<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------- ----------------------
-------------------
For Quarter Ended June 30, 1996 Commission File No. 0-21396
AFG Investment Trust
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3145953
- ---------------------------------------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
- ---------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
--------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court 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 No
--- ---
<PAGE>
AFG Investment Trust A
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position
at June 30, 1996 and December 31, 1995 3
Statement of Operations for the three and
six months ended June 30, 1996 and 1995 4
Statement of Cash Flowsm for the six months
ended June 30, 1996 and 1995 5
Notes to the Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION:
Items 1 - 6 13
</TABLE>
2
<PAGE>
AFG Investment Trust A
STATEMENT OF FINANCIAL POSITION
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 1,677,290 $ 455,262
Rents receivable 407,688 642,680
Accounts receivable - affiliate 127,649 83,314
Equipment at cost, net of accumulated
depreciation of $9,544,942 and
$8,310,244 at June 30,1996 and
Decmeber 31, 1995, respectively 13,438,967 15,420,535
Organization costs, net of accumulated
amortization of $4,167 and $3,667
at June 30, 1996 and December 31,
1995, respectively 833 1,333
----------- -----------
Total assets $15,652,427 $16,603,124
=========== ===========
LIABILITIES AND PARTICIPANTS' CAPITAL
- -------------------------------------
Notes payable $ 5,531,008 $ 6,323,893
Accrued interest 57,896 83,426
Accrued liabilities 14,700 24,135
Accrued liabilities - affiliate 171,165 4,744
Deferred rental income 46,115 39,853
Cash distributions payable to
participants 127,092 127,092
----------- -----------
Total liabilities 5,947,976 6,603,143
----------- -----------
Participants' capital (deficit):
Managing Trustee (26,286) (23,330)
Special Beneficiary (224,110) (199,729)
Beneficiary Interests
(549,218 Interests; initial
purchase price of $25 each) 9,954,847 10,223,040
Total participants' capital 9,704,451 9,999,981
----------- -----------
Total liabilities and participants'
capital $15,652,427 $16,603,124
=========== ===========
</TABLE>
3
<PAGE>
AFG Investment Trust A
STATEMENT OF OPERATIONS
for the three and six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
--------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Income:
Lease revenue $1,173,106 $1,324,658 $2,427,754 $2,679,029
Interest income 32,465 15,943 38,801 19,999
Loss on sale of equipment (1,994) (68,769) (150,061) (77,267)
---------- ---------- ---------- ----------
Total income 1,203,577 1,271,832 2,316,494 2,621,761
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization 911,392 912,607 1,863,511 1,777,493
Interest expense 111,740 144,675 216,697 277,142
Interest expense - affiliate -- 364 -- 364
Equipment management fees
- affiliate 44,542 48,820 93,003 99,740
Operating expenses - affiliate 40,561 33,688 57,537 61,028
---------- ---------- ---------- ----------
Total expenses 1,108,235 1,140,154 2,230,748 2,215,767
---------- ---------- ---------- ----------
Net income $ 95,342 $ 131,678 $ 85,746 $ 405,994
========== ========== ========== ==========
Net income per Beneficiary Interest $ 0.16 $0.22 $ 0.14 $ 0.67
========== ========== ========== ==========
Cash distributions declared
per Beneficiary Interest $ 0.32 $0.63 $ 0.63 $ 1.26
========== ========== ========== ==========
</TABLE>
4
<PAGE>
AFG Investment Trust A
STATEMENT OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from (used in) operating
activities:
Net income $ 85,746 $ 405,994
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,863,511 1,777,493
Loss on sale of equipment 150,061 77,267
Changes in assets and liabilities
Decrease (increase) in:
rents receivable 234,992 244,050
accounts receivable - affiliate (44,335) (54,094)
Increase (decrease) in:
accrued interest (25,530) (30,925)
accrued liabilities (9,435) (500)
accrued liabilities - affiliate 166,421 (69,170)
deferred rental income 6,262 (17,222)
----------- -----------
Net cash from operating activities 2,427,693 2,332,893
----------- -----------
Cash flows from (used in) investing
activities:
Purchase of equipment 1,410,292 1,305,269
Proceeds from equipment sales (1,441,796) (2,378,228)
----------- -----------
Net cash used in investing activities (31,504) (1,072,959)
----------- -----------
Cash flows from (used in) financing
activities:
Proceeds from notes payable 997,888 1,454,669
Proceeds from notes payable -
affiliate -- 38,396
Principal payments - notes payable (1,790,773) (1,559,300)
Distributions paid (381,276) (762,551)
----------- -----------
Net cash used in financing activities (1,174,161) (828,786)
----------- -----------
Net increase in cash and cash
equivalents 1,222,028 431,148
Cash and cash equivalents at beginning
of period 455,262 6,471
----------- -----------
Cash and cash equivalents at end of
period $ 1,677,290 $ 437,619
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period
for interest $424,227 $308,432
=========== ===========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During 1995, the Trust sold equipment to a third party which assumed related
debt and interest of $96,913 and $625, respectively.
