<PAGE> 1
As filed with the Securities and Exchange Commission on August 15, 1997.
===============================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One) For the quarterly period ended June30,1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------- to --------------
----------------------------
Commission File No. 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
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
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)
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports 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
As of June 30, 1997, there are two owners of the issuer's certificates,
holding, respectively, 79% and 21% of the issuer's aggregate equity
===============================================================================
<PAGE> 2
<TABLE>
ARCH LEASING CORPORATION TRUST
BALANCE SHEET
<CAPTION>
JUNE 30, MARCH 31,
Assets 1997 1997
-----------------------------------
<S> <C> <C>
Cash $ 310,357 $ 305,764
Accounts receivable 52,216 38,659
Inventory 326,508 34,729
Leased assets,less accumulated
depreciation 19,637,842 23,123,142
Purchased residual values 2,026,627 2,094,887
Deferred charges 1,358,056 1,508,750
-----------------------------------
23,711,606 27,105,931
===================================
Liabilities and Equity
----------------------
Liabilities:
Accrued interest 63,275 63,275
Due to related parties 16,742 25,971
Deferred income 151,554 191,344
Bonds payable 14,011,000 14,011,000
Nonrecourse discounted lease
rentals 10,149,011 13,091,129
-----------------------------------
Total liabilities 24,391,582 27,382,719
-----------------------------------
Equity:
Certificateholders' equity (deficit) (679,976) (276,788)
-----------------------------------
$23,711,606 $27,105,931
===================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 3
<TABLE>
ARCH LEASING CORPORATION TRUST
INCOME STATEMENT
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
6/30/97 6/30/96
--------------------------------------
<S> <C> <C>
Revenues:
Leasing revenues $ 3,027,933 $ 3,987,394
Interest income 3,044 2,538
--------------------------------------
Total revenues $ 3,030,977 $ 3,989,932
--------------------------------------
Costs and expenses:
Interest 722,498 711,546
Depreciation and amortization 2,684,591 3,059,676
Fees 37,077 75,500
--------------------------------------
Total costs and expenses 3,444,166 3,846,722
--------------------------------------
Net income (loss) $ (413,189) $ 143,210
======================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 4
<TABLE>
ARCH LEASING CORPORATION TRUST
STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
-------------------------------------
Cash flows from operating activities: 1997 1996
-------------------------------------
<S> <C> <C>
Net Income (loss) $ (413,189) $ 143,210
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,684,591 3,059,676
Loss on sale of leased equipment 334,320 197,336
Change in assets and liabilities:
(Increase) decrease in accounts receivable (13,557) 188,817
(Increase) decrease in inventory (291,779) 6,826
(Increase) in due from related parties (9,228) (165,348)
(Decrease) in deferred income (39,790) (79,654)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,251,368 3,350,863
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of leased equipment 696,114 163,494
Increase in marketing fee (10,771) (16,949)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 685,343 146,545
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payment on notes payable (2,942,118) (3,351,142)
Sale of equity certificates 10,000 0
- -----------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,932,118) (3,351,142)
- -----------------------------------------------------------------------------------------------------------
Net increase in cash $ 4,593 $ 146,266
=====================================
Cash - beginning of period 305,764 287,132
- -----------------------------------------------------------------------------------------------------------
Cash - end of period $ 310,357 $ 433,398
===========================================================================================================
Supplemental disclosure of cash flow information
Interest paid $ 722,498 $ 711,546
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 5
ARCH LEASING CORPORATION TRUST
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30,1997
------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
GENERAL
-------
All adjustments which, in the opinion of management, are necessary to
fairly present the results of operation for the period ended June
30,1997, have been included in the accompanying financial statements.
LEASE ACCOUNTING
----------------
The leases in which the Trust participates as lessor are accounted for
in accordance with Statement on Financial Accounting Standards No. 13.
DEFERRED CHARGES
----------------
Deferred charges are being amortized over the term of each respective
Series of Bonds.
INCOME TAXES
------------
The Trust will be treated as a partnership for Federal income tax
purposes and consequently there is no provision for income taxes.
2. DEBT:
----
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%.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
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
- ----
For the three month period ended June 30, 1997, the Trust recorded
leasing revenues in the amount of $3,027,933, a 24% decrease from 1996, due to
attrition caused by a maturing lease portfolio. Depreciation on the leased
equipment amounted to $2,554,295, a 10% decrease from 1996, due also to a
maturing lease portfolio. Operating expenses, namely service fee expense,
amortization and interest expense, amounted to $889,871. This amounts to an
11% decrease from the previous period ended 1996. The period's activity
resulted in net loss in the amount of $413,189. The decrease in net income
from 1996 of $556,399 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
- ----
For the three month period ended June 30,1996 the Trust recorded
leasing revenues in the amount of $3,987,394. Depreciation on leased equipment
amounted to $2,843,437. Operating expenses, namely service fee expense,
amortization and interest expense amounted to $291,739. The period's activity
resulted in net income of $143,210.
<PAGE> 7
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: August 14, 1997 By:--------------------------------
Lynnette Frownfelter, President
Dated: August 14, 1997 By:--------------------------------
Lynnette Frownfelter
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 310,357
<SECURITIES> 0
<RECEIVABLES> 52,216
<ALLOWANCES> 0
<INVENTORY> 326,508
<CURRENT-ASSETS> 0
<PP&E> 37,982,776
<DEPRECIATION> 18,344,934
<TOTAL-ASSETS> 23,711,606
<CURRENT-LIABILITIES> 0
<BONDS> 14,011,000
<COMMON> 0
0
0
<OTHER-SE> (679,976)
<TOTAL-LIABILITY-AND-EQUITY> 23,711,606
<SALES> 0
<TOTAL-REVENUES> 3,030,977
<CGS> 0
<TOTAL-COSTS> 2,721,668
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 722,498
<INCOME-PRETAX> (413,189)
<INCOME-TAX> 0
<INCOME-CONTINUING> (413,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (413,189)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
