SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 26, 1999
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 33-26824
Bear Stearns Secured Investors Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3402173
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1601 Elm Street
Dallas, Texas 75201
(Address of principal executive offices) (Zip Code)
(214) 754-8300
(Registrant's telephone number, including area code)
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
THE 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 REDUCED
DISCLOSURE FORMAT CONTEMPLATED THEREBY.
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition at March 26, 1999
(Unaudited) and June 30, 1998
Statements of Operations (Unaudited) for the three months
ended March 26, 1999 and March 27, 1998
and for the nine months ended March 26, 1999
and March 26, 1998
Statements of Cash Flows (Unaudited) for the nine months ended
March 26, 1999 and March 27, 1998
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signature
<PAGE>
<TABLE>
<CAPTION>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF FINANCIAL CONDITION
March 26, June 30,
1999 1998
(Unaudited)
ASSETS
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,000 $ 1,000
Receivable from affiliates 16,204,877 16,204,877
Other Assets 686 686
---------------- -----------------
Total Assets $ 16,206,563 $ 16,206,563
================ =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Payable to Parent $ 16,289,519 $ 16,288,603
Other liabilities 165,000 165,000
---------------- ----------------
Total Liabilities 16,454,519 16,453,603
---------------- ----------------
Stockholders Equity
Common stock, $.01 par value;
1,000 shares authorized:
100 shares outstanding 1 1
Paid-in capital 1,000 1,000
Accumulated deficit (248,957) (248,041)
----------------- ---------------
Total Stockholder's Equity (247,956) (247,040)
----------------- ----------------
Total Liabilities and Stockholder's Equity $ 16,206,563 $ 16,206,563
================= ================
See accompanying notes to financial statements.
<PAGE>
<CAPTION>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March March March March
26, 27, 26, 27,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Expenses
Other expenses $ 906 $ 166,387 $ 1,621 $ 493,498
------------- ------------- ------------- -------------
Total expenses $ 906 $ 166,387 $ 1,621 $ 493,498
------------- ------------- ------------- -------------
Loss before benefit from income taxes (906) (166,387) (1,621) (493,498)
Benefit from income taxes 394 72,413 705 214,775
-------------- ------------- ------------- -------------
Net loss $ (512) $ (92,974) $ (916) $ (278,723)
============== ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 26, March 27,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (916) $ (278,723)
Decrease in deferred organization costs - 449,313
Increase (decrease) in other liabilities - 688
-------------- ------------
Cash (used in) provided by operating activities (916) 171,278
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Payable to Parent 916 (171,278)
-------------- ------------
Cash provided by (used in) financing activities 916 (171,278)
-------------- ------------
Cash and cash equivalents, beginning of period 1,000 1,000
-------------- ------------
Cash and cash equivalents, end of period $ 1,000 $ 1,000
============== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
BEAR STEARNS SECURED INVESTORS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Organization
Bear Stearns Secured Investors Inc. (the Company) a direct wholly-owned
limited purpose finance subsidiary of The Bear Stearns Companies Inc. (the
Parent) was organized on November 26 1986 as a Delaware corporation. The
Companys sole purpose is to issue and sell one or more series of collateralized
mortgage obligations (CMOs) directly or through one or more trusts
established by it. In connection therewith, the Company provides management and
administrative services after the issuance of each CMO.
The Companys activities are limited to issuing CMOs that will be
collateralized by mortgage-backed certificates, whole residential or commercial
mortgage loans or participations therein, and, in connection therewith,
acquiring, owning, holding and pledging mortgage-backed certificates, whole
loans or commercial mortgage loans.
The financial statements are prepared in conformity with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the amounts in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Note 2. Collateralized Mortgage Obligations
During the nine months ended March 26, 1999, the Company did not issue
any collateralized mortgage obligations ("CMO's").