The accompanying notes are an intregal part
of these financial statements.
5
<PAGE>
AGF Investment Trust A
Notes to the Financial Statements
June 30, 1996
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing
Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in
conjunction with the footnotes presented in the 1995 Annual Report. Except as
disclosed herein, there has been no material change to the information
presented in the footnotes to the 1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 1996 and December 31, 1995 and results of operations for
the three and six month periods ended June 30, 1996 and 1995 have been made and
are reflected.
NOTE 2 - CASH
-------------
At June 30, 1996, the Trust had $1,665,000 invested in reverse repurchase
agreements secured by U.S. Treasury Bills or interests in U.S. Government
securities.
NOTE 3 - REVENUE RECOGNITION
----------------------------
Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$8,808,363 are due as follows:
<TABLE>
<S> <C>
For the year ending June 30, 1997 $4,463,196
1998 2,986,650
1999 663,256
2000 232,020
2001 196,490
Thereafter 266,751
----------
Total $8,808,363
==========
</TABLE>
During March 1996, the Trust acquired an 8.86% proportionate ownership
interest in an MD-87 jet aircraft leased by Reno Air, Inc. (the "Reno
Aircraft") - See Note 4 herein. The Trust will receive approximately $157,000
of rental revenue in each of the years in the period ending June 30, 2002 and
$79,000 in the year ending June 30, 2003, pursuant to the Reno Aircraft lease
agreement. Rents from the Reno Aircraft, as provided for in the lease
agreement, are adjusted monthly for changes of the London Inter-Bank Offered
Rate ("LIBOR"). Future rents from the Reno Aircraft, included above, reflect
the most recent LIBOR effected rental payment.
6
<PAGE>
AFG Investment Trust A
Notes to the Financial Statements
(Continued)
NOTE 4 - EQUIPMENT
------------------
The following is a summary of equipment owned by the Trust at June 30, 1996.
In the opinion of American Finance Group ("AFG"), the acquisition cost of the
equipment did not exceed its fair market value.
<TABLE>
<CAPTION>
Lease Term Equipment
Equipment Type (Months) at Cost
- -------------------------- ------------- -----------
<S> <C> <C>
Aircraft 60-81 $6,814,662
Materials handling 12-60 3,751,618
Retail store fixtures 36-60 2,992,236
Vessels 72 2,399,580
Computers and peripherals 9-62 2,226,777
Construction and mining 36-84 1,945,484
Communications 56 1,802,423
Research and test 60 459,282
Manufacturing 48 442,590
Energy systems 60 108,975
Photocopying 24-36 40,282
----------
Total equipment cost 22,983,909
Accumulated depreciation (9,544,942)
-----------
Equipment, net of accumulated depreciation $13,438,967
===========
</TABLE>
On September 29, 1995, the Trust entered into an agreement with United Air
Lines, Inc. ("United") to transfer the Trust's proportionate ownership interest
in a Boeing 747-SP aircraft (the "United Aircraft"), to United for cash
consideration of $1,609,894, including unpaid rents through the date of sale,
which event concluded in February 1996. In March 1996, the Trust acquired an
8.86% ownership interest in the Reno Aircraft, pursuant to the reinvestment
provisions of the Trust's prospectus, at a cost of $1,239,741. To acquire the
interest in the Reno Aircraft, the Trust obtained leveraging of $997,888 from a
third-party lender and utilized cash proceeds of $241,853 from the sale of the
United Aircraft. The Managing Trustee intends to reinvest the remaining
proceeds from the sale of the United Aircraft in other equipment in 1996.
At June 30, 1996, the Trust's equipment portfolio included equipment having
a proportionate original cost of $8,519,757, representing approximately 37% of
total equipment cost.
The summary above includes equipment held for sale or re-lease with a cost
and net book value of approximately $58,000 and $20,000, respectively, at June
30, 1996.
