<PAGE>
<PAGE>
SECURITIES EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Act of
_____ 1934 for the quarterly period ended June 30, 1996.
_____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file No. 333-3954
IMC MORTGAGE COMPANY
(Exact name of issuer as specified in its Charter)
FLORIDA 59-3350574
- --------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification number)
3450 BUSHWOOD PARK DRIVE
TAMPA, FLORIDA 33618
(Address of Principal Executive Offices)
Issuer's telephone number, including area code: (813) 932-2211
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing for the past 90 days. Yes X No
__ __
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title of each Class: Outstanding at August 10, 1996
- -------------------------------------- ------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE 9,834,833
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<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 1
Consolidated Statements of Operations for the three months and
six months ended June 30, 1996 and June 30, 1995 2
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and June 30, 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE>
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PART I. FINANCIAL INFORMATION
<PAGE>
<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER
1996 1995
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 19,158,134 $ 5,133,718
Securities purchased under agreements to resell 417,130,000 138,058,262
Accrued interest receivable 3,382,905 1,872,129
Accounts receivable 2,908,282 1,179,907
Mortgage loans held for sale 433,252,537 193,002,835
Interest-only and residual certificates 34,185,965 14,072,771
Warehouse financing due from stockholders 1,151,196 53,200
Furniture, fixtures and equipment, net 1,096,603 679,950
Capitalized mortgage servicing rights 2,810,154 --
Deferred tax asset 3,600,000 --
Other assets 5,100,154 498,662
------------- --------------
Total assets $923,775,930 $ 354,551,434
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Warehouse finance facilities $404,364,911 $ 189,819,046
Term debt 17,708,582 11,120,642
Accrued and other liabilities 6,363,394 547,707
Accrued interest payable 2,031,684 1,055,550
Securities sold but not yet purchased 416,620,923 139,200,000
Amounts payable to stockholders for taxes -- 1,306,645
Accrual for sharing of proportionate value of equity -- 5,893,000
------------- --------------
Total liabilities 847,089,494 348,942,590
------------- --------------
Stockholders' equity:
Common stock, par value $.01 per share; 50,000,000
authorized; 9,834,833 and 6,000,000 shares issued
and outstanding 98,348 60,000
Additional paid-in capital 76,588,088 3,844,601
Retained earnings -- 1,704,243
------------- --------------
Total stockholders' equity 76,686,436 5,608,844
------------- --------------
Total liabilities and stockholders' equity $923,775,930 $ 354,551,434
============= ==============
</TABLE>
See accompanying notes to Consolidated Financial Statements.
1
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<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- --------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Gain on sales of loans $11,315,433 $ 2,823,232 $22,190,900 $ 6,120,640
Additional securitization
transaction expense (1,329,053) (176,860) (4,157,644) (431,367)
------------ ------------ ------------ ------------
Net gain on sale of loans 9,986,380 2,646,372 18,033,256 5,689,273
------------ ------------ ------------ ------------
Warehouse interest income 6,453,721 1,703,094 11,614,663 2,794,027
Warehouse interest expense (4,457,415) (1,192,707) (7,832,659) (2,212,350)
------------ ------------ ------------ ------------
Net warehouse interest income 1,996,306 510,387 3,782,004 581,677
------------ ------------ ------------ ------------
Servicing fees 1,466,803 322,564 2,462,242 431,731
Other 835,709 272,773 1,464,245 481,016
------------ ------------ ------------ ------------
Total servicing fees and other 2,302,512 595,337 3,926,487 912,747
------------ ------------ ------------ ------------
Total revenues 14,285,198 3,752,096 25,741,747 7,183,697
------------ ------------ ------------ ------------
Expenses:
Compensation and benefits 4,372,965 1,263,021 8,039,650 2,284,836
Selling, general and
administrative expenses 2,895,854 662,627 5,136,710 1,216,537
Other interest expense 1,005,057 92,540 1,347,591 108,624
Sharing of proportionate value
