<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 Number 2-67676
C.M. CORP.
(Exact name of registrant as specified in its charter)
Delaware 59-1995931
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
311 Park Place Boulevard, Suite 500, Clearwater, Florida 34619
(Address of principal executive offices)
(813) 791-2111
(Telephone Number)
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
Number of shares outstanding of the registrant's common stock as of October
31, 1995:
Class Outstanding as of October 31, 1995
- ----------------------------------- ------------------------------------
Common Stock, $1 par value 1,000 shares
<PAGE> 2
C.M. CORP.
INDEX
Page Number
Part I - Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 3
Condensed Statements of Operations - Three
and Nine Months Ended September 30, 1995
and 1994 4
Condensed Statements of Cash Flows - Nine
Months Ended September 30, 1995 and 1994 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
the of the Results of Operations and Financial
Condition 10
Item 3. Defaults Upon Senior Securities 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
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C.M. CORP.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
September 30, December 31,
1995 1994
---------- --------
ASSETS
------
RESTRICTED CASH ................................ $ 616 $ 543
ACCRUED INTEREST ............................... 27 36
INVESTMENT IN RESIDENTIAL MORTGAGE LOANS, net .. 1,339 1,883
REAL ESTATE OWNED .............................. 51 263
------- -------
$ 2,033 $ 2,725
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
LIABILITIES:
Payable to U.S. Home Mortgage Corporation ...... $ 1,364 $ 1,364
Accrued interest and other liabilities ........ 272 278
Long-term debt, in default .................... 3,795 4,228
------- -------
Total liabilities ............... .... 5,431 5,870
------- -------
STOCKHOLDER'S EQUITY:
Common stock, $1 par value ................... 1 1
Capital in excess of par value ............... 1,718 1,718
Retained deficit ............................. (5,117) (4,864)
------- -------
Total stockholder's equity .......... (3,398) (3,145)
------- -------
$ 2,033 $ 2,725
======= =======
The accompanying notes are an integral part of these balance sheets.
<PAGE> 4
C.M. CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1995 1994 1995 1994
------- ------- ------- ------
REVENUES:
Interest ............................. $ 89 $ 116 $ 288 $ 360
----- ----- ----- -----
EXPENSES:
Interest ............................. 118 132 368 408
Other ................................ 20 32 25 80
Provision of losses on loans and
real estate owned ............... 10 27 148 106
----- ----- ----- -----
148 191 541 594
----- ----- ----- -----
NET LOSS ................................ $ (59) $ (75) $(253) $(234)
===== ===== ===== =====
The accompanying notes are an integral part of these statements.
<PAGE> 5
C.M. CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
-----------------
1995 1994
------- -------
Net Cash Used By Operating Activities ...................... $ (44) $(167)
----- -----
Cash Flows From Investing Activities:
Proceeds from investments in residential mortgage loans . 550 394
----- -----
Net cash provided by investing activities ............... 550 394
----- -----
Cash Flows From Financing Activities:
Repayment of long-term debt ............................. (433) (191)
----- -----
Net cash used by financing activities ................... (433) (191)
----- -----
Net Increase In Cash ....................................... 73 36
Cash At Beginning of Period ................................ 543 644
----- -----
Cash At End of Period ...................................... $ 616 $ 680
===== =====
Supplemental Disclosure:
Interest Paid .......................................... $ 373 $ 411
===== =====
The accompanying notes are an integral part of these statements.
<PAGE> 6
C.M. CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - The accompanying unaudited condensed financial statements
have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations. Although
C.M. Corp. ("Company") believes that the disclosures made
are adequate to make the information presented not misleading,
it is suggested that these condensed financial statements
be read in conjunction with the unaudited financial
statements and notes thereto included in the Company's
latest annual report on Form 10-K. The Company did not have
the cash funds to pay the costs and expenses of an audit by
independent certified public accountants of its financial
statements included in such annual report and, accordingly,
those statements are unaudited.
In the opinion of the Company, the accompanying condensed
financial statements contain all adjustments (all of which
were normal and recurring) necessary to present fairly the
financial position as of September 30, 1995 and December 31,
1994, and the results of operations for the three-month and
nine-month periods ended September 30, 1995 and 1994 and the
statements of cash flows for the nine-month periods ended
September 30, 1995 and 1994.