NOTE 5 - RELATED PARTY TRANSACTIONS
-----------------------------------
All operating expenses incurred by the Trust are paid by AFG on behalf of
the Trust and AFG is reimbursed at its actual cost for such expenditures. Fees
and other costs incurred during the six month periods ended June 30, 1996 and
1995, which were paid or accrued by the Trust to AFG or its Affiliates, are as
follows:
7
<PAGE>
AGF Investment Trust A
Notes to the Finacial Statements
(Continued)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Equipment acquisition fees $ 36,109 $ 45,250
Interest on note payable - affiliate -- 364
Equipment management fees 93,003 99,740
Administrative charges 10,500 10,500
Reimbursable operating expenses
due to third parties 47,037 50,528
-------- --------
Total $186,649 $206,382
======== ========
</TABLE>
All rents and proceeds from the sale of equipment are paid directly to
either AFG or to a lender. AFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Trust. At
June 30, 1996, the Trust was owed $127,649 by AFG for such funds and the
interest thereon. These funds were remitted to the Trust in July 1996.
NOTE 6 - NOTES PAYABLE
----------------------
Notes payable at June 30, 1996 consisted of installment notes of $5,531,008
payable to banks and institutional lenders. The notes bear interest rates
ranging between 5.7% and 9.17%, except for one note which bears a fluctuating
interest rate based on LIBOR plus a margin (5.5% at June 30, 1996). All of the
installment notes are non-recourse and are collateralized by the equipment and
assignment of the related lease payments. Generally, the installment notes will
be fully amortized by noncancellable rents. However, the Trust has a balloon
payment obligation at the expiration of the primary lease term related to the
Reno Aircraft. The carrying amount of notes payable approximates fair value at
June 30, 1996.
The annual maturities of the notes payable are as follows:
<TABLE>
<S> <C>
For the year ending June 30, 1997 $2,748,172
1998 1,587,035
1999 479,965
2000 108,896
2001 118,984
Thereafter 487,956
----------
Total $5,531,008
==========
</TABLE>
8
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations.
----------------------
Three and six months ended June 30, 1996 compared to the three and six months
-----------------------------------------------------------------------------
ended June 30, 1995:
--------------------
Overview
--------
As an equipment leasing trust, the Trust was organized to acquire a
diversified portfolio of capital equipment subject to lease agreements with
third parties. The Trust was designed to progress through three principal
phases: acquisitions, operations, and liquidation. During the operations
phase, a period of approximately six years, all equipment in the Trust's
portfolio will progress through various stages. Initially, all equipment will
generate rental revenues under primary term lease agreements. During the life
of the Trust, these agreements will expire on an intermittent basis and
equipment held pursuant to the related leases will be renewed, re-leased or
sold, depending on prevailing market conditions and the assessment of such
conditions by AFG to obtain the most advantageous economic benefit. Over time,
a greater portion of the Trust's original equipment portfolio will become
available for remarketing and cash generated from operations and from sales or
refinancings will begin to fluctuate. Ultimately, all equipment will be sold
and the Trust will be dissolved. The Trust's operations commenced in 1992.
Results of Operations
---------------------
For the three and six months ended June 30, 1996, the Trust recognized lease
revenue of $1,173,106 and $2,427,754, respectively, compared to $1,324,658 and
$2,679,029 for the same periods in 1995. The decrease in lease revenue from
1995 to 1996 is due primarily to the Trust's sale of its interest in the United
Aircraft in February 1996, as discussed below. In the near-term, lease revenue
is expected to increase due to reinvestment of the proceeds from the sale of
the United Aircraft in other equipment. Over time, the level of lease revenue
will decline due to the expiration of the Trust's primary lease term
agreements. The Trust also earns interest income from temporary investments of
rental receipts and equipment sales proceeds in short-term instruments.
The Trust's equipment portfolio includes certain assets in which the Trust
holds a proportionate ownership interest. In such cases, the remaining
interests are owned by AFG or an affiliated equipment leasing program sponsored
by AFG. Proportionate equipment ownership enables the Trust to further
diversify its equipment portfolio by participating in the ownership of selected
assets, thereby reducing the general levels of risk which could result from a
concentration in any single equipment type, industry or lessee. The Trust and
each affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment.