of equity -- 677,575 2,555,000 1,396,527
------------ ------------ ------------ ------------
Total expenses 8,273,876 2,695,763 17,078,951 5,006,524
------------ ------------ ------------ ------------
Income before income taxes 6,011,322 1,056,333 8,662,796 2,177,173
Non-recurring benefit
associated with the Conversion
of Partnership to C Corporation 3,600,000 -- 3,600,000 --
------------ ------------ ------------ ------------
Net income $ 9,611,322 $ 1,056,333 $12,262,796 $ 2,177,173
============ ============ ============ ============
PRO FORMA DATA (GIVING EFFECT TO
PROVISION FOR INCOME TAXES):
Income before provision for income
taxes $ 6,011,322 $ 1,056,333 $ 8,662,796 $ 2,177,173
Pro forma provision for income taxes 2,358,522 406,477 3,384,522 837,776
------------ ------------ ------------ ------------
Pro forma net income $ 3,652,800 $ 649,856 $ 5,278,274 $ 1,339,397
============ ============ ============ ============
Pro forma net income per common share:
Primary $0.44 $0.08 $0.65 $0.17
============ ============ ============ ============
Fully diluted $0.43 $0.08 $0.63 $0.17
============ ============ ============ ============
Weighted average number of shares
outstanding:
Primary 8,217,193 7,935,752 8,099,666 7,935,752
============ ============ ============ ============
Fully diluted 8,551,210 7,935,752 8,389,910 7,935,752
============ ============ ============ ============
</TABLE>
See accompanying notes to Consolidated Financial Statements.
2
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IMC MORTGAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
1996 1995
<S> <C> <C>
Cash flow for operating activities:
Net income $12,262,796 $ 2,177,173
Adjustments to reconcile net income to net cash used in
operating activities:
Sharing of proportionate value of equity 2,555,000 1,396,527
Depreciation and amortization 502,255 61,454
Deferred hedge 1,650,815 18,312
Deferred tax assets (3,600,000) --
Capitalized mortgage servicing rights (3,081,154) --
Net loss in joint venture 227,790 --
Net change in operating assets and liabilities, net of effects
from purchase of Assets of Mortgage Central Corp.:
Mortgages purchased or originated (666,578,231) (244,052,000)
Sales of mortgage loans 424,677,714 170,891,000
Increase in securities purchased under agreement to resell
and securities sold but not yet purchased (1,650,815) (18,312)
Increase in accrued interest receivable on mortgage loans
held for sale (1,510,776) (177,335)
(Increase) decrease in warehousing financing due from
stockholders (1,097,996) 57,000
Increase in interest-only and residual certificates (20,113,194) (4,040,061)
Increase in other assets (359,806) (532,270)
(Increase) decrease in accounts receivable (1,728,375) 33,152
Increase (decrease) in accrued interest payable 976,134 (399,952)
Decrease in deferred income -- (450,600)
Increase (decrease) in accrued and other liabilities 4,509,042 (1,943,291)
------------ -------------
Net cash used in operating activities (252,358,801) (76,979,203)
------------ -------------
Investing activities:
Purchase of furniture, fixtures and equipment (547,908) (123,956)
Investment in joint venture (2,563,474) --
------------ -------------
Net cash used in investing activities (3,111,382) (123,956)
------------ -------------
Financing activities:
Issuance of common stock 58,203,377 --
Contributions from stockholders -- 15,700
Distributions to stockholders for taxes (9,842,583) (4,630,699)
Borrowings - warehouse 653,246,666 236,730,440
Borrowings - term debt 18,387,940 --
Repayments of borrowings - warehouse (438,700,801) (155,913,225)
Repayments of borrowings - term debt (11,800,000) --
------------ -------------
Net cash provided by financing activities 269,494,599 76,202,216
------------ -------------
Net increase (decrease) in cash and cash equivalents 14,024,416 (900,943)
Cash and cash equivalents, beginning of period 5,133,718 3,091,180
------------ -------------
Cash and cash equivalents, end of period $19,158,134 $ 2,190,237
============ =============
SUPPLEMENTAL DISCLOSURE CASH FLOW INFORMATION:
Cash paid during the period for interest $ 8,204,116 $ 2,720,926
============ =============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES:
Acquisition of assets of Mortgage Central $ 2,006,000 $ --
============ =============
Issuance of options to ContiFinancial $ 8,448,000 $ --
============ =============
</TABLE>
See accompanying notes to Consolidated Financial Statements.
