Total Pages: 11
Index to Exhibits: Page 11
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One) FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1994
---------------
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 00-12811
---------
GUARANTEED MORTGAGE CORPORATION III
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
MICHIGAN 31-1054754
- - --------------------------------------- ----------------------------
- - -
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
6061 South Willow Drive, Suite 301, Greenwood Village, Colorado 80111
- - --------------------------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 740-3370
--------------
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 twelve 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 of common stock outstanding as of April 30, 1994: 1,000
Registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form
10-Q with the reduced disclosure format.
financial/quarter/gmc3.1st
- 1 -
Guaranteed Mortgage Corporation III
INDEX
Page No
------
- - -
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, March 31, 1994 and December 31, 1993 3
Statements of Operations and Retained Earnings,
Three Months Ended March 31, 1994 and 1993 4
Statements of Cash Flows, Three Months Ended
March 31, 1994 and 1993 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
- 2 -
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Guaranteed Mortgage Corporation III
Balance Sheets
Unaudited Audited
March 31, December 31,
1994 1993
-------------- -------------
ASSETS
------
Cash $ 697 $ 1,003
Funds held by trustee 5,736,555 7,621,454
Mortgage-backed securities 137,858,778 154,532,645
Accrued interest receivable 1,042,917 1,160,553
Bond issue costs 691,671 759,108
Due from affiliates 7,313
------------- -------------
$145,337,931 $ 164,074,763
============= =============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Liabilities:
Bonds payable $135,769,224 $ 153,750,523
Accrued liabilities, primarily
interest 2,092,063 2,354,417
Due to affiliates 249,956
------------- -------------
Total liabilities 137,861,287 156,354,896
============= =============
Shareholder's equity:
Common stock, $1 par value; 50,000
shares authorized; 1,000 shares
issued and outstanding 1,000 1,000
Additional paid-in capital 19,000 19,000
Retained earnings 7,456,644 7,699,867
------------- -------------
Total shareholder's equity 7,476,644 7,719,867
------------- -------------
$145,337,931 $ 164,074,763
============= =============
See accompanying notes.
- 3 -
Guaranteed Mortgage Corporation III
Statements of Operations and Retained Earnings
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1994 1993
------------ ------------
Revenues:
Interest, including amorti-
zation of net mortgage
discounts/premiums $3,029,523 $5,935,363
Fee income 9,737 13,442
----------- -----------
Total revenues 3,039,260 5,948,805
----------- -----------
Expenses:
Interest, including amorti-
zation of bond discounts
and issue costs 3,413,435 6,040,810
General and administrative 24,552 57,530
----------- -----------
Total expenses 3,437,987 6,098,340
----------- -----------
Loss before income tax
benefit and extraordinary item (398,727) (149,535)
Income tax benefit (155,504) (56,824)
----------- -----------
Loss before extraordinary item (243,223) (92,711)
Extraordinary loss from early
extinguishment of debt, net
of tax benefit ($193,513) (315,733)
----------- -----------
Net loss (243,223) (408,444)
Retained earnings at
beginning of quarter 7,699,867 10,522,628
----------- -----------
Retained earnings at
end of quarter $7,456,644 $10,114,184
=========== ===========
See accompanying notes.
- 4 -
Guaranteed Mortgage Corporation III
Statements of Cash Flows
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1994 1993
------------ ------------
Cash flows from operating activities:
Net loss $ (243,223) $ (408,444)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of net mortgage
premiums/discounts 177,138 113,455
Amortization of bond discounts
and issue costs 194,766 197,586
Loss from early extinguishment of debt 509,246
Provision for income tax benefit (155,504) (250,337)
Operating changes in cash due to:
Decrease in accrued interest receivable 117,636 330,304
Increase in accrued liabilities 766,491 278,738
----------- ----------
Net cash provided by operating activities 857,304 770,548
----------- ----------
Cash flows from investing activities:
Principal amortization and prepayments
of mortgage-backed securities 16,496,729 14,235,286
Transfer of mortgage-backed securities
to holding company 27,702,449
Decrease in funds held by trustee 1,884,899 3,230,330
----------- -----------
Net cash provided by investing activities 18,381,628 45,168,065
----------- -----------
Cash flows from financing activities:
Bond principal payments (19,137,473) (46,350,649)
Increase (decrease) in due affiliates (101,765) 411,230
----------- -----------
Net cash used in financing activities (19,239,238) (45,939,419)
----------- -----------
Net decrease in cash (306) (806)
Cash at beginning of period 1,003 936
----------- -----------
Cash at end of period $ 697 $ 130
=========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the period for interest $2,452,178 $5,564,485
=========== ===========
See accompanying notes.