On February 5, 1996, the Trust concluded the sale of its interest in a
Boeing 747-SP to the lessee, United Air Lines, Inc., as reported in Note 3 to
the Trust's 1995 Annual Report. The Trust recognized a net loss of $458,638 in
connection with this transaction, of which $311,621 was recognized as Write-
Down of Equipment in 1995. The remainder of $147,017 was recognized as a loss
on sale of equipment on the accompanying financial statements for the six
months ended June 30, 1996. In addition to lease rents, the Trust received net
sale proceeds of $1,392,779 from United for the aircraft. The Trust plans to
reinvest substantially all of such proceeds in other equipment in 1996, a
portion of which was completed in March 1996 through the acquisition of an
8.86% ownership interest in the Reno Aircraft at an aggregate cost of
$1,239,741. To acquire the interest in the Reno Aircraft, the Trust obtained
long-term financing of $997,888 from a third-party lender and utilized cash
proceeds of $241,853 from the sale of the United Aircraft. During the three
and six months ended June 30, 1996, the Trust sold other equipment having a net
book value of
9
<PAGE>
AFG Investments Trust A
FORM 10-Q
PART 1. FINANCIAL INFORMATION
$4,736 and $20,557, respectively, to existing lessees and third parties. These
sales resulted in a net loss, for financial statement purposes, of $1,994 and
$3,044, respectively.
During the three and six months ended June 30, 1995, the
Trust sold equipment having a net book value of $1,464,026 and $1,480,074,
respectively, to existing lessees and third parties. These sales resulted in
net losses, for financial statement purposes, of $68,769 and $77,267,
respectively. The equipment sales included the Trust's interest in a vessel
with an original cost and net book value of $1,948,190 and $1,449,673,
respectively, which the Trust sold to an existing lessee in June 1995. In
connection with this sale, the Trust realized sale proceeds of $1,285,318 and
the purchaser assumed related debt and interest of $96,913 and $625,
respectively, which resulted in a net loss, for financial statement purposes,
of $66,817. This equipment was sold prior to the expiration of the related
lease term. The sale proceeds were fully reinvested in other equipment as of
June 30, 1995.
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Trust, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at
the time of sale. In addition, the amount of gain or loss reported for
financial statement purposes is partly a function of the amount of accumulated
depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including AFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances, and many other events can converge to enhance or detract from asset
values at any given time. AFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and which will
maximize total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon
the asset's sale in addition to all other cash receipts obtained from renting
the asset on a re-lease, renewal or month-to-month basis. The Trust classifies
such residual rental payments as lease revenue. Consequently, the amount of
gain or loss reported in the financial statements is not necessarily indicative
of the total residual value the Trust achieved from leasing the equipment.
Depreciation and amortization expense was $911,392 and $1,863,511 for the
three and six months ended June 30, 1996, respectively, compared to $912,607
and $1,777,493 for the same periods in 1995. For financial reporting purposes,
to the extent that an asset is held on primary lease term, the Trust
depreciates the difference between (i) the cost of the asset and (ii) the
estimated residual value of the asset on a straight-line basis over such term.
For purposes of this policy, estimated residual values represent estimates of
equipment values at the date of primary lease expiration. To the extent that
an asset is held beyond its primary lease term, the Trust continues to
depreciate the remaining net book value of the asset on a straight-line basis
over the asset's remaining economic life. The overall increase in depreciation
expense from 1995 to 1996 reflects the acquisition of equipment subsequent to
June 30, 1995.
Interest expense was $111,740 and $216,697 or 9.5% and 8.9% of lease revenue
for the three and six months ended June 30, 1996, respectively, compared to
$145,039 and $277,506 or 11% and 10.4% of lease revenue for the same periods in
1995. Interest expense in the near-term is expected to increase due to
anticipated leveraging to be obtained to finance the acquisition of
reinvestment equipment, discussed above. Thereafter, interest expense will
decline in amount and as a percentage of lease revenue as the principal balance
of notes payable is reduced through the application of rent receipts to
outstanding debt.
10
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART 1. FINANCIAL INFORMATION
Management fees were 3.8% of lease revenue for each of the three and six
month periods ended June 30, 1996 compared to 3.7% of lease revenue for each of
the same periods in 1995. Management fees are based on 5% of gross lease
revenue generated by operating leases and 2% of gross lease revenue generated
by full payout leases.
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. Collectively, operating expenses
represented 3.5% and 2.4% of lease revenue for the three and six months ended
June 30, 1996, respectively, compared to 2.5% and 2.3% of lease revenue for the
same periods in 1995. The amount of future operating expenses cannot be
predicted with certainty; however, such expenses are usually higher during the
acquisition and liquidation phases of a trust.
