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Total Pages: 10
Index to Exhibits: Page 10
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 JUNE 30, 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 0-12811
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 July 31, 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.
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GUARANTEED MORTGAGE CORPORATION III
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets, June 30, 1994 and December 31, 1993 3
Statements of Operations and Retained Earnings,
Three Months Ended June 30, 1994 and June 30, 1993 and
Six Months Ended June 30, 1994 and June 30, 1993 4
Statements of Cash Flows, Six Months Ended
June 30, 1994 and June 30, 1993 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 10
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUARANTEED MORTGAGE CORPORATION III
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
JUNE 30, DECEMBER 31,
1994 1993
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<S> <C> <C>
ASSETS
------
Cash $ 911 $ 1,003
Funds held by trustee 3,794,305 7,621,454
Mortgage-backed securities 126,505,438 154,532,645
Accrued interest receivable 957,217 1,160,553
Bond issue costs 630,335 759,108
Due from affiliates 121,091
------------ ------------
$132,009,297 $164,074,763
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Liabilities:
Bonds payable $122,851,105 $153,750,523
Accrued liabilities, primarily
interest 1,903,091 2,354,417
Due to affiliates 249,956
------------ ------------
Total liabilities 124,754,196 156,354,896
------------ ------------
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 7,235,101 7,699,867
------------ ------------
Total shareholder's equity 7,255,101 7,719,867
------------ ------------
$132,009,297 $164,074,763
============ ============
</TABLE>
See accompanying notes.
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GUARANTEED MORTGAGE CORPORATION III
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1994 1993 1994 1993
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Interest, including
amortization of
net mortgage
discounts/premiums $ 2,744,958 $ 5,139,229 $ 5,774,482 $11,074,592
Fee income 8,045 11,473 17,781 24,915
----------- ----------- ----------- -----------
Total revenues 2,753,003 5,150,702 5,792,263 11,099,507
----------- ----------- ----------- -----------
Expenses:
Interest, including
amortization of
bond discounts
and issue costs 3,092,576 5,180,817 6,506,011 11,221,626
General and
administrative 23,612 51,611 48,164 109,142
----------- ----------- ----------- -----------
Total expenses 3,116,188 5,232,428 6,554,175 11,330,768
----------- ----------- ----------- -----------
Loss before income
tax benefit and
extraordinary item (363,185) (81,726) (761,912) (231,261)
Income tax benefit (141,642) (31,056) (297,146) (87,880)
----------- ----------- ----------- -----------
Loss before
extraordinary item (221,543) (50,670) (464,766) (143,381)
Extraordinary loss from
early extinguishment
of debt, net of tax
benefits (941,830) (1,257,563)
----------- ----------- ----------- -----------
Net loss (221,543) (992,500) (464,766) (1,400,944)
Retained earnings at
beginning of period 7,456,644 10,114,184 7,699,867 10,522,628
----------- ----------- ----------- -----------
Retained earnings at
end of period $ 7,235,101 $ 9,121,684 $ 7,235,101 $ 9,121,684
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
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GUARANTEED MORTGAGE CORPORATION III
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (464,766) $ (1,400,944)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Amortization of net mortgage
premiums/discounts 340,700 202,119
Amortization of bond discounts
and issue costs 386,001 379,670
Loss from early extinguishment
of debt 2,028,327
Provision for income tax benefit (297,146) (858,643)
Operating changes in cash due to:
Decrease in accrued interest
receivable 203,336 661,897
Increase in accrued liabilities 1,629,212 586,165
------------ ------------
Net cash provided by
operating activities 1,797,337 1,598,591
------------ ------------
Cash flows from investing activities:
Principal amortization and prepayments
of mortgage-backed securities 27,686,507 33,370,952
Transfer of mortgage-backed securities
to holding company 51,692,185
Decrease (increase) in funds held by
trustee 3,827,149 (24,179,490)
------------ ------------
Net cash provided by
investing activities 31,513,656 60,883,647
------------ ------------
Cash flows from financing activities:
Bond principal payments (33,237,183) (87,157,853)
Increase (decrease) in due affiliates (73,902) 24,674,944
------------ ------------
Net cash used in financing
activities (33,311,085) (62,482,909)
------------ ------------
Net decrease in cash (92) (671)
Cash at beginning of period 1,003 936
------------ ------------
Cash at end of period $ 911 $ 265
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 4,490,797 $ 10,255,790
============ ============
</TABLE>
See accompanying notes.
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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.
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 $(121,091)
and $249,956 at June 30, 1994 and December 31, 1993, respectively.
Average month-end balances due these affiliates were $225,670 and
$9,244,994 for the six months ended June 30, 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 six months ended June 30, 1994 and 1993, GMC III paid $17,781
and $25,915, respectively, to PFCI for management fees related to the
issuance and administration of non-recourse bonds (see Note 3).
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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 June 30, 1994, mortgage-backed securities (GNMA certificates) had an
estimated market value of $128,984,348, which included gross unrealized gains
of $2,478,910 on securities with an amortized cost of $126,505,438. 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.
During the six months ended June 30, 1993, GMC III extinguished $53,695,473
of its long-term debt prior to scheduled maturity. Due to this redemption,
GMC III transferred the related outstanding collateral of $52,525,818 and the
unamortized discount of $833,633 associated with this collateral, to its
affiliate, Pulte Financial Holding Company.
3. BONDS PAYABLE
Bonds payable at June 30, 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 8.88% and 8.82% at June 30, 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 $1,356,081.
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GUARANTEED MORTGAGE CORPORATION III
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. BONDS PAYABLE, CONTINUED
Bonds payable are stated net of discounts. At June 30, 1994 and December 31,
1993, unamortized bond discounts were $4,022,537 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 June 30, 1994, $87,786,943 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.
4. EXTRAORDINARY ITEM
During the six months ended June 30, 1993, GMC III extinguished, or notified
the trustee of its intent to extinguish, $79,295,473 of its long-term debt
prior to scheduled maturity, resulting in an extraordinary pretax loss of
$2,028,327, due to the write-off of unamortized bond discounts and issue
costs. Tax benefits related to these extraordinary losses amounted to
$577,251 and $770,763 for the three months and six months ended June 30,
1993, respectively.
The funds for these extinguishments were obtained from the sale of
mortgage-backed securities which collateralized the bond.
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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 $363,185 and $761,912
for the quarter and six months ended June 30, 1994, respectively, as compared
to $81,726 and $231,261 for the respective periods in 1993. 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 six months
ended June 30, 1993 were $2,028,327. These losses resulted from the
write-off of unamortized bond discounts and 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.
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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 June 30, 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
August 12, 1994 By: /s/ James A. Weissenborn
- - ------------------ ------------------------------------
(Date) James A. Weissenborn, President
(Principal Executive Officer)
August 12, 1994 By: /s/ Bruce E. Robinson
- - ------------------ ------------------------------------
(Date) Bruce E. Robinson, Controller
(Principal Accounting Officer)
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