3
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<PAGE>
IMC MORTGAGE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the three and six months ended June 30, 1996 and 1995
(unaudited)
1. ORGANIZATION:
Industry Mortgage Company, L.P. and its subsidiaries (the "Partnership) is
a limited partnership which was organized under the laws of the state of
Delaware on August 12, 1993 (inception). The Partnership's equity was
owned (until June 24, 1996) 1% by its corporate General Partner, Industry
Mortgage Corporation (the "General Partner") and 99% by a number of voting
limited partners and certain key employee (nonvoting) partners
(collectively the "Limited Partners"). The Partnership in turn owned 100%
of the common stock of its subsidiaries, IMC Corporation of America, and
IMC Securities, Inc. Until June 24, 1996, the partnership also owned the
controlling interest in IMC Mortgage Company.
In June 1996, the Limited Partners exchanged their limited
partnership interest and the sole stockholder of the General Partner
exchanged the voting common stock of the General Partner for
voting common shares (the exchange or recapitalization) of IMC Mortgage
Company. The exchange was consummated on a historical cost basis as all
entities were under common control. Accordingly, since June 24, 1996, IMC
Mortgage Company (the "Company") owns 100% of the limited partnership
interest in the Partnership and 100% of the general partnership interest
in the Partnership. At the time of the exchange, the retained earnings
previously reflected by the Partnership were transferred to additional
paid-in capital. Net income recognized from the time of the exchange to
June 30, 1996 was not significant.
The accompanying consolidated financial statements include the accounts of
the Company, the Partnership, IMC Corporation of America, and IMC
Securities, Inc., after giving effect to the exchange as if it had
occurred at inception. All intercompany transactions have been eliminated
in the accompanying consolidated financial statements.
2. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June 30,
1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. For further information, refer to
the
4
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. BASIS OF PRESENTATION, CONTINUED:
consolidated financial statements and footnotes thereto for the year ended
December 31, 1995 included in the Company's registration statement on Form
S-1 for the initial sale of public shares.
Certain reclassifications have been made to the presentations to conform
to current period presentations.
3. RECENT ACCOUNTING PRONOUNCEMENTS:
CAPITALIZED MORTGAGE SERVICING RIGHTS - Effective January 1, 1996, the
Company adopted SFAS No. 122 "Accounting for Mortgage Servicing Rights"
("SFAS 122"), superseded in June 1996 by SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities" ("SFAS 125"), which is effective January 1, 1997. The SFAS's
require that upon sale or securitization of mortgages, companies
capitalize the cost associated with the right to service mortgage loans
based on their relative fair values. The Company determines fair value
based on the present value of estimated net future cash flows related
to servicing income. The cost allocated to the servicing rights is
amortized in proportion to and over the period of estimated net future
servicing fee income. Under SFAS 122, the Company capitalized $3,081,154
of capitalized mortgage servicing rights during the six months ended
June 30, 1996. During the same period, amortization of capitalized
mortgage servicing rights was approximately $271,000.
Prior to the adoption of SFAS 122, servicing rights acquired through loan
origination activities were recorded in the period for which the loans
were serviced.
ACCOUNTING FOR STOCK-BASED COMPENSATION - On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation." This
standard establishes a fair value method for accounting for stock-based
compensation plans, either through recognition or disclosure. The Company
intends to adopt this standard by disclosing in the footnotes on an annual
basis the pro forma net income and earnings per share amounts assuming the
fair value method was adopted. The adoption of this standard is not
anticipated to have a material impact on results of operations,
financial position or cash flows.
4. PRO FORMA DATA:
The Partnership which is included in the consolidated financial statements
became a wholly owned subsidiary of the Company on June 24, 1996 as
described in Note 1. The Partnership made no provision for income taxes
since the Partnership's income or losses were passed through to the
partners individually.
5
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. PRO FORMA DATA, CONTINUED:
The Partnership income became subject to income taxes at a corporate level
on June 24, 1996. The pro forma data included in the consolidated
statements of operations of the Company includes a pro forma provision for
income taxes using the provisions of SFAS No. 109, "Accounting for Income
Taxes," to indicate what these taxes would have been had the Partnership's
income been subject to income taxes at a corporate level in prior years.