The Company clears all of its security transactions relating to the
purchase of the underlying collateral and issuance of CMO's through an
affiliate. An affiliate also acts as the principal underwriter for the Company's
CMO issuances.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's principal business activity is the issuing of collateralized
mortgage obligations ("CMO's") that are secured by mortgage-backed certificates,
whole residential or commercial mortgage loans or participations therein, and in
connection therewith, acquiring, owning, holding, and pledging mortgage-backed
certificates, whole residential or commercial mortgage loans. The Company also
derives revenues in its capacity as administrator during the life of the CMO
transactions where it originates and retaines such servicing obligation.
<PAGE>
The Company's results of operations reflects the impact of many factors in
the issuance of CMO's, including securities market conditions, the level of
volatility of interest rates, competitive conditions and the size and timing of
transactions. In addition, results of operations for any particular interim
period may not be indicative of results to be expected for a full year.
The net loss for the third quarter of the fiscal year 1999 was $512 as
compared with a net loss of $92,974 for the third quarter of fiscal year 1998.
During the 1999 and 1998 third quarters the Company was inactive.
Year 2000 Issue
The Year 2000 issue is the result of legacy computer programs being written
using two digits rather than four digits to define the applicable year and
therefore, without consideration of the impact of the upcoming change in the
century. Such programs may not be able to accurately process dates ending in the
year 2000 and thereafter. The Company determined that it needed to modify or
replace portions of its software and hardware so that its computer systems would
properly utilize dates beyond December 31, 1999.
Over four years ago, the Company established a task force to review and
develop an action plan to address the Year 2000 issue. The Companys action plan
addresses both information technology and non-information technology system
compliance issues. Since then, the ongoing assessment and monitoring phase has
continued and includes assessment of the degree of compliance of its significant
vendors, facility operators, custodial banks and fiduciary agents to determine
the extent to which the Company is vulnerable to those third parties failure to
remediate their own Year 2000 issues. The Company has contacted all significant
external vendors in an effort to confirm their readiness for the Year 2000 and
is in the process of testing compatibility with such converted systems. The
Company also participates actively in industry-wide tests.
The Company has and will continue to test the software and hardware for
Year 2000 modifications. To date, the amounts incurred related to the assessment
of, and efforts in connection with, the Year 2000 and the development and
execution of a remediation plan have approximated $45.8 million. The Companys
total projected Year 2000 project cost, including the estimated costs and time
associated with the impact of third party Year 2000 issues, are based on
currently available information. The total remaining Year 2000 project cost is
estimated at approximately $14.2 million, which will be funded through operating
cash flows and primarily expensed as incurred.
The Company presently believes that the activities that it is undertaking
in the Year 2000 project should satisfactorily resolve Year 2000 compliance
exposures within its own systems worldwide. The Company has substantially
completed the reprogramming and replacement phase of the project. Testing is in
progress and is expected to be completed in fiscal year 1999 with additional
testing, as deemed appropriate, through the end of the calendar year. However,
if such modifications and conversions are not operationally effective on a
timely basis, the Year 2000 issue could have a material impact on the operations
of the Company. Additionally, there can be no assurance that the systems of
other companies on which the Companys systems rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Companys systems, would not have a material adverse
effect on the Company. The Company has developed an action plan and a formal
contingency plan designed to safeguard the interests of the Company and its
customers. The Company believes that these plans significantly reduces the risk
of a Year 2000 issue serious enough to cause a business disruption. With regard
to Year 2000 compliance of other external entities, the Company is monitoring
developments closely. Should it appear that a major utility, such as a stock
exchange, would not be ready, the Company will work with other firms in the
industry to plan an appropriate course of action.
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 3. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the period covered by this
report.
<PAGE>
SIGNATURE
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.
Bear Stearns Secured Investors Inc.
(Registrant)
Date: May 12, 1999 By: /s/William J. Montgoris
William J. Montgoris
Secretary, Treasurer and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the unaudited
Statements of Financial Condition at March 26, 1999 and unaudited Statements
of Operations for the nine months ended March 26, 1999, which are contained in
the body of the accompanying Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-26-1999
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 16,204,877
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,206,563
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (247,957)
<TOTAL-LIABILITY-AND-EQUITY> 16,206,563
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,621)
<INCOME-TAX> (705)
<INCOME-CONTINUING> (916)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (916)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