- 5 -
Guaranteed Mortgage Corporation III
Notes to Financial Statements
(Unaudited)
1.Basis of presentation, related party transactions and significant
accounting policies
------------------------------------------------------------------------
Basis of presentation
---------------------
Guaranteed Mortgage Corporation III (GMC III) is a wholly-owned
financing subsidiary of Pulte Financial Companies, Inc. (PFCI), which is
a wholly-owned financing subsidiary of Pulte Corporation (formerly known
as PHM Corporation).
GMC III acquired mortgage-backed securities from affiliates and entered
into funding agreements with various limited purpose financing companies
(funding companies), the notes (funding notes) issued thereunder being
secured by mortgage-backed securities. GMC III then issued bonds
collateralized by such securities or funding notes. The mortgage-backed
securities are guaranteed by the Government National Mortgage
Association, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation.
Related party transactions
--------------------------
Transactions and arrangements between GMC III and PFCI, Pulte
Corporation and/or Pulte Home Corporation (PHC), an indirect wholly-
owned subsidiary of Pulte Corporation, are summarized as follows:
-- GMC III has periodic interest- free cash and non-cash advances
from certain affiliates, the net (receivable) payable balances of
which were $(7,313) and $249,956 at March 31, 1994 and December 31,
1993, respectively. Average month-end balances due these affiliates
were $281,049 and $4,219,761 for the quarters ended March 31, 1994
and 1993, respectively. Advances payable by GMC III to affiliates
relate principally to the acquisition of mortgage-backed securities.
-- Certain of GMC III's corporate officers are also officers of
PFCI, Pulte Corporation, PHC, ICM, and/or other affiliates of GMC III.
-- PFCI incurs certain administrative expenses on behalf of GMC III,
for which GMC III reimburses PFCI.
-- During the quarters ended March 31, 1994 and 1993, GMC III paid
$9,737 and $13,442, respectively, to PFCI for management fees related
to the issuance and administration of non-recourse bonds (see Note 3).
- 6 -
Guaranteed Mortgage Corporation III
Notes to Financial Statements, continued
Significant accounting policies
-------------------------------
-- The Company adopted Statement of Accounting Standards No. 115
(FAS No. 115), "Accounting for Certain Investments in Debt and Equity
Securities", effective January 1, 1994, for investments held as of or
acquired after that date. There was no cumulative effect as of
January 1, 1994 on net income or equity as a result of the adoption of
FAS No. 115. Mortgage-backed securities are classified as held-to-
maturity based upon the Company's positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at
amortized cost and are adjusted for amortization of premiums and
accretion of discounts over the estimated life of the security. Such
amortization, along with interest and dividends are included in
interest income.
-- The information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. All adjustments are
of a normal recurring nature.
2. Mortgage-backed securities
---------------------------
At March 31, 1994, mortgage-backed securities (GNMA certificates) had an
estimated market value of $142,330,376, which included gross unrealized
gains of $4,471,598 on securities with an amortized cost of
$137,858,778. At December 31, 1993, these securities had an estimated
market value of $163,612,379, which included gross unrealized gains of
$9,079,734 on securities with an amortized cost of $154,532,645.
Expected maturities of these mortgage-backed securities may differ from
contractual maturities because the issuers of the securities may have
the right to prepay obligations without penalties.
