Merrill Lynch Mortgage
Capital Inc., which is an indirect, wholly owned subsidiary of Merrill Lynch &
Co.("ML&Co").
The Company has been established for the sole purpose of engaging in the
following activities: (a) acquiring, owning, holding, transferring, pledging,
selling, delivering, investing in or otherwise purchasing or disposing of (and
entering into agreements in connection with)(i) bonds, notes or other evidences
of indebtedness ("Debt Obligations"), debt or equity securities, obligations,
trust certificates ("Certificates") and other securities and instruments
(collectively, "Securities"), (ii) trade receivables("Receivables"), (iii) loan
agreements, promissory notes or other evidences of indebtedness ("Loans")
secured by Receivables or participation interests in pools of receivables
("Participation Interests"), and (iv) Participation Interests, in each case
together with any related insurance contracts and agreements with dealers,
originators and servicers of such Receivables; (b) acting as settlor or
depositor of trusts formed under trust agreements or other agreements (each an
"Agreement") to issue series (which may be divided into classes) of Certificates
representing undivided interests in Securities, Receivables, Loans,
Participation Interests, Subordinated Interests (as defined below), and to enter
into any other agreement in connection with the authorization, purchase,
issuance, sale and delivery of Certificates;(c) arranging or otherwise providing
for credit support or other enhancement for any series of Certificates, such as
insurance policies, letters of credit, puts, calls, interest rate swaps,
currency swaps, floors, caps, collars and other forms of hedging contracts; (d)
using proceeds from the Certificates as provided in the Agreements and loaning,
investing or otherwise applying proceeds and any other income as determined by
the Company's Board of Directors; (e) holding, pledging, transferring or
otherwise dealing with Certificates, Debt Obligations and any Certificates or
Debt Obligations representing a subordinated undivided in Receivables, Loans
and/or Participation Interests ("Subordinated Interests") or a residual interest
in Receivables ("Residual Interests"); (f) authorizing, issuing, selling and
delivering subordinated indebtedness; and (g) exercising all powers permitted to
corporations under the laws of the State of Delaware that are necessary or
convenient to accomplish the foregoing.
Each series of the Company's Certificates will be secured by, or represent
ownership of, a separate and identifiable pool of Debt Obligations purchased in
connection with the issuance of such Certificates.
Page 6
<PAGE>
The Debt Obligations for each series of Certificates will be the Trustee
under each Agreement on behalf of the holders of the Certificates of that
series, and will not be available for the Certificates of any other series.
At September 24, 1999, the Company had one effective Registration Statement
on Form S-3 with the Securities and Exchange Commission ("SEC") for the issuance
of $500 million of securities and had filed another Registration Statement on
Form S-3 with the SEC for the issuance of $500 million of securities.
Note 2. Accounting Policies
The Company may borrow funds from an affiliate, as needed. Interest expense
is allocated to the Company based on the rate of the asset financed. All other
operating expenses are charged directly to the Parent.
Note 3. Income Taxes
The results of operations of the Company are included in the consolidated
Federal income tax return of ML&Co. ML&Co. allocates the income taxes to its
subsidiaries in a manner that approximates the separate company method.
The Company uses the asset and liability method in providing income taxes
on all transactions that have been recognized in the financial statements. The
asset and liability method requires that deferred taxes be adjusted to reflect
the tax rates at which future taxable amounts will be settled or realized. The
effects of tax rate changes on future deferred tax liabilities and deferred tax
assets, as well as other changes in income tax laws, are recognized in net
earnings in the period such changes are enacted.
Note 4. Year 2000
The Company does not believe that it has a material problem resulting from
the inability of computer programs to properly recognize a year that begins with
"20" instead of "19." The Company's operations do not rely on information
technology, but, to the extent that information technology becomes a significant
element of Company's operations, the Company would rely on its parent, ML&Co.,
with respect to its information technology. Therefore, the Company would rely on
the initiatives of its ML&Co. with respect to Year 2000 compliance.