Note 2 - In accordance with the terms of an indenture, dated as of
July 15, 1980, between the Company and The First National Bank
of Chicago, as amended and supplemented ("Indenture"), the
Company issued, in 1980 and 1981, conventional mortgage-backed
bonds with original principal balances of $100,000,000
("Bonds") of which $3,795,000 in principal amount is
outstanding at September 30, 1995. The Company secured the
Bonds pursuant to an investment in a significant number
of conventional residential mortgage loans with high
loan-to-value ratios that are located primarily in
energy-related areas which in the mid 1980's experienced a
sharp decline in real estate values and high foreclosure
rates. In 1987, the costs and losses associated with the
repossession, maintenance and resale of foreclosed properties
increased due to depressed resale values in these areas which,
in turn, accelerated claims against available blanket
mortgage insurance coverage. During 1987, the Company
projected that, based on its accelerated claim experience,
it would exhaust the blanket mortgage insurance coverage for
the conventional mortgage loan pools securing the Bonds and
such coverage was exhausted during 1988. As a result of
the exhaustion of the blanket mortgage insurance coverage for
the mortgage pools, losses have been and will be incurred
by the Company that previously were reimbursed by the mortgage
insurer.
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Note 2 - The Company establishes reserves for losses on loans and
(cont'd.) real estate owned which reflect an estimate of the losses
that will be incurred in connection with its investment loans
and foreclosed properties. These reserves are based on
management's best estimate of amounts that will not
be reimbursed under insurance policies using current and
historical information. These estimates may change due to
economic and other conditions, the resulting effect of which
will be recognized in the period of change.
The following summarizes valuation reserves for the nine
months ended September 30, 1995 and 1994(dollars in thousands).
Real Estate
Investments Owned
------------ -----------
Balance at December 31, 1993 $ 1,588 $ 226
Provision of losses ..... 88 18
Write-offs .............. -- (102)
Reclassification ........ (44) 44
-------- --------
Balance at September 30, 1994 $ 1,632 $ 186
======== ========
Balance at December 31, 1994 $ 1,544 $ 165
Provision for losses .... 53 95
Write-offs .............. (31) (141)
Reclassification ........ (22) 22
-------- --------
Balance at September 30, 1995 $ 1,544 $ 141
======== ========
The Company does not have, nor expect to have, any
significant assets other than the mortgage loans, reserve
funds and primary mortgage insurance policies pledged as
collateral for each series of Bonds. Accordingly, its
ability to pay the principal and interest on the Bonds when
due is substantially dependent on the cash flow to be
generated by the pledged loans and the adequacy of both the
reserve funds and coverage under the primary mortgage
insurance policies. Substantially all of the pledged
mortgage loans are insured by private mortgage insurance
coverage for mortgagor payment defaults down to
approximately 72% of the original value of the underlying
properties on the date of origination of the loans.
Under the terms of the Indenture, the Company agreed to
provide the Trustee with the periodic reports filed with the
Securities and Exchange Commission ("SEC") and to provide an
annual statement to the bondholders. The Company does not
have, nor does it expect to have, the cash funds to pay for
the costs and expenses of (a) the annual audit of its
financial statements required to be included in the annual
report filed with the SEC or (b) the annual statement to be
provided to the bondholders. Accordingly, the financial
statements included in the Company's latest annual report
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Note 2 - and those included in the Company's annual reports filed
(cont'd.) with the SEC for 1993, 1992 and 1991 are unaudited and the
Company did not and no longer intends to provide annual
statements to the bondholders which results in
non-compliance with a covenant under the Indenture,
permitting the Trustee or holders of 25% of the Bonds to
accelerate their maturity.
The remaining Series A and Series B Bonds have maturities of
July 31, and August 31, 2000, respectively. On May 28, 1992,
the Trustee notified the Company that an Event of Default
(as defined in the Indenture) and a default have occurred
under Section 6.01(4) and Section 6.01(2), respectively, of
the Indenture. The Trustee declared the outstanding
principal balance of all of the remaining Bonds issued under
the Indenture to be immediately due and payable.
Accordingly, pursuant to Section 12.02(a) of the Indenture,
the Company will no longer redeem any of the Bonds.
As part of the Trustee's annual report to bondholders, dated
July 14, 1992, the Trustee notified the bondholders of the
notices to the Company on May 28, 1992 relating to the Event
of Default and default under the Indenture and acceleration
of all amounts due on the remaining Bonds. In addition, the
Trustee enclosed a special report, dated July 2, 1993,
("July Report") with its 1993 annual report to the
bondholders summarizing, among other things, the remedies
available under the Indenture and the actions taken and
proposed to be taken by the Trustee relating to the Events
of Default. The Trustee informed the bondholders in the July
Report that it had retained AM&G Financial Services, Inc.
