<PAGE>
PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 30(a) OF THE
INVESTMENT COMPANY ACT OF 1940
AND SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 30(a) OF THE INVESTMENT
COMPANY ACT OF 1940 AND SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
-----------------------------
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 Commission file number 2-23772
-------------- -------
IDS Certificate Company
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-6009975
- -------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS Tower 10, Minneapolis, Minnesota 55440
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3131
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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 11, 1995
150,000 Common shares
Registrant is a wholly owned subsidiary of American Express
Financial Corporation (formerly IDS Financial Corporation), which
is a wholly owned subsidiary of American Express Company, and
Registrant meets the conditions set forth in General Instruction
H(1) (a) and (b) of Form 10-Q and is therefore filing this form
with the abbreviated narrative disclosure.<PAGE>
PAGE 2
FORM 10-Q
IDS CERTIFICATE COMPANY
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
--------------------
The information furnished reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for these interim periods. Certain amounts from the prior
year have been reclassified to conform to the current year
presentation.
<TABLE><CAPTION>
IDS CERTIFICATE COMPANY
BALANCE SHEET
-------------
ASSETS March 31, December 31,
------ 1995 1994
(Unaudited)
-------------- --------------
<S> <C> <C>
Qualified Assets: ($ Thousands)
Cash and cash equivalents $141,530 $140,128
Investments in unaffiliated issuers (note 1) 3,144,643 2,784,638
Receivables 56,890 49,530
Investments in and advances to affiliates 5,441 5,399
Other 32,822 25,094
---------- ----------
Total qualified assets 3,381,326 3,004,789
Other assets:
Deferred federal income taxes 1,095 8,372
Other 30,287 27,696
---------- ----------
Total assets $3,412,708 $3,040,857
========== ==========
</TABLE>
<TABLE><CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Certificate reserves $3,069,365 $2,887,405
Accounts payable and accrued liabilities 169,545 11,600
---------- ----------
Total liabilities 3,238,910 2,899,005
---------- ----------
Stockholder's equity:
Common stock 1,500 1,500
Additional paid-in-capital 147,844 140,344
Retained earnings 31,058 23,166
Unrealized holding gains and losses on
investment securities - net (6,604) (23,158)
---------- ----------
Total stockholder's equity 173,798 141,852
---------- ----------
Total liabilities and
stockholder's equity $3,412,708 $3,040,857
========== ==========
See note to financial statements.</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
IDS CERTIFICATE COMPANY
STATEMENT OF OPERATIONS (Unaudited)
-----------------------
For the Three Months Ended
-----------------------------
March 31, 1995 March 31, 1994
-------------- --------------
($ Thousands)
<S> <C> <C>
Investment income $57,044 $52,973
Investment expenses 15,571 15,219
------- -------
Net investment income before provision
for certificate reserves and income tax benefit 41,473 37,754
Net provision for certificate reserves 35,600 25,191
------- -------
Net investment income before income tax benefit 5,873 12,563
Income tax benefit 1,844 252
------- -------
Net investment income 7,717 12,815
------- -------
Realized gain (loss) on investments - net 162 (9,039)
Income tax benefit (expense) (57) 3,164
------- -------
Net realized gain (loss) on investments 105 (5,875)
------- -------
Net income - wholly owned subsidiary 70 40
------- -------
Net income $7,892 $6,980
======= =======
See note to financial statements.
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
IDS CERTIFICATE COMPANY
STATEMENT OF CASH FLOWS (Unaudited)
------------------------------------------
For the Three Months Ended
-----------------------------
March 31, 1995 March 31, 1994
-------------- --------------
($ Thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $7,892 $6,980
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of wholly owned subsidiary (70) (40)
Certificate reserves 35,600 25,191
Interest income added to certificate loans (484) (567)
Amortization of premium/discount - net 6,681 5,624
Deferred federal income taxes (1,637) 3,943
Deferred distribution fees (2,792) 682
Net (gain) loss on investments (162) 9,039
Increase in dividends and interest receivable (4,026) (33)
(Increase) decrease in other assets 117 (7,381)
Decrease in other liabilities (2,639) (6,091)
-------- --------
Net cash provided by operating activities 38,480 37,347
-------- --------
Cash Flows from Investing Activities:
Maturity and redemption of investments:
Hold-to-maturity securities 41,728 83,962
Available-for-sale securities 44,613 47,134
Other investments 9,314 12,097
Sale of investments:
Hold-to-maturity securities 8,000 -
Available-for-sale securities - 19,138
Other investments - -
Certificate loan payments 1,487 2,093
Purchase of investments:
Hold-to-maturity securities (16,968) -
Available-for-sale securities (255,778) (51,483)
Other investments (10,746) (2,723)
Certificate loan fundings (1,922) (1,745)
Investment in subsidiary - (100)
-------- --------
Net cash (used in) provided by investing activities ($180,272) $108,373
-------- --------
See note to financial statements.