5. DEFERRED TAXES
Deferred income taxes reflecting the tax effect of the temporary
differences between the Company's financial statement and tax bases of
certain assets and liabilities became a net asset of the Company on June
24, 1996 and was reflected on the consolidated balance sheet with a
corresponding non-recurring benefit being reflected in the consolidated
statement of operations for the three months ended June 30, 1996. The net
deferred tax asset is reduced by a valuation allowance when it is deemed
more likely than not that all the deferred tax asset will not be realized.
Although realization is not assured, management believes it is more likely
than not all the deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward
period are reduced. Deferred taxes relate primarily to mark-to-market
adjustments recognized for tax purposes under IRS Section 475, accrued
contingent fees, servicing rights, and REMIC income recognition.
6. PRO FORMA EARNINGS PER SHARE:
Pro forma net income per common share has been computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the period after giving effect to the recapitalization
described in Note 1. Dilutive common share equivalents consist of stock
options (calculated using the treasury stock method) and convertible
preferred stock. Pursuant to the requirements of the Securities and
Exchange Commission, common shares and common equivalent shares issued at
prices below the estimated public offering price of $18 per share during
the twelve months immediately preceding the proposed date of the initial
filing of the Registration Statement (cheap stock) have been included in
the calculation of common shares and common share equivalents, using the
treasury stock method, as if they were outstanding for all periods
presented. Weighted average number of shares outstanding is comprised of
the following:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
End June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding 6,252,845 6,000,000 6,126,423 6,000,000
Additional shares deemed outstand-
ing; cheap stock 1,964,348 1,935,752 1,973,243 1,935,752
---------- --------- --------- ---------
Primary weighted average
number of common shares
and common share equivalents 8,217,193 7,935,752 8,099,666 7,935,752
Additional shares deemed
outstanding:
Convertible debt 100,436 -- 53,763 --
Convertible preferred stock 233,581 -- 236,481 --
---------- ---------- --------- ---------
Fully diluted weighted
average number of common shares
and common share equivalents 8,551,210 7,935,752 8,389,910 7,935,752
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
7. MORTGAGE LOANS HELD FOR SALE:
Mortgage loans held for sale at June 30, 1996, consistent with December
31, 1995, is comprised primarily of loans secured by first or second
mortgages on one-to-four family residences. In July 1996, the Company
completed a securitization through a public offering of securities in the
aggregate amount of $250 million.
6
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. WAREHOUSE FINANCE FACILITIES:
The Company has available numerous lines of credit at June 30, 1996
totaling $620,000,000 ($645,000,000 at December 31, 1995) of which at June
30, 1996 $404,364,911 was outstanding ($189,819,046 at December 31, 1995).
Outstanding borrowings under warehouse finance facilities are
collateralized by the mortgage loans held for sale and warehouse financing
due from stockholders.
9. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Goodwill $1,732,261 $ --
Investment in joint venture 2,335,684 --
Prepaid expenses 411,467 214,206
Real estate owned 463,173 141,840
Organization costs, net 43,581 54,014
Other assets 113,988 88,602
---------- ---------
$5,100,154 $498,662
========== =========
</TABLE>
10. ACCRUED AND OTHER LIABILITIES:
Accrued and other liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Accrued compensation and benefits $2,379,000 $125,000
Accounts payable 3,984,394 422,707
----------- ---------
$6,363,394 $547,707
=========== ==========
</TABLE>
11. SHAREHOLDERS' EQUITY:
In June 1996, the Company sold 3,565,000 shares of common stock for $18
per share, the net proceeds of which amounted to $58,204,000, and issued
269,833 of Common Stock pursuant to options and convertible preferred
stock.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and notes included in Item 1 of this Quarterly Report, and
the financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's S-1 Registration Statement, filed on June 24, 1996.
Results of Operations for the three months and six months ended June 30, 1996
compared to the three months and six months ended June 30, 1995
Pro forma net income for the three and six months ended June 30, 1996 was $3.7
million and $5.3 million, respectively, representing an increase of $3.0 million
and $4.0 million or 462% and 294% over pro forma net income of $0.7 million, and
$1.3 million, respectively, for the three and six months ended June 30, 1995.