Liquidity and Capital Resources and Discussion of Cash Flows
------------------------------------------------------------
The Trust by its nature is a limited life entity which was established for
specific purposes described in the preceding "Overview". As an equipment
leasing program, the Trust's principal operating activities derive from asset
rental transactions. Accordingly, the Trust's principal source of cash from
operations is provided by the collection of periodic rents. These cash inflows
are used to satisfy debt service obligations associated with leveraged leases,
and to pay management fees and operating costs. Operating activities generated
net cash inflows of $2,427,693 and $2,332,893 for the six months ended June 30,
1996 and 1995, respectively. In the near-term, net cash inflows generated from
operating activities are expected to increase due to the receipt of additional
lease revenue from additional reinvestment equipment to be purchased during the
remainder of 1996. Subsequently, future renewal, re-lease and equipment sale
activities will cause a gradual decline in the Trust's lease revenue and
corresponding sources of operating cash. Overall, expenses associated with
rental activities, such as management fees, and net cash flow from operating
activities will decline as the Trust experiences a higher frequency of
remarketing events.
Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold to
the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During the six month periods ended June
30, 1996 and 1995, the Trust expended $1,441,796 and $2,378,228, respectively,
to acquire equipment, including reinvestment equipment discussed above. During
the six months ended June 30, 1996, the Trust realized net cash proceeds of
$1,410,292 compared to $1,305,269 for the same period in 1995. Future inflows
of cash from asset disposals will vary in timing and amount and will be
influenced by many factors including, but not limited to, the frequency and
timing of lease expirations, the type of equipment being sold, its condition
and age, and future market conditions.
The Trust obtained long-term financing in connection with certain equipment
leases. The origination of such indebtedness and the subsequent repayments of
principal are reported as components of financing activities. Cash inflows of
$997,888 and $1,454,669 in 1996 and 1995, respectively, resulted from
leveraging a portion of the Trust's equipment portfolio with third-party
lenders. AFG also provided interim financing of $38,396 during the six months
ended June 30, 1995, until third-party financing was finalized. Each note
payable is recourse only to the specific equipment financed and to the minimum
rental payments contracted
11
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART 1. FINANCIAL INFORMATION
to be received during the debt amortization period (which period generally
coincides with the lease rental term). As rental payments are collected, a
portion or all of the rental payment is used to repay the associated
indebtedness. In the near-term, the amount of cash used to repay debt
obligations will increase due to leveraging expected to be obtained to finance
the acquisition of additional reinvestment equipment. Subsequently, the amount
of cash used to repay debt obligations will decline as the principal balance of
notes payable is reduced through the collection and application of rents.
However, the Trust has a balloon payment obligation at the expiration of the
primary lease term related to the Reno Aircraft.
Cash distributions to the Managing Trustee, the Special Beneficiary and the
Beneficiaries are declared and generally paid within 45 days following the end
of each calendar month. The payment of such distributions is presented as a
component of financing activities. For the six months ended June 30, 1996, the
Trust declared total cash distributions of Distributable Cash From Operations
and Distributable Cash From Sales and Refinancings of $381,276. In accordance
with the Amended and Restated Declaration of Trust, the Beneficiaries were
allocated 90.75% of these distributions, or $346,008; the Special Beneficiary
was allocated 8.25%, or $31,455; and the Managing Trustee was allocated 1%, or
$3,813.
Cash distributions paid to the Participants consist of both a return of and
a return on capital. To the extent that cash distributions consist of Cash
From Sales or Refinancings, substantially all of such cash distributions should
be viewed as a return of capital. Cash distributions do not represent and are
not indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Trust and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset
at its disposal date. Future market conditions, technological changes, the
ability of AFG to manage and remarket the assets, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Trust's equipment portfolio.
The future liquidity of the Trust will be influenced by the foregoing and
will be greatly dependent upon the collection of contractual rents and the
outcome of residual activities. The Managing Trustee anticipates that cash
proceeds resulting from these sources will satisfy the Trust's future expense
obligations. However, the amount of cash available for distribution in future
periods will fluctuate. Equipment lease expirations and asset disposals will
cause the Trust's net cash from operating activities to diminish over time; and
equipment sale proceeds will vary in amount and period of realization.
Accordingly, fluctuations in the level of monthly cash distributions will occur
during the life of the Trust.
12
<PAGE>
AFG Investment Trust A
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
13
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AFG Investment Trust A
By: AFG ASIT Corporation, a Massachusetts
corporation and the Managing Trustee of
the Registrant.
By: /s/ Michael J. Butterfield
-------------------------------
Michael J. Butterfield
Treasurer AFG ASIT Corporation
(Duly Authorized Officer and
Principal Accounting Officer)
Date: August 14, 1996
---------------
By: /s/ Gary M. Romano
-------------------------------
Gary M. Romano
Clerk of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Financial Officer)
Date: August 14, 1996
-----------------------------
14
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0
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