UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 1996
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: 33-31337
STRUCTURED ASSET SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-2440850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Vesey Street, 20th Floor, New York, NY 10285
(Address of principal executive offices) (Zip Code)
212-526-5594
(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 12 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 ___
Registrant had 1,000 shares of common stock outstanding (all owned indirectly by
Lehman Brothers Holdings Inc.) as of March 31, 1996.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND THEREFORE IS FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT CONTEMPLATED THEREBY.
INDEX
STRUCTURED ASSET SECURITIES CORPORATION
Cover
Index Page
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements 2 - 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Liquidity and Capital
Resources and Results of Operations 10 - 11
PART II OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of
Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
STRUCTURED ASSET SECURITIES CORPORATION
INDEX to FINANCIAL STATEMENTS
Statement of Operations for the three months
ended February 29, 1996 and
February 28, 1995 3
Statement of Financial Condition as of
February 29, 1996 and November 30, 1995 4
Statement of Cash Flows for the three months ended
February 29, 1996 and February 28, 1995 5
Notes to Financial Statements 6 - 9
<PAGE>
<TABLE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of OPERATIONS
(Unaudited)
<CAPTION>
Three months ended
February 29, February 28,
1996 1995
<S> <C> <C> <C>
Revenues:
Trading ................................ $5,278,904 $4,467,905
Interest ............................... 4,420,535 2,668,665
---------- ----------
9,699,439 7,136,570
---------- ----------
Expenses:
Compensation ........................... 7,500 7,500
General and administrative ............. 2,427,987 1,788,565
---------- ----------
2,435,487 1,796,065
---------- ----------
Income before income taxes ................. 7,263,952 5,340,505
Income tax provision ................... 3,345,050 2,459,302
---------- ----------
Net income ................................. $3,918,902 $2,881,203
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of FINANCIAL CONDITION
ASSETS
<CAPTION>
February 29, 1996 November 30, 1995
(Unaudited)
<S> <C> <C> <S> <C> <C>
Cash ............................................................................. $ -- $ 40,921
Financial instruments owned, at fair value ....................................... 127,168,537 145,971,295
Receivables from brokers, dealers and
financial institutions ........................................................ 4,019,220 1,575,758
Receivables from affiliates ...................................................... 61,032 121,260
Due from others .................................................................. 1,728,522 1,791,245
Investment in collateralized mortgage obligation trusts .......................... 170 170
Deferred registration costs, net of
accumulated amortization of $1,718,242
and $981,562 in 1996 and 1995, respectively ................................... 3,044,991 3,609,329
------------ ------------
$136,022,472 $153,109,978
============ ============
LIABILITIES and STOCKHOLDER'S EQUITY
Liabilities:
Issuance expenses payable ................................................. $ 575,797 $ 1,316,880
Payables to brokers, dealers and
financial institutions ................................................. 4,392,518 1,431,682
Payables to affiliates .................................................... 24,047 1,315,028
Other liabilities and accrued expenses .................................... 338,074 18,958
------------ ------------
Total liabilities ........................................ 5,330,436 4,082,548
------------ ------------
Stockholder's equity:
Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding ...................................... 1,000 1,000
Additional paid-in capital ................................................ 111,039,677 133,293,973
Retained earnings ......................................................... 19,651,359 15,732,457
------------ ------------
Total stockholder's equity ............................... 130,692,036 149,027,430
------------ ------------
$136,022,472 $153,109,978
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
February 29, February 28,
1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................... $ 3,918,902 $ 2,881,203
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Amortization ............................. 736,680 126,172
Effect of changes in operating assets
and liabilities:
Financial instruments owned,
at fair value ............................ 18,802,758 (68,809,043)
Receivables from brokers,
dealers and financial
institutions ........................... (2,443,462) (656,085)
Receivables from affiliates .............. 60,228 1,029,768
Due from others .......................... 62,723 (15,094)
Deferred registration costs .............. (172,342) (34,098)
Issuance expenses payable ................ (741,083) 322,489
Payables to brokers, dealers
and financial institutions ............... 2,960,836 (149,091)
Payables to affiliates ................... (1,290,981) 3,128,317
Income taxes payable to affiliate ........ -- 2,462,847
Other liabilities and accrued expenses ... 319,116 (25,401)
------------ ------------
Total adjustments .................. 18,294,473 (62,619,219)
------------ ------------
Net cash provided by
(used in) operating activities ...... 22,213,375 (59,738,016)
------------ ------------
Cash flows from financing activities:
Capital contributions by parent .............. 20,800,906 71,008,763
Capital distributions to parent .............. (43,055,202) (11,368,802)
------------ ------------
Net cash (used in)
provided by financing activities ... (22,254,296) 59,639,961
------------ ------------
Net decrease in cash ........................... (40,921) (98,055)
Cash at the beginning of the period ............ 40,921 111,735
------------ ------------
Cash at the end of the period ...... $ $ 13,680
------------
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
1. Organization:
Structured Asset Securities Corporation (the "Company") is a
limited-purpose finance corporation. All of the outstanding
capital stock is owned by Lehman Commercial Paper Inc. ("LCPI"),
an indirect wholly owned subsidiary of Lehman Brothers Holdings Inc.