The increase in pro forma net income resulted principally from increases in gain
on sale of loans, net of additional securization expense of $7.4 million and
$12.3 million, respectively, or 277% and 217%, to $10.0 million and $18.0
million, respectively, for the three months and six months ended June 30, 1996
from $2.6 million and $5.7 million, respectively, for the three and six months
ended June 30, 1995. Also contributing to the increase in pro forma net income
was a $1.5 million and $3.2 million or 291% and 550% increase in net warehouse
interest income to $2.0 million and $3.8 million, respectively, for the three
and six months ended June 30, 1996 from $0.5 million and $0.6 million for the
three and six months ended June 30, 1995, a $1.2 million and $2.1 million or
355% and 471% increase in servicing fees to $1.5 million and $2.5 million for
the three and six months ended June 30, 1996 from $0.3 million and $0.4 million
for the three and six months ended June 30, 1995 and a $0.5 million and $1.0
million or 206% and 204% increase in other revenues to $0.8 million and $1.5
million for the three and six months ended June 30, 1996 from $0.3 million and
$0.5 million for the three and six months ended June 30, 1995.
The increase in income was partially offset by a $3.1 million and $5.7 million
or 246% and 252% increase in compensation and benefits to $4.4 million and $8.0
for the three and six months ended June 30, 1996 from $1.3 million and $2.3
million for the three and six months ended June 30, 1995 and $2.2 million and
$3.9 million or 337% and 322% increase in selling, general and administrative
expenses to $2.9 million and $5.1 million for the three and six months ended
June 30, 1996 from $0.7 million and $1.2 million for the three and six months
ended June 30, 1995. The increase in
8
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<PAGE>
income was further offset by a $0.9 million and $1.2 million or 986% and 1,141%
increase in other interest expense to $1.0 million and $1.3 million for the
three and six months ended June 30, 1996 from $0.1 million and $0.1 million for
the three and six months ended June 30, 1995. Finally, income was favorably
impacted by a $0.7 million decrease in the sharing of proportionate value of
equity to zero for the three months ended June 30, 1996 from $0.7 for the three
months ended June 30, 1995 and unfavorably impacted by a $1.2 million or 83%
increase in sharing of proportionate value of equity to $2.6 million for the six
months ended June 30, 1996 from $1.4 million for the six months ended June 30,
1995.
Pro forma income before taxes was reduced by a pro forma income tax expense of
$2.4 million and $3.4 million for the three and six months ended June 30,
1996 compared to $0.4 million and $0.8 million for the three and six months
ended June 30, 1995 representing a pro forma effective tax rate of approximately
39%.
REVENUES
The following table sets forth information regarding components of the Company's
revenues for the three and six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Gain on sale of loans $11,315,433 $ 2,823,232 $22,190,900 $ 6,120,640
Additional securitization transaction
expense (1,329,053) (176,860) (4,157,644) (431,367)
------------ ------------ ----------- ------------
Gain on sale of loans, net 9,986,380 2,646,372 18,033,256 5,689,273
------------ ------------ ----------- ------------
Warehouse interest income 6,453,721 1,703,094 11,614,663 2,794,027
Warehouse interest expense (4,457,415) (1,192,707) (7,832,659) (2,212,350)
------------ ------------ ----------- ------------
Net warehouse interest income 1,996,306 510,387 3,782,004 581,677
------------ ------------ ----------- ------------
Servicing fees 1,466,803 322,564 2,462,242 431,731
Other 835,709 272,773 1,464,245 481,016
------------ ------------ ----------- ------------
Total revenues $14,285,198 $ 3,752,096 $25,741,747 $ 7,183,697
============ ============ =========== ============
</TABLE>
GAIN ON SALE OF LOANS, NET
For the three and six months ended June 30, 1996, gain on sale of loans
increased to $11.3 million and $22.2 million from $2.8 million and $6.1 million
for the three and six months ended June 30, 1995, an increase of 301% and 263%
reflecting increased loan production and securitizations for the three and six
months ended June 30, 1996 and the adoption of the Financial Accounting
Standards Board's SFAS 122-Accounting for Mortgage Servicing Rights. The total
volume of loans produced increased by 223% and 173% to $402.7 million and $666.6
million for the three and six months ended June 30, 1996 as compared with a
total volume of $124.7 million and $244.1 million for the three and six months
ended June 30, 1995. Originations by the correspondent network increased 255%
and 192% to $371.4 million and $607.9 million for the three and six months ended
June 30, 1996 from $104.7 million and $208.0 million for the three and six
months ended June 30, 1995, while production from the Company's broker network
and direct lending operations increased to
9
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<PAGE>
$31.3 million and $58.7 million or 57% and 63% for the three and six months
ended June 30, 1996 from $20.0 million and $36.1 million for the three and six
months ended June 30, 1995. Production volume increased during the 1996 period
due to: (i) the Company's expansion program; (ii) the growth of its
securitization capability; (iii) the growth of its loan servicing capability;
and (iv) the acquisition of the assets and business of Mortgage Central Corp.
