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 December 31, 1998
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 December 31, 1998
(Unaudited) and June 30, 1998
Statements of Operations (Unaudited) for the three months
ended December 31, 1998 and December 31, 1997
and for the six months ended December 31, 1998
and December 31, 1997
Statements of Cash Flows (Unaudited) for the six months ended
December 31, 1998 and December 31, 1997
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
December 31, June 30,
1998 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 $ 16,289,007 $ 16,288,603
Other liabilities 165,000 165,000
---------------- ----------------
Total Liabilities 16,454,007 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 (248,445) (248,041)
--------------- ---------------
Total Stockholder's Equity (247,444) (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 Six Months Ended
December December 31, December December 31,
31, 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Expenses
Other expenses $ 84 $ 163,423 $ 714 $ 327,111
------------- ------------- ------------- -------------
Total expenses $ 84 $ 163,423 $ 714 $ 327,111
------------- ------------- ------------- -------------
Loss before benefit from income taxes (84) (163,423) (714) (327,111)
Benefit from income taxes 36 71,123 310 142,361
-------------- ------------- ------------- -------------
Net loss $ (48) $ (92,300) $ (404) $ (184,750)
============== ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BEAR STEARNS SECURED INVESTORS INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31, December 31,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (404) $ (184,749)
Decrease in deferred organization costs ---- 99,312
Increase (decrease) in other liabilities ----
688
--------------- ------------
Cash provided by (used in) operating activities (404) 115,251
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Payable to Parent 404 (115,251)
------------- -----------
Cash provided by (used in) financing activities 404 (115,251)
--------------- ------------
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.
<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 six months ended December 31, 1998, 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 second quarter of the fiscal year 1999 was $48 as
compared with a net loss of $92,300 for the second of fiscal year 1998. During
the 1999 and 1998 second 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. All hardware and software used by the Company is
through The Bear Stearns Companies, Inc. and affiliates (BSC). BSC has
determined that they need to modify or replace portions of their software and
hardware so that its computer system will properly utilize dates beyond December
31, 1999.
Over three years ago, BSC established a task force to review and develop an
action plan to address the Year 2000 issue. BSCs 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 BSC is vulnerable to those third parties failure to remediate their
own year 2000 issues. BSC has contacted all significant external vendors in an
effort to confirm their readiness for the Year 2000 and plans to test
compatibility with such converted systems. BSC1 also participates in
industry-wide tests.
BSC has and will continue to utilize both internal and external resources
to reprogram, or replace, and test the software and hardware for Year 2000
modifications. To date, the amounts incurred and expensed related to the
assessment of, and efforts in connection with, the Year 2000 and the development
of a remediation plan have approximated $31.3 million. BSCs 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. BSCs total remaining Year 2000 project cost is estimated at
approximately $28.7 million which will be funded through operating cash flows
and expensed as incurred.
BSC 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. BSC has substantially completed the
reprogramming and replacement phase of the project. Testing has commenced and
will proceed through calendar 1999. 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 BSC.
Additionally, there can be no assurance that the systems of other companies
on which BSCs systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with BSCs
systems, would not have a material adverse effect on BSC. While BSC does not
have a specific, formal contingency plan, the BSCs action plan is designed to
safeguard the interests of the BSC and its customers. BSC believes that this
action plan 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, BSC is monitoring developments closely. Should it appear that
a major utility, such as a stock exchange, would not be ready, BSC 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: February 12, 1999 By: /s/William J. Montgoris
William J. Montgoris
Secretary, Treasurer and
Chief Financial Officer
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the unaudited
Statements of Financial Condition at December 31, 1998 and unaudited Statements
of Operations for the six-months ended December 31, 1998, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 1000
<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> (247,445)
<TOTAL-LIABILITY-AND-EQUITY> 16,206,563
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 714
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (714)
<INCOME-TAX> (310)
<INCOME-CONTINUING> (404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (404)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