As the Year 2000 approaches, ML&Co. has undertaken initiatives to address
the Year 2000 problem (the "Y2K problem"), as more fully described in ML&Co.'s
1998 Annual Report included as an exhibit to its Form 10-K for the year ended
December 31, 1998 (the "1998 Annual Report"). The failure of ML&Co.'s technology
systems relating to a Y2K problem would likely have a material adverse effect on
the company's business, results of operations, and financial condition. This
effect could include disruption of normal business transactions, such as the
settlement, execution, processing, and recording of trades in securities,
commodities, currencies, and other assets. The Y2K problem could also increase
ML&Co.'s exposure to risk and legal liability and its need for liquidity.
The renovation phase of ML&Co.'s Year 2000 system efforts, as described in
the 1998 Annual Report, was 100% completed as of June 30, 1999, and production
testing was also 100% completed as of that date. In March and April 1999, ML&Co.
successfully participated in U.S. industrywide testing sponsored by the
Securities Industry Association. These tests involved an expanded number of
firms, transactions, and conditions compared with those previously conducted.
ML&Co. has participated in and continues to participate in numerous industry
tests throughout the world.
Page 7
<PAGE>
ML&Co.'s business units have developed and tested contingency plans. The
plans identify critical processes, potential Y2K problems, and personnel,
processes, and available resources needed to maintain operations. However, the
failure of exchanges, clearing organizations, vendors, service providers,
clients and counterparties, regulators, or others to resolve their own
processing issues in a timely manner could have a material adverse effect on
ML&Co.'s business, results of operations, and financial condition.
In light of the interdependency of the parties in or serving the financial
markets, there can be no assurance that all Y2K problems will be identified and
remedied on a timely basis or that all remediation and contingency planning will
be successful. Public uncertainty regarding successful remediation of the Y2K
problem may cause a reduction in activity in the financial markets. This could
result in reduced liquidity as well as increased volatility. Disruption or
suspension of activity in the world's financial markets is also possible. In
some non-U.S. markets in which ML&Co. does business, the level of awareness and
remediation efforts relating to the Y2K problem are thought to be less advanced
than in the U.S. Management is unable at this point to ascertain whether all
significant third parties will successfully address the Y2K problem. ML&Co. will
continue to monitor third parties' Year 2000 readiness to determine if
additional or alternative measures are necessary. ML&Co.'s year-end balance
sheet levels will depend on Y2K risks and many other factors, including business
opportunities and customer demand.
As of September 24, 1999, the total estimated expenditure of existing and
incremental resources for the Year 2000 compliance initiative was approximately
$520 million. This estimate includes $104 million of occupancy, communications,
and other related overhead expenditures, as ML&Co. is applying a fully costed
pricing methodology for this project. Of the total estimated expenditures,
approximately $40 million, related to continued testing, contingency planning,
risk management and the wind down of the efforts, has not yet been spent. There
can be no assurance that the costs associated with such efforts will not exceed
those currently anticipated by ML&Co., or that the possible failure of such
efforts will not have a material adverse effect on ML&Co.'s business, results of
operations, or financial condition.
Page 8
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
The Company is not a party to any pending legal proceedings, nor is
the Company aware of any proceedings contemplated by governmental
authorities.
Item 2. Changes in Securities
---------------------
Omitted pursuant to general instruction H(1) (a) and (b) of the
Form 10-Q.
Item 3. Defaults upon Senior Securities
-------------------------------
Omitted pursuant to general instruction H(1) (a) and (b) of the
Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Omitted pursuant to general instruction H(1) (a) and (b) of the
Form 10-Q.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits required by Item 601 of Regulation S-K:
There are no exhibits required to be filed with this report.
(b) Reports for the Trust prepared by the Master Servicer are filed
on Form 8-K.
Page 9
<PAGE>
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.
By:/s/ Barry N. Finkelstein
------------------------
Name: Barry N. Finkelstein
Title: President / EVP / Treasurer
Dated: November 8, 1999
By:/s/ Michael McEvilly
------------------------
Name: Michael McEvilly
Title: Senior VP / Secretary
Dated: November 8, 1999
Page 10
