<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 33-02105
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Newman Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware 84-1007510
(State or other Jurisdiction of (I.R.S. Employer
of incorporation) Identification Number)
1801 California Street, Suite 3700; Denver, Colorado
(Address of principal executive offices)
80202-2637
(Zip Code)
(303) 293-8500
(Registrant's telephone number, including area code)
Indicate by checkmark 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 of time that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes XX No
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(2) Yes XX No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock: 1,000 shares
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Attached as Exhibit A.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto.
BACKGROUND AND LIQUIDITY
The registrant has issued two series of its Collateralized Multifamily
Housing Bonds ("Bonds") pursuant to an Indenture ("Indenture") dated as of July
1, 1986 between the registrant and First Interstate Bank of Denver, National
Association, as trustee ("Trustee"). On July 25, 1986, the registrant issued
$6,128,400 principal amount of its Bonds, Series 1986-A (GNMA Security) (the
"Series 1986-A Bonds") pursuant to the Indenture and a Series 1986-A Supplement.
On August 26, 1986 the registrant issued $7,380,000 principal amount of its
Collateralized Multifamily Housing Bonds, Series 1986-B (GNMA Security) (the
"Series 1986-B Bonds") pursuant to the Indenture and a Series 1986-B Supplement.
The proceeds of the offerings were used to acquire certificates ("GNMA
Certificates") in the principal amount of $6,128,400 and $7,365,000 guaranteed
by the Government National Mortgage Association. The Series 1986-A Bonds were
redeemed in full on August 3, 1990.
Cash flow from payments on the GNMA Certificates, together with
reinvestment earnings thereon, is anticipated to provide cash sufficient to make
all required payments on the Bonds. Consequently, the registrant anticipates
that it will have no additional cash requirements with respect to its
outstanding Bonds.
BUSINESS ENVIRONMENT AND EVENTS
The registrant competes with the GNMA whole loan market to provide
funding for FHA insured multifamily housing project loans. During periods when
interest rate yield curves are relatively steep, the registrant has a
competitive advantage over the GNMA whole loan market because it can structure
debt as a combination of serial bonds, term bonds, and deferred interest bonds,
thereby taking advantage of lower interest rates on the "low end" of the yield
curve. Conversely, during periods when interest rate yield curves are
relatively flat, the registrant has no advantage over the GNMA whole loan market
and is actually at a disadvantage because of legal and underwriting costs
associated with issuing a series of bonds under the Indenture.
<PAGE>
For the past several years, the interest rate yield curve has been
relatively flat and the registrant has been unable to compete efficiently with
the GNMA whole loan market. As a consequence, the registrant has not issued
Bonds since the initial two series of Bonds in 1986.
RESULTS OF OPERATIONS AND TRENDS
Generally, revenues and expenses are relatively constant as a result of
fixed rate GNMA securities producing revenue to pay fixed rate bond interest.
Revenue from GNMA securities represents 99% of all revenues. Bond interest and
the amortization of organization costs represent 98% of all expenses.
During the three months ended March 31, 1995 and 1994, the revenues for
the registrant were $170,026 and $168,046, respectively, which consisted
primarily of interest received from the GNMA Certificates, amortization of
discounts on the GNMA Certificates and interest earned on temporary cash
investments. Payment of interest on the outstanding Bonds and the amortization
of organization costs were the major sources of costs and expenses. Costs and
expenses were virtually constant between the three months ended March 31, 1995
and 1994.
During the nine months ended March 31, 1995 and 1994, the revenues for
the registrant were $503,486 and $502,031 respectively, which consisted
primarily of interest income on the GNMA Certificate, amortization of discounts
on the GNMA Certificate, and interest earned on temporary cash investments.
Costs and expenses were nearly identical between the nine month periods ended
March 31, 1995 and 1994.
The registrant's ongoing costs and expenses will be paid from interest
income from the remaining GNMA Certificate and interest earnings thereon after
payment of amounts required to be deposited into the Collection Account for the
Series 1986-B Bonds. The registrant anticipates that amounts not required to be
deposited into the Collection Account will be sufficient to pay costs and
expenses of the Trustee and other related expenses of the Bonds if the interest
income from the GNMA Certificate can be invested at a rate of not less than
three percent (3%) per year during the term of the Bonds. In addition, amounts
released to the registrant from the lien of the Indenture and not distributed to
its shareholder will be available to pay unanticipated expenses in connection
with the administration of the Bonds and other expenses incurred by the
registrant, and taxes, as needed or required.
<PAGE>
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Indenture dated as of July 1, 1986 (the "Indenture")
between the Company and First Interstate Bank of Denver
National Association, as Trustee (the "Trustee"),
previously filed as Exhibit 4.1 to the Company's
Post-Effective Amendment No. 1 to Form S-11, Registration
No. 33-02105 and incorporated by reference.
Series Supplement to the Indenture, dated as of July 1,
1986, relating to Series 1986-A Bonds, previously filed as
Exhibit 4 to the Company's Form 8-K filed on August 6, 1986
and incorporated by reference.
Series Supplement to the Indenture, dated as of August 1,
1986, relating to Series 1986-B Bonds, previously filed as
Exhibit 4 to the Company's Form 8-K filed on September 3,
1986 and incorporated by reference.
27 Financial Data Schedule.
b. Reports on Form 8-K. The registrant has not filed any 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.