acquired by the Company. For the three and six months ended June 30, 1996,
the Company experienced higher gains as it sold more loans through
securitization. Securitization increased by $200 million in the three months
ended June 30, 1996 from zero in the three months ended June 30, 1995.
Securitization increased by $265 million, an increase of 241% in the six
months ended June 30, 1996 from $110 million in the six months ended June
30, 1995. The number of approved correspondents and brokers increased by 145
and 613 or 97% and 75% to 294 and 1,434, respectively, at June 30, 1996 from
149 and 821 at June 30, 1995. Additional securitization transaction expense
increased by $1.1 million and $3.8 million or 651% and 864% to $1.3 million and
$4.2 million in the three and six months ended June 30, 1996 from $0.2 million
and $0.4 million in the three and six months ended June 30, 1995. For the
three and six months ended June 30, 1996, gain on sale of loans, net, increased
to $10.0 million and $18.0 million from $2.6 million and $5.7 million for the
three and six months ended June 30, 1995, an increase of 277% and 217%,
reflecting increased loan production and securizations in the 1996 period.
NET WAREHOUSE INTEREST INCOME
Net warehouse interest income increased to $2.0 million and $3.8 million for the
three and six months ended June 30, 1996 from $0.5 million and $0.6 million for
the three and six months ended June 30, 1995, an increase of 291% and 550%. The
increase in the 1996 period reflected higher interest income resulting from
increased mortgage loan production which was partially offset by interest costs
associated with warehouse facilities. The mortgage loans held for sale
increased in the three and six months ended June 30, 1996 from the three and
six months ended June 30, 1995 as the Company increased its loan production.
SERVICING FEES
Servicing fees increased to $1.5 million and $2.5 million for the three and six
months ended June 30, 1996 from $0.3 million and $0.4 million for the three and
six months ended June 30, 1995, an increase of 355% and 471%. Servicing fees for
the three and six months ended June 30, 1996 were positively affected due to an
increase in loans serviced over the prior year. The increase in loans serviced
came from the Company's normal purchase and origination channels.
10
<PAGE>
<PAGE>
OTHER
Other revenues, consisting principally of interest on interest-only and residual
certificates, increased to $.8 million and $1.5 million or 206% and 204% in the
three and six months ended June 30, 1996 from $0.3 million and $0.5 million in
the three and six months ended June 30, 1995 as a result of increased
securitization volume.
EXPENSES
The following table sets forth information regarding components of the Company's
expenses for the three and six months ended June 30, 1995 and 1996.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Compensation and benefits $ 4,372,965 $ 1,263,021 $ 8,039,650 $ 2,284,836
Selling, general and administrative
expenses 2,895,854 662,627 5,136,710 1,216,537
Other 1,005,057 92,540 1,347,591 108,624
Sharing of proportionate value of
equity 677,575 2,555,000 1,396,527
------------ ------------ ------------ -----------
Total expenses $ 8,273,876 $ 2,695,763 $ 17,078,951 $ 5,006,524
============ ============ ============ ===========
</TABLE>
Compensation and benefits increased by $3.1 million and $5.7 million or 246% and
252% to $4.4 million and $8.0 million in the three and six months ended June 30,
1996 from $1.3 million and $2.3 million in the three and six months ended June
30, 1995, principally due to an increase in the number of employees to service
the Company's increased loan production, the acquisition of the assets and
business of Mortgage Central Corp. and an increase in executive bonuses.
