<PAGE> 1
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 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
------------- ------------
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 April 30, 1995: 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.
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<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Balance Sheets, March 31, 1995 and December 31, 1994 3
Condensed Statements of Operations and Retained Earnings,
Three Months Ended March 31, 1995 and 1994 4
Condensed Statements of Cash Flows, Three Months Ended
March 31, 1995 and 1994 5
Notes to Condensed 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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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUARANTEED MORTGAGE CORPORATION III
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------------------- ---------------------
<S> <C> <C>
ASSETS
------
Cash $ 2,160 $ 450
Funds held by trustee 2,216,573 2,275,383
Mortgage-backed securities 110,814,492 114,015,107
Accrued interest receivable 851,764 869,788
--------------------- ---------------------
$ 113,884,989 $ 117,160,728
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Liabilities:
Bonds payable $ 111,680,712 $ 114,830,836
Accrued liabilities, primarily
interest 1,682,138 1,727,987
Due to affiliates 3,329 86,479
--------------------- ---------------------
Total liabilities 113,366,179 116,645,302
--------------------- ---------------------
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 498,810 495,426
--------------------- ---------------------
Total shareholder's equity 518,810 515,426
--------------------- ---------------------
$ 113,884,989 $ 117,160,728
===================== =====================
</TABLE>
See accompanying notes.
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<PAGE> 4
GUARANTEED MORTGAGE CORPORATION III
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------------ ------------------
<S> <C> <C>
Revenues:
Interest, including amorti-
zation of net mortgage
premiums/discounts of
$177,138 in 1994 $ 2,545,137 $ 3,029,523
Fee income 8,074 9,737
------------------ ------------------
Total revenues 2,553,211 3,039,260
------------------ ------------------
Expenses:
Interest, including amorti-
zation of bond discounts
and issue costs of $194,766
in 1994 2,504,418 3,413,435
General and administrative 43,153 24,552
------------------ ------------------
Total expenses 2,547,571 3,437,987
------------------ ------------------
Income (loss) before income taxes
(benefits) 5,640 (398,727)
Income taxes (benefits) 2,256 (155,504)
------------------ ------------------
Net income (loss) 3,384 (243,223)
Retained earnings at
beginning of quarter 495,426 7,699,867
------------------ ------------------
Retained earnings at
end of quarter $ 498,810 $ 7,456,644
================== ==================
</TABLE>
See accompanying notes.
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<PAGE> 5
GUARANTEED MORTGAGE CORPORATION III
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,384 $ (243,223)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Amortization of net mortgage
premiums/discounts 177,138
Amortization of bond discounts
and issue costs 194,766
Provision for income taxes (benefits) 2,256 (155,504)
Operating changes in cash due to:
Decrease in accrued interest receivable 18,024 117,636
Increase in accrued liabilities 1,077,477 766,491
------------------ ------------------
Net cash provided by operating activities 1,101,141 857,304
------------------ ------------------
Cash flows from investing activities:
Principal amortization and prepayments
of mortgage-backed securities 3,200,615 16,496,729
Decrease in funds held by trustee 58,810 1,884,899
------------------ ------------------
Net cash provided by investing activities 3,259,425 18,381,628
------------------ ------------------
Cash flows from financing activities:
Bond principal payments (4,273,450) (19,137,473)
Decrease in due affiliates (85,406) (101,765)
------------------ ------------------
Net cash used in financing activities (4,358,856) (19,239,238)
------------------ ------------------
Net increase (decrease) in cash 1,710 (306)
Cash at beginning of period 450 1,003
------------------ ------------------
Cash at end of period $ 2,160 $ 697
------------------ ------------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for interest $ 1,426,940 $ 2,452,178
================== ==================
</TABLE>
See accompanying notes.
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<PAGE> 6
GUARANTEED MORTGAGE CORPORATION III
NOTES TO CONDENSED 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 previously engaged in the acquisition of 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. GMC III has not initiated any such
transactions since 1988 and is presently allowing its balance sheet to
liquidate. As the security portfolio and the bonds outstanding continue to
decline, GMC III's revenues and expenses will decline accordingly.