(now known as First Security Capital Markets and hereinafter
referred to as "FSCM") in the last half of 1992 to review
and analyze the collateral securing the Bonds. The July
Report concludes that (a) the proceeds from the liquidation
of the collateral would not be sufficient to pay either
series of Bonds in full and (b) the projected future cash
flows from the collateral will also result in a shortfall in
repayment of principal for both series of Bonds.
Subsequently, the Trustee mailed another special report,
dated December 3, 1993 ("December Report"), to the
bondholders to update the July Report and advise the
bondholders of the course of action that has been elected by
the Trustee. As part of the December Report, FSCM analyzed
the collateral, including the reserve funds, using more
current information as of August 30, 1993 to determine the
economic value to the bondholders of immediately liquidating
the collateral and distributing the proceeds from the
liquidation to the bondholders, compared to the value of
holding the collateral intact over the remaining life of the
Bonds and using the income stream generated from the
collateral to pay the Bonds.
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Note 2 - Based on this analysis and after considering the additional
(cont'd.) costs and risks to maintain the trust estate intact, the
Trustee also stated in the December Report that ". . . the
Trustee has determined not to hold the Trust Estate, but
rather to liquidate the Trust Estate and distribute the
proceeds to the Bondholders" and the Indenture will be
terminated.
The Trustee informed the bondholders in the Trustee's 1994
annual report to bond-holders, dated July 15, 1994, that
FSCM subsequently obtained appraised values and/or brokers'
estimated values for all the properties securing the
mortgage loans. Based on those values, the Trustee now
states that, due to the depreciation in the value of the
properties to a greater extent than was assumed previously,
such depreciation in value is likely to have a significant
effect on the bondholders' ultimate recovery of their
investment in the Bonds.
The Trustee issued a special report, dated October 7, 1994,
of the final findings of FSCM in which the Trustee stated
their intent to hold the collateral for the present and review
periodically this decision with FSCM. As part of the
Trustee's 1995 annual report to bondholders, dated July 15,
1995, the Trustee stated it was not aware of any material
change in the assumptions or market conditions used in their
decision in October 1994 to hold the collateral for the
present.
The Trustee requested reimbursement from the Company for
costs of legal counsel and FSCM's collateral evaluation
services relating to the Events of Default and for trust
administration services of the Trustee. The Company does not
have, nor does it expect to have, the cash funds to
reimburse the Trustee for these costs. The Trustee may, in
certain instances, apply moneys from the reserve funds or
from the sale of the pledged collateral to the payment of
expenses incurred and advances made by the Trustee pursuant
to Section 7.07 of the Indenture. As of September 30, 1995,
the Trustee withdrew on a cumulative basis $97,910 from the
reserve fund for the Series A Bonds and the same amount of
$97,910 from the reserve fund for the Series B Bonds for
these costs.
Thus far, the Company has made timely payments due to the
bondholders under the terms of the Indenture. However, the
Company believes that the exhaustion of the blanket mortgage
insurance coverage for the Bonds issued by the Company, the
anticipated withdrawal by the Trustee for additional
expenses and advances of the type described in the preceding
paragraph, a continuation of the high costs and losses
associated with foreclosures on pledged loans and the
application by the Company of certain proceeds from
<PAGE> 10
Note 2 - insurance claims, principal prepayments and foreclosures to
(cont'd) payment of interest on the Bonds rather than to redemptions
or prepayments of principal on the Bonds will in the future
cause a deficiency in cash flows available for the payments
due on the related Bonds and the eventual depletion of the
cash reserve funds. Such an event would cause the Company to
be unable to meet its normal debt service requirements under
the Indenture. The Company agrees with the Trustee that the
proceeds from any sale of the remaining collateral by the
Trustee will be insufficient to pay the Bonds in full.
Accordingly, holders of Bonds would receive less than the
principal amounts due on their Bonds.
U.S. Home Mortgage Corporation ("Mortgage"), as servicer, is
not obligated to advance delinquent payments due on the
pledged mortgage loans unless it reasonably believes that
such advances will ultimately be recoverable from mortgage
insurance proceeds. On March 27, 1991, Mortgage, as
servicer, advised the Company that it will not advance
delinquent mortgage loan payments due to the uncertainty of
the recoverability of such advances. As a result, the
Trustee withdrew a portion of the reserve funds on March 28,
1991 and March 30, 1992 to make the required interest
payments on the Series B Bonds. In addition to the
withdrawals from the reserve funds by the Trustee for bond
administration costs and expenses, the anticipated cash flow
deficiencies to meet future debt service requirements will
also result in further withdrawals from each of the reserve
funds for both series of Bonds until these funds are
eventually exhausted. As of September 30, 1995, the
remaining balance in each of the two cash reserve funds
separately securing the Series A and B Bonds outstanding on
that date was approximately $248,000 and $204,000,
respectively.