("Holdings").
The Company's activities consist of the issuance and sale of debt
securities (the "Bonds") collateralized by mortgages and/or
mortgage-backed securities or serving as the depositor for one or more
trusts (the "Trust(s)") which will issue Pass-Through Certificates,
representing an undivided interest in such mortgage collateral.
The Company has filed registration statements on Form S-3 with the
Securities and Exchange Commission (the "Commission") which permit the
Company to issue, from time to time, Bonds and Pass-Through
Certificates in principal amount not to exceed $11.7 billion. The
Company has also filed registration statements on Form S-3 for the
issuance of $6 billion principal amount of Bonds. During the three
months ended February 29, 1996, the Company issued Aetna 1995
Commercial Mortgage Trust Multiclass Pass-Through Certificates, Series
1995-C5 totaling approximately $341.3 million principal amount,
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1995-4 totaling approximately $201.3 million
principal amount and Structured Asset Securities Corporation Multiclass
Pass-Through Certificates, Series 1996-CFL totaling approximately $1.6
billion principal amount. As of February 29, 1996, approximately $9.2
billion was available for issuance under the registration statements
referred to above.
The Company has issued Bonds and acted as depositor for various Trusts
which have issued Pass-Through Certificates collateralized by mortgages
and/or mortgage securities. The Company has surrendered to the Trusts
all future economic interests in the Bonds, Pass-Through Certificates
and related collateral. According to the terms of the various Trust
agreements, the security holders can look only to the related
collateral for repayment of both principal and interest. In accordance
with generally accepted accounting principles, the Bonds, Pass-Through
Certificates, and related collateral have been removed from the
accompanying Statement of Financial Condition.
During the three months ended February 29, 1996, LCPI contributed $20.8
million in capital to the Company, and the Company made capital
distributions to LCPI of $43.1 million.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies:
Deferred registration costs:
Deferred registration costs relate to filing fees and other costs paid
by the Company in connection with filings for the registration of the
securities which were or are to be issued by the Company. These costs
are deferred in anticipation of future revenues upon the issuance of
securities from the respective shelf that has been established.
Amortization of the costs is based upon the percentage of issued
securities to the respective shelf from which the securities are issued
and is included as a component of trading revenue in the accompanying
Statement of Operations.
Financial instruments owned, at fair value:
Financial instruments owned principally represent subordinated
interests in pools of mortgage loans, with the remaining instruments
representing the right to receive certain future interest payments on
the underlying loans. Financial instruments owned are valued at market
or fair value, as appropriate, with unrealized gains and losses
reflected in trading revenues in the Statement of Operations. Market
value is generally based on listed market prices. If listed market
prices are not available, fair value is determined based on other
relevant factors, including broker or dealer price quotations, and
valuation pricing models which take into account time value and
volatility factors underlying the financial instruments.
All securities transactions are recorded in the accompanying financial
statements on a trade date basis.
Income taxes:
The Company is included in the consolidated U.S. federal income tax
return of Holdings and in combined state and local returns with other
affiliates of Holdings. The Company computes its income tax provision
on a separate return basis in accordance with the terms of a tax
allocation agreement between Holdings and its subsidiaries. The income
tax provision is greater than that calculated by applying the statutory
federal income tax rate principally due to state and local taxes.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the
estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
3. Investment in Collateralized Mortgage Obligation Trusts:
The investment consists of seventeen $10 deposits made with an owner
trustee to establish the Trusts pursuant to deposit trust agreements.
4. Related Party Transactions:
In connection with the Company's activities, mortgage collateral is
purchased from and recorded at an affiliate's carrying value, which for
such broker/dealer affiliates represents market value.
Certain directors and officers of the Company are also directors and
officers of Lehman Brothers Inc., LCPI and/or other affiliates of the
Company.
Pursuant to a management agreement (the "Agreement"), the Company is
charged a management fee for various services rendered on its behalf by
LCPI. The Agreement provides for an allocation of costs based upon the
level of activity processed by LCPI on behalf of the Company.
Management fees of $2,427,987 for the three months ended February 29,
1996, and $1,788,533 for the three months ended February 28, 1995 are
the principal component of general and administrative expenses in the
accompanying Statement of Operations. The Agreement is renewable each
year unless expressly terminated or renegotiated by the parties.
Compensation expense represents amounts allocated to the Company by
LCPI for compensation paid to certain common officers and directors of
the Company.
Income taxes of $3,345,050 were paid by the Company to LCPI in
accordance with the terms of the Company's tax allocation agreement
during the three months ended February 29, 1996.
The Company believes that amounts arising through related party
transactions, including the fees referred to above, are reasonable and
approximate the amounts that would have been recorded if the Company
operated as an unaffiliated entity.