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 payable balances of which were $3,329 and
$86,479 at March 31, 1995 and December 31, 1994, respectively.
Average month-end balances due these affiliates were $25,756 and
$281,049 for the quarters ended March 31, 1995 and 1994, 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, 1995 and 1994, GMC III paid $8,074
and $9,737, respectively, to PFCI for management fees related to the
issuance and administration of non-recourse bonds (see Note 3).
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<PAGE> 7
GUARANTEED MORTGAGE CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
SIGNIFICANT ACCOUNTING POLICIES
-- 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.
-- In December 1994, due to higher than anticipated collateral prepayment
experience, GMC III changed its accounting estimate of required
amortization and expensed all remaining mortgage discounts, bond
discounts and issue costs.
-- The accompanying unaudited condensed 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 period ended
March 31, 1995 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1995. For further
information, refer to the financial statements and footnotes thereto
included in the Registrant Company's annual report on Form 10-K for
the year ended December 31, 1994.
2. MORTGAGE-BACKED SECURITIES
At March 31, 1995, mortgage-backed securities (GNMA certificates)
had an estimated fair market value of $114,746,730, which included gross
unrealized gains of $3,932,238 on securities with an amortized cost of
$110,814,492. At December 31, 1994, these securities had an estimated fair
market value of $115,620,712, which included gross unrealized gains of
$1,605,605 on securities with an amortized cost of $114,015,107. Actual
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.
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<PAGE> 8
GUARANTEED MORTGAGE CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
3. BONDS PAYABLE
Bonds payable at March 31, 1995 and December 31, 1994 consisted of two bond
issues with stated interest rates ranging from 8.5% to 9.0%. Weighted
average stated interest rates were 8.90% and 8.88% at March 31, 1995 and
December 31, 1994, 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 $1,053,639.
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, 1995, $70,991,363 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.
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<PAGE> 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 (Certificates) or finance
companies' notes secured by Certificates (Funding Notes) were used as
collateral for associated bonds payable. Mortgage-backed securities were
acquired from affiliates. Through December 31, 1994, any difference
between the acquisition price and the principal balance of the securities
at their date of acquisition (mortgage discounts/premiums) was amortized
into operations as an adjustment of mortgage yield.
The Company's pretax income (loss) was $5,640 and ($398,727) for the
quarters ended March 31, 1995 and 1994, respectively. The pretax income
increased during 1995 from 1994, primarily due to elimination of
amortization expenses related to mortgage discounts, bond discounts and
bond issue costs, as a result of GMC III changing its accounting estimate
of amortization speeds in December, 1994. Earnings were also positively
impacted as a result of improved interest spreads resulting from decreasing
prepayment levels experienced during the three months ended March 31, 1995.
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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<PAGE> 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is required to be filed as part of
this report as required under 601c(2) of Regulation S-K:
27. Financial Data Schedule for the 10-Q for the quarter
ended March 31, 1995.
(b) Reports on Form 8-K. The Company did not file any reports
on Form 8-K during the quarter ended March 31, 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.
GUARANTEED MORTGAGE CORPORATION III
May 11, 1995 By: /s/ James A. Weissenborn
- ------------ ---------------------------------
(Date) James A. Weissenborn, President
(Principal Executive Officer)
May 11, 1995 By: /s/ Bruce E. Robinson
- ------------ ---------------------------------
(Date) Bruce E. Robinson, Vice President-Finance
and Treasurer
(Principal Financial Officer)
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<PAGE> 11
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,218,733
<SECURITIES> 110,814,492
<RECEIVABLES> 851,764
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,884,989
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 113,884,989
<CURRENT-LIABILITIES> 1,685,467
<BONDS> 111,680,712
<COMMON> 1,000
0
0
<OTHER-SE> 517,810
<TOTAL-LIABILITY-AND-EQUITY> 113,884,989
<SALES> 0
<TOTAL-REVENUES> 2,553,211
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,504,418
<INCOME-PRETAX> 5,640
<INCOME-TAX> 2,256
<INCOME-CONTINUING> 3,384
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,384
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