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
IDS CERTIFICATE COMPANY
STATEMENT OF CASH FLOWS (Continued) (Unaudited)
------------------------------------------
For the Three Months Ended
-----------------------------
Mar. 31, 1995 Mar. 31, 1994
-------------- --------------
($ Thousands)
<S> <C> <C>
Cash Flows from Financing Activities:
Reserve payments by certificate holders $453,113 $179,478
Capital contribution from Parent 7,500 -
Certificate maturities and cash surrenders (317,419) (277,033)
Dividends paid - (12,400)
-------- --------
Net cash provided by (used in) financing activities 143,194 (109,955)
-------- --------
Net Increase In Cash and Cash Equivalents 1,402 35,765
Cash and Cash Equivalents Beginning of Period 140,128 54,059
-------- --------
Cash and Cash Equivalents End of Period $141,530 $89,824
======== ========
Supplemental Disclosures:
Cash received for income taxes $284 $5,862
Certificate maturities and surrenders through loan
reductions $2,961 $3,365
See note to financial statements.
</TABLE>
IDS CERTIFICATE COMPANY
NOTE TO FINANCIAL STATEMENTS (Unaudited)
($ in Thousands)
- ----------------------------------------
1. The following is a summary of investments in unaffiliated issuers:
<TABLE>
<CAPTION>
March 31, 1995 Dec. 31, 1994
-------------- --------------
<S> <C> <C>
Investment securities at amortized cost............... $1,213,052 $1,245,793
Investment securities at fair value................... 1,620,041 1,226,674
First mortgage loans on real estate................... 255,389 253,968
Certificate loans - secured by certificate reserves... 56,161 58,203
----------- -----------
Total $3,144,643 $2,784,638
=========== ===========
</TABLE>
<PAGE>
PAGE 6
MANAGEMENT'S NARRATIVE ANALYSIS OF THE
RESULTS OF OPERATIONS
--------------------------------------
During the first three months of 1995, total assets and certificate
reserves increased $372 million and $182 million, respectively.
The increases in total assets and accounts payable and accrued
liabilities reflect the purchases of $161 million of investment
securities during the first quarter of 1995, that will settle in
early April. The increase in certificate reserves resulted
primarily from certificate sales exceeding certificate maturities
and surrenders, which also contributed to the increase in total
assets.
Sales of face-amount certificates totaled $412 million during the
first quarter of 1995 compared to $155 during the prior year's
period. Certificate maturities and surrenders totaled $320 million
during the first quarter of 1995 compared to $280 million during
the comparable period in 1994. The excess of certificate sales
over certificate maturities and surrenders during the first quarter
of 1995, resulted primarily from higher accrual rates declared by
Registrant during the last six months of 1994 and the first quarter
of 1995, reflecting higher interest rates available in the
marketplace.
Investment income increased 8% during the first three months of
1995 from the the prior year's period reflecting a higher average
balance of invested assets and higher investment yields.
The 3% increase in investment expenses resulted primarily from
higher distribution and investment advisory and services fees of
$.7 million and $.2 million, respectively. These increases were
partially offset by $.3 million lower amortization of both the cost
of options and interest rate caps. The lower amortization of
interest rate caps reflects $1.9 million of accelerated
amortization and $2.2 million of interest earned under the cap
agreements.
Net provision for certificate reserves increased 42% during the
first three months of 1995 from the prior year's period reflecting
a higher average balance of certificate reserves and higher accrual
rates.
The $1.6 million increase in income tax benefit on net investment
income resulted primarily from a greater portion of net investment
income being attributable to tax-advantaged income.
During the first three months of 1995, Registrant sold a
hold-to-maturity security with an amortized cost and fair value of
$8.0 million. The sale was due to deterioration in the issuer's
creditworthiness.
Certificate reserve financing activities provided net cash of $136
million during the first three months of 1995 compared to net cash
used of $98 million during the prior year's period. The
improvement resulted primarily from higher certificate sales.
During the first quarter of 1995, Registrant received a capital
contribution from its Parent of $7.5 million. The contribution was
necessary to manage Registrant's regulatory capital requirements.
As of Jan. 1, 1995, Registrant adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan", as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". The adoption of SFAS No. 114 did not
have a material impact on Registrant's results of operations or
financial condition.
<PAGE>
PAGE 7
IDS CERTIFICATE COMPANY
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
<PAGE>
PAGE 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
REGISTRANT IDS CERTIFICATE COMPANY
BY
NAME AND TITLE Stuart A. Sedlacek, President and
Director (Principal Executive Officer)
DATE May 11, 1995
BY
NAME AND TITLE Jay Hatlestad, Vice President and
Controller (Principal Accounting Officer)
DATE May 11, 1995