Selling, general and administrative expenses increased by $2.2 million and $3.9
million or 337% and 322% to $2.9 million and $5.1 million in the three and six
months ended June 30, 1996 from $0.7 million and $1.2 million in the three and
six months ended June 30, 1995, principally due to an increase in the volume of
loan production and the acquisition of the assets and business of Mortgage
Central Corp.
Other interest expense increased to $1.0 million and $1.3 million in the three
and six months ended June 30, 1996 from $0.1 million and $0.1 million in the
three and six months ended June 30, 1995 as a result of increased term debt
borrowings.
The sharing of proportionate value of equity, representing the amount payable
under the Conti Value Sharing Arrangement (VSA), decreased to
zero in the three months ended June 30, 1996 from $0.7 million in the three
months ended June 30, 1995. No amounts were reflected for the sharing of
proportionate value of equity in the three months ended June 30, 1996 or will be
reflected in the future as the Company, in March 1996, replaced the amounts
payable under the VSA with an option to acquire an interest in the Company. The
sharing of proportionate value of equity, representing the amount payable under
the VSA, increased by $1.2 million or 83% to $2.6 million in the six months
ended June 30, 1996 from $1.4 million in the six months ended June 30, 1995.
11
<PAGE>
<PAGE>
PRO FORMA INCOME TAXES
The effective pro forma income tax rate for the three and six months ended June
30, 1996 was approximately 39%, which differed from the federal tax rate of 35%
primarily due to state income taxes. The increase in pro forma income taxes of
$2.0 million and $2.5 million or 480% and 304% to $2.4 million and $3.3 million
in the three and six months ended June 30, 1996 from $0.4 million and $0.8
million in the three and six months ended June 30, 1995 was proportionate to the
increase in pre-tax income.
FINANCIAL CONDITION
June 30, 1996 Compared to December 31, 1995
Mortgage loans held for sale at June 30, 1996 were $433.3 million, representing
an increase of $240.3 million or 125% over mortgage loans held for sale of
$193.0 million at December 31, 1995. This increase was a result of increased
loan origination and purchasing as the Company expanded into new states and as
well as increased origination and purchasing efforts in states in which the
Company had an existing market presence.
Interest-only and residual certificates at June 30, 1996 were $34.2 million,
representing an increase of $20.1 million or 143% over interest-only and
residual certificates of $14.1 million at December 31, 1995. This increase was a
result of the completion of two securitizations.
Borrowings under warehouse financing facilities at June 30, 1996 were $404.4
million, representing an increase of $214.6 million or 113% more than
warehouse financing facilities of $189.8 million at December 31, 1995. This
increase was primarily a result of increased loan originations and purchases.
Term debt at June 30, 1996 was $17.7 million, representing an increase of $6.6
million or 59% more than term debt of $11.1 million at December 31, 1995. This
increase was primarily a result of financing interest-only and residual
certificates.
Stockholders' equity as of June 30, 1996 was $76.7 million, representing an
increase of $71.1 million or 1,267% over stockholders' equity of $5.6 million at
December 31, 1995. This increase was primarily a result of the Company selling
3.6 million shares of common stock for $18.00 per share, the net proceeds
amounted to $58.2 million, the conversion of the Conti VSA into the Conti Option
of $8.5 million, and the recognition of a deferred tax asset of approximately
$3.6 million, offset by distributions to stockholders for taxes of 9.8 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses its cash flow from loans sold through securitizations, whole
loan sales, loan origination fees, processing fees, net interest income,
servicing fees and borrowings under its warehouse facility and term debt to meet
its working capital needs. The Company's cash requirements include the funding
of loan purchases and originations, payment of interest expenses, funding the
over-collateralization requirements for securitizations, operating expenses,
income taxes and capital expenditures.
12
<PAGE>
<PAGE>
Adequate credit facilities and other sources of funding, including the ability
of the Company to sell loans, are essential to the continuation of the Company's
ability to purchase and originate loans. As a result of increased loan purchases
and originations and its growing securitization program, the Company has
operated, and expects to continue to operate, on a negative cash flow basis.