5. Financial Instruments with Off-Balance Sheet Risk and Concentration of
Credit Risk:
Certain of the Company's activities are principally conducted with
financial institutions. At February 29, 1996, the Company had no
material individual counterparty concentration of credit risk, or any
financial instrument with off-balance sheet risk.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
6. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures About Fair Value of Financial Instruments", requires
disclosure of the fair values of most on- and off-balance sheet
financial instruments, for which it is practicable to estimate that
fair value. The scope of SFAS No. 107 excludes certain financial
instruments, such as trade receivables and payables when the carrying
value approximates the fair value, employee benefit obligations and all
non-financial instruments, such as fixed assets. The fair value of the
Company's assets and liabilities which qualify as financial instruments
under SFAS No. 107 approximate the carrying amounts presented in the
Statement of Financial Condition.
Financial instruments owned principally represent subordinated
interests in pools of mortgage loans, with the remaining instruments
representing the right to receive certain future interest payments on
the underlying loans. These financial instruments are generally
non-rated or rated as non-investment grade by recognized rating
agencies. Changes in interest rates could potentially have an adverse
impact on the future cash flows for financial instruments owned. In
addition, for certain securities, defaults on the mortgage loans
underlying these instruments could have a greater than proportional
impact on their fair value since the payments of principal and interest
are subordinate to other securities issued in the same series. These
risks, among other risks, are incorporated in the determination of fair
value of financial instruments owned.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION, continued
Item 2 Management's Discussion and Analysis of Financial Condition and
Liquidity and Capital Resources and Results of Operations
Set forth below is management's discussion and analysis of financial
condition and liquidity and capital resources and results of operations
for the three months ended February 29, 1996 and three months ended
February 28, 1995.
Financial Condition and Liquidity and Capital Resources
The Company's assets decreased from $153.1 million at November 30, 1995
to $136.0 million at February 29, 1996 primarily related to the
decrease in financial instruments owned. Financial instruments owned
represent the portion of issued securities retained by the Company and
are carried at market or fair value, as appropriate.
Stockholder's equity decreased from $149.0 million at November 30, 1995
to $130.7 million at February 29, 1996 as a result of net capital
distributions to LCPI partially offset by income earned during the
three months ended February 29, 1996. Capital contributions from LCPI
are made to fund securities retained by the Company from new issuances.
The Company continually monitors its capital position and makes capital
distributions to LCPI as excess funds are realized from securities
related transactions.
Results of Operations
During the three months ended February 29, 1996, the Company issued
Aetna 1995 Commercial Mortgage Trust Multiclass Pass-Through
Certificates, Series 1995-C5 totaling approximately $341.3 million
principal amount, Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1995-4 totaling approximately $201.3
million principal amount and Structured Asset Securities Corporation
Multiclass Pass-Through Certificates, Series 1996-CFL totaling
approximately $1.6 billion principal amount. During the three months
ended February 28, 1995 the Company issued Structured Asset Securities
Corporation Multiclass Pass-Through Certificates, Series 1995-C1
totaling approximately $394.3 million principal amount.
Trading revenues totaled $5,278,904 and $4,467,905 for the three months
ended February 29, 1996 and February 28, 1995, respectively. Trading
revenues are attributable to the issuance and sale of securities and
valuing financial instruments owned at market or fair value.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION, continued
Item 2 Management's Discussion and Analysis of Financial Condition and
Liquidity and Capital Resources and Results of Operations
Interest income increased from $2,668,665 during the three months ended
February 28, 1995 to $4,420,535 during the three months ended February
29, 1996. The increase was principally due to an increase of interest
earning securities held during the first quarter of 1996. Management
fees totaled $2,427,987 and $1,788,533 during the three months ended
February 29, 1996 and February 28, 1995, respectively, reflecting the
increased trading and operating activities of the Company. Management
fees are the principal component of general and administrative expenses
in the accompanying Statement of Operations.
<PAGE>
PART II - OTHER INFORMATION
The following items have been omitted as inapplicable or not required
under general instruction H(2)(a) and (b) of Form 10-Q:
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
<PAGE>
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.
STRUCTURED ASSET SECURITIES
CORPORATION
(Registrant)
Date: April 12, 1996 /S/ Theodore P. Janulis
Theodore P. Janulis
President
Date: April 12, 1996 /S/ David Goldfarb
David Goldfarb
Controller
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Statement of Financial Condition at February 29, 1996 (Unaudited) and
the Statement of Operations for the three months ended February 29, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 0
<RECEIVABLES> 5,808,774
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 127,168,537
<PP&E> 0
<TOTAL-ASSETS> 136,022,472
<SHORT-TERM> 0
<PAYABLES> 4,992,362
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
<COMMON> 1,000
0
0
<OTHER-SE> 130,691,036
<TOTAL-LIABILITY-AND-EQUITY> 136,022,472
<TRADING-REVENUE> 5,278,904
<INTEREST-DIVIDENDS> 4,420,535
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 7,500
<INCOME-PRETAX> 7,263,952
<INCOME-PRE-EXTRAORDINARY> 3,918,902
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,918,902
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