- 7 -
Guaranteed Mortgage Corporation III
Notes to Financial Statements, continued
2. Mortgage-backed securities, continued
--------------------------------------
During the three months ended March 31, 1993, GMC III extinguished
$29,297,000 of its long-term debt prior to scheduled maturity. Due to
this redemption, GMC III transferred the related outstanding collateral
of $28,948,588 and the unamortized mortgage discount of $1,246,139
associated with this collateral, to its affiliate, Pulte Financial
Holding Company, resulting in an extraordinary pretax loss of $509,246
due to the write-off of unamortized bond issue costs.
3. Bonds payable
--------------
Bonds payable at March 31, 1994 and December 31, 1993 consisted of two
bond issues with stated interest rates ranging from 8.5% to 9.0%.
Weighted average stated interest rates were 8.85% and 8.82% at March 31,
1994 and December 31, 1993, respectively. Both of the bond issues have
classes of bonds with serial maturities. Each series of the bonds is
secured by separate pools of mortgage-backed securities. Timing of bond
retirements is dependent upon payments received on mortgage loans. The
bonds are further collateralized by additional pledged GNMA certificates
in the aggregate amount of $1,494,621.
Bonds payable are stated net of discounts. At March 31, 1994 and
December 31, 1993, unamortized bond discounts were $4,152,436 and
$4,279,765, respectively.
Under provisions of the bond indenture, funds held by trustee are
restricted so as to assure the payment of principal and interest on the
bonds to the extent of such funds.
As of March 31, 1994, $98,290,100 was outstanding for three series of
non-recourse bonds issued by GMC III, in the initial aggregate principal
amount of $527,300,000, which are secured by funding notes or mortgage-
backed securities in which GMC III has nominal or no ownership interest.
In accordance with generally accepted accounting principles, these
series of bonds are not treated as borrowings and, accordingly, such
bonds and related collateral are not included on the balance sheet.
- 8 -
Guaranteed Mortgage Corporation III
Notes to Financial Statements, continued
4. Extraordinary item
-------------------
During the quarter ended March 31, 1993, GMC III extinguished
$29,297,000 of its long-term debt prior to scheduled maturity, resulting
in pretax extraordinary losses of $509,200 due to the write-off of
unamortized bond issue costs.
The funds for this extinguishment were obtained from the sale of
mortgage-backed securities which collateralized the bond.
- 9 -
Guaranteed Mortgage Corporation III
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
---------------------
The Company's mortgage-backed securities are used as collateral for
associated bonds payable. Mortgage-backed securities were acquired from
affiliates. Any difference between the acquisition price and the
principal balance of the securities at their date of acquisition
(mortgage discounts/premiums) are amortized into operations over the
estimated lives of the securities.
The Company's pretax loss before extraordinary item was $398,727 and
$149,535 for the quarters ended March 31, 1994 and 1993, respectively.
Earnings have decreased, during 1994 from 1993, primarily due to the
reduced interest carry (i.e. interest income less interest expense) as a
result of volume declines due to mortgage prepayments and bond
redemptions.
Pretax extraordinary losses from bond extinguishments during the first
quarter of 1993 were $509,246. These losses resulted from the write-off
of unamortized bond issue costs. There was no similar activity in the
comparable period in 1994.
Financial Condition
-------------------
It is anticipated that the Company will have no additional capital or
liquidity requirements, assuming the mortgage-backed securities continue
to pay principal and interest in accordance with their terms.
- 10 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. No exhibits are required to be filed with this
report.
(b) Reports on Form 8-K. The Company did not file any reports
on Form 8-K during the quarter ended March 31, 1994.
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.
Guaranteed Mortgage Corporation III
May 16, 1994 By: /s/ James A. Weissenborn
- - ------------------------- -------------------------------
(Date) James A. Weissenborn, President
(Principal Executive Officer)
May 16, 1994 By: /s/ Bruce E. Robinson
- - ------------------------ ------------------------------
(Date) Bruce E. Robinson, Controller
(Principal Accounting Officer)
- 11 -