During the six months ended June 30, 1996, the Company used cash flow for
operating activities of $252.4 million, an increase of $175.4 million, or 228%
over cash flows used for operating activities of $77.0 million for the six
months ended June 30, 1995. During the same six months ended June 30, 1996, the
Company received cash flows from financing activities of $269.5 million, an
increase of $193.3 million, or 254% over cash flows received from financing
activities of $76.2 million for the six months ended June 30, 1995. The cash
flows for operating activities related primarily to mortgage loans purchased or
originated and cash flows received from financing activities related primarily
to funding the mortgage loans purchased or originated and net proceeds from the
Company's sale of 3.6 million shares.
The Company's sale of loans through securitizations has resulted in an increase
in the amount of gain on sale recognized by the Company. The recognition of this
excess servicing spread results in the occurrence of significant costs being
incurred upon closing of the securitization transactions because the Company is
required to pay state and federal income taxes on the gain on sale in the period
recognized. During the six months ended June 30, 1996, the Company received cash
of approximately $1.4 million related to interest only and residual
certificates. The Company borrows funds on a short-term basis to support the
accumulation of loans prior to sale. These short-term borrowings are made
under warehouse lines of credit with various lenders.
At June 30, 1996, the Company had available warehouse lines of credit totaling
$620.0 million for financing the acquisition of mortgage loans held for sale,
$404.4 million of which was outstanding at June 30, 1996. Of the warehouse lines
of credit available at June 30, 1996, the full amount matures within one year.
Interest rates on these facilities fluctuate, but ranged from 6.3% to 7.0% as of
June 30, 1996. Outstanding borrowings under these lines of credit are
collateralized by all of the Company's mortgage loans held for sale and
warehouse financing due from stockholders. Upon the sale of these loans and
repayment of warehouse financing due from stockholders, the related amounts
outstanding under the lines will be repaid.
At June 30, 1996, the Company also had term loans outstanding of $17.7 million
expiring through January 2000. Outstanding borrowings under this facility are
secured by interest-only and residual certificates.
The Company's warehouse lines and standby facility contain various affirmative
and negative covenants customary for credit arrangements of their type and which
the Company believes will not have a material effect on its operations, growth
and financial flexibility. The Company does not believe that the existing
financial covenants will restrict its
13
<PAGE>
<PAGE>
operations or growth within the next 12 months. Management believes the Company
is in compliance with all such covenants under these agreements.
The Company's current warehouse and credit facilities generally are subject to
one-year terms. Certain agreements have automatic renewal features subject
to the absence of defaults and creditor notification of termination.
Funds available under the Company's current warehouse and other current
facilities and the net proceeds from the Public Offering are expected to be
sufficient to fund the Company's liquidity requirements, including the
implementation of each of its business strategies, for the next 12 months.
Consequently, the Company anticipates that it may need to arrange for additional
external cash resources on or after July 1997 through additional financing.
While the company anticipates that it will be able to meet its warehouse and
credit needs for the next 12 months through its current facilities, and has no
reason to believe that additional credit facilities will be unavailable if
future operations are consistent with current performance, there can be no
assurance either that the Company's current creditors will renew their
facilities as they expire or that the Company will be able to acquire additional
credit lines.
OUTLOOK
Except for the historical information contained herein, the matters discussed
herein are forward-looking statements that are subject to certain risks and
uncertainties and actual results could differ materially from those contemplated
by such forward-looking statements.
14
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--None
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K--Note
(a) Exhibits
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 14th, 1996 IMC MORTGAGE COMPANY
------------------
By: /s/ Thomas G. Middleton
-----------------------------------
Thomas G. Middleton
President, Chief Operating Officer,
Assistant Secretary and Director
By: /s/ Stuart D. Marvin
-----------------------------------
Stuart D. Marvin
Chief Financial Officer
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 19,158
<SECURITIES> 0
<RECEIVABLES> 440,968
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,457
<DEPRECIATION> 360
<TOTAL-ASSETS> 923,776
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 98
0
0
<OTHER-SE> 76,588
<TOTAL-LIABILITY-AND-EQUITY> 923,776
<SALES> 37,732
<TOTAL-REVENUES> 25,742
<CGS> 11,990
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,348
<INCOME-PRETAX> 8,663
<INCOME-TAX> (3,600)
<INCOME-CONTINUING> 12,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,278
<EPS-PRIMARY> .65
<EPS-DILUTED> .63
</TABLE>