Newman Financial Corporation
(Registrant)
Date: May 12, 1995 By: /s/ David W. Curtiss
-------------------------------
David W. Curtiss, Treasurer
and Principal Financial Officer
<PAGE>
Exhibit A to Form 10-Q
for Quarter Ended March 31, 1995
NEWMAN FINANCIAL CORPORATION
INTERIM FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
<PAGE>
NEWMAN FINANCIAL CORPORATION
BALANCE SHEETS
MARCH 31, 1995 AND JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash $ 732 $ 710
Restricted assets
Cash and temporary cash investments 72,361 244,426
Investment in governmental securities,
net of discount of $125,074 and
$128,625 at March 31 and June 30,
respectively 6,898,749 6,937,228
Accrued interest receivable 53,662 53,479
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7,024,772 7,235,133
Organization costs, net of accumulated
amortization. 3,332 3,427
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$7,028,836 $7,239,270
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---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable $ 2,896 $ 4,153
Payable to parent company 19,036 8,656
Accrued interest payable 2,300 37,000
Bonds payable, including accrued interest
of $3,253,006 and $2,857,250 at March 31
and June 30, net of discount of $89,084 and $91,621
at March 31 and June 30, respectively 6,740,711 6,932,418
---------- ----------
Total liabilities 6,764,943 6,982,227
Stockholder's equity
Common stock - authorized, 5,000 shares of $.10 par
value; issued and outstanding, 1,000 shares 100 100
Capital in excess of par value 254,343 254,343
Retained earnings 26,005 19,155
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280,448 273,598
Less note receivable - parent
company (16,555) (16,555)
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263,893 257,043
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$7,028,836 $ 7,239,270
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---------- ----------
</TABLE>
The accompanying notes are an integral part of these interim statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
STATEMENTS OF OPERATIONS
PERIODS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
March 31, 1995 March 31, 1994 March 31, 1995 March 31, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Interest income $168,842 $166,862 $499,935 $498,480
Amortization of GNMA discount 1,184 1,184 3,551 3,551
-------- -------- -------- --------
170,026 168,046 503,486 502,031
Costs and expenses
Interest expense 161,321 161,333 483,814 483,254
Amortization of organization
costs 32 32 95 95
General/administrative expenses 1,248 1,248 8,628 8,679
-------- -------- -------- --------
162,601 162,613 492,537 492,028
-------- -------- -------- --------
Earnings before income taxes 7,425 5,433 10,949 10,003
Income tax expense
Currently payable 2,700 1,800 4,100 3,400
Deferred - - - -
-------- -------- -------- --------
2,700 1,800 4,100 3,400
-------- -------- -------- --------
Net earnings $ 4,725 $ 3,633 $ 6,849 $ 6,603
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings per common share $ 4.73 $ 3.63 $ 6.85 $ 6.60
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of common
shares outstanding 1,000 1,000 1,000 1,000
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,849 $ 6,603
Adjustments required to reconcile net earnings
to net cash provided by operating activities:
Amortization of GNMA discounts (3,551) (3,551)
Amortization of organization costs 95 95
Amortization of bond discount 2,537 2,537
Decrease(increase) in accrued interest receivable (183) 301
Decrease in accounts payable (1,257) (1,257)
Increase in accrued interest payable 361,057 314,771
-------- --------
Net cash provided by operating activities 365,547 319,499
-------- --------
Cash flows from investing activities:
Net decrease in restricted cash 172,065 175,630
Principal payments on GNMA securities 42,030 39,115
Net advances from parent 10,380 5,430
-------- --------
Net cash provided by investing activities 224,475 220,175
-------- --------
Cash flows from financing activities:
Payment of bond principal (590,000) (540,000)
-------- --------
Net cash used in financing activities (590,000) (540,000)
-------- --------
NET INCREASE (DECREASE) IN UNRESTRICTED
CASH 22 (326)
Unrestricted cash at beginning of period 710 1,031
-------- --------
Unrestricted cash at end of period $ 732 $ 705
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NEWMAN FINANCIAL CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(UNAUDITED)
NOTE A - GENERAL
1. ORGANIZATION
Newman Financial Corporation (the Company) was incorporated in the State of
Delaware on August 30, 1985 and is a wholly-owned subsidiary of Newman
Financial Services, Inc. (NFSI). The Company was organized for the sole
purpose of issuing and selling bonds, notes and other obligations which
would be collateralized by certain mortgage collateral guaranteed by the
Government National Mortgage Association (GNMA) or mortgage notes that are
insured by the United States Department of Housing and Urban Development
acting through the Federal Housing Administration pursuant to the National
Housing Act, as amended, together with certain funds and other collateral.
In June 1986, a shelf registration statement filed with the Securities and
Exchange Commission became effective authorizing the Company to issue up to
$250,000,000 in Collateralized Multifamily Housing Bonds.
2. INTERIM FINANCIAL INFORMATION
The financial information contained herein is unaudited but includes all
normal and recurring adjustments which, in the opinion of management, are
necessary to present fairly the information set forth. The financial
statements should be read in conjunction with the Notes to Financial
Statements which are included in the Company's Form 10-K dated
September 20, 1994.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF MARCH 31, 1995 AND STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 732
<SECURITIES> 6,898,749
<RECEIVABLES> 53,662
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,028,836
<CURRENT-LIABILITIES> 0
<BONDS> 6,740,711
<COMMON> 100
0
0
<OTHER-SE> 263,793
<TOTAL-LIABILITY-AND-EQUITY> 7,028,836
<SALES> 0
<TOTAL-REVENUES> 503,486
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 483,814
<INCOME-PRETAX> 10,949
<INCOME-TAX> 4,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,849
<EPS-PRIMARY> 6.85
<EPS-DILUTED> 0
</TABLE>