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations -
Interest revenues and expenses decreased during the three and
nine month periods ended September 30, 1995 compared to the
same periods in 1994 due, primarily, to a reduction in the
outstanding principal balances of the mortgage loans, real
estate owned and long-term debt. The reductions in the
outstanding principal balances of the mortgage loans, real
estate owned and long-term debt are due to principal repayments
of the mortgage loans and liquidation of real estate owned,
resulting in a corresponding retirement of the related
long-term debt. Other expenses also decreased during 1995 as
compared to 1994 due, primarily, to a reduction in bond
administration costs and expenses. In addition, provision for
losses on loans and real estate owned increased during the nine
months ended September 30, 1995 as compared to the same period
in 1994 due primarily to additional losses on foreclosed
properties.
The Company's profitability will be adversely impacted by
future foreclosures, the inadequacy of mortgage insurance
coverage on loans which are not now delinquent and the costs
and expenses relating to the Events of Default.
Financial Condition and Liquidity -
At September 30, 1995, the Company had outstanding
approximately $3.8 million of mortgage-backed bonds ("Bonds")
issued under two series of publicly held debt. On May 28, 1992,
the Trustee for the Bonds notified the Company that an Event of
Default (as defined in the Indenture) had occurred and declared
the outstanding principal balance of all of the remaining Bonds
issued under the Indenture to be immediately due and payable.
The Company does not have, nor expect to have, any significant
assets other than the mortgage loans, reserve funds and primary
mortgage insurance policies pledged as collateral for each
remaining series of Bonds. Accordingly, the Company's ability
to pay the principal and interest on the Bonds when due is
substantially dependent on the cash flows to be generated by
the pledged loans and the adequacy of both the reserve funds
and coverage under the primary mortgage insurance policies. For
additional information, see "Note 2 of Notes to Condensed
Financial Statements".
<PAGE> 12
Item 3. Defaults Upon Senior Securities.
The remaining Series A and Series B Bonds ($3.8 million
outstanding at September 30, 1995) have stated maturities of
July 31, and August 31, 2000, respectively. On May 28, 1992,
the Trustee notified the Company that an Event of Default (as
defined in the Indenture) had occurred and declared the
outstanding principal balance of all of the remaining Bonds
issued under the Indenture to be immediately due and payable.
For additional information, see "Note 2 of Notes to Condensed
Financial Statements."
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Loss Per Common Share.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company
during the three months ended September 30, 1995.
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.
C.M. CORP.
(Registrant)
Date: November 9, 1995 /s/ James R. Petty
-------------------
(James R. Petty)
President and Chief Executive Officer
(principal executive officer)
Date: November 9, 1995 /s/ Ronald C. McCabe
---------------------
(Ronald C. McCabe)
Senior Vice President and Chief
Accounting Officer
(principal accounting officer)
<PAGE> 14
INDEX OF EXHIBITS
Exhibit Page
Number Number
- -------- ------
11 Computation of Loss Per Common Share 15
27 Financial Data Schedule 16
<PAGE> 15
EXHIBIT 11
(Unaudited)
C.M. CORP.
LOSS PER COMMON SHARE FOR THE CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- --------------------
1995 1994 1995 1994
------ ------- ------- -------
Net loss ................... $ (59) $ (75) $ (253) $ (234)
======= ======= ======= =======
Total common shares ........ 1,000 1,000 1,000 1,000
======= ======= ======= =======
Loss per common share ...... $ (59) $ (75) $ (253) $ (234)
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
Condensed Financial Statements As Of Sepember 30, 1995 And For The Nine
Months Then Ended And Is Qualified In Its Entirety By Reference To Such
Financial Statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 616
<SECURITIES> 0
<RECEIVABLES> 1366
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2033
<CURRENT-LIABILITIES> 1636
<BONDS> 3795
<COMMON> 1
0
0
<OTHER-SE> (3399)
<TOTAL-LIABILITY-AND-EQUITY> 2033
<SALES> 0
<TOTAL-REVENUES> 288
<CGS> 0
<TOTAL-COSTS> 25
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 148
<INTEREST-EXPENSE> 368
<INCOME-PRETAX> (253)
<INCOME-TAX> 0
<INCOME-CONTINUING> (253)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253)
<EPS-PRIMARY> (253)
<EPS-DILUTED> (253)
</TABLE>
