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 May 31, 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 July 1, 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.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MAY 31, 1996
INDEX
Part I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements - (unaudited)
Statement of Operations -
Three and Six Months Ended May 31, 1996
and 1995 .................................. 3
Statement of Financial Condition -
May 31, 1996 and November 30, 1995 ........ 5
Statement of Cash Flows -
Six Months Ended May 31, 1996
and 1995................................... 6
Notes to Financial Statements................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............ 13
Signatures..................................................... 14
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of OPERATIONS
(Unaudited)
Three months ended
---------------------------------
May 31, May 31,
1996 1995
-------------- --------------
Revenues:
Trading $ 108,962 $ 1,072,430
Interest 2,253,669 1,914,143
-------------- --------------
2,362,631 2,986,573
-------------- --------------
Expenses:
Compensation 7,500 7,500
General and administrative 597,557 749,779
-------------- --------------
605,057 757,279
-------------- --------------
Income before taxes 1,757,574 2,229,294
Provision for income taxes 809,363 1,026,590
-------------- --------------
Net income $ 948,211 $ 1,202,704
============== ==============
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of OPERATIONS
(Unaudited)
Six months ended
---------------------------------
May 31, May 31,
1996 1995
-------------- --------------
Revenues:
Trading $ 5,387,866 $ 5,540,335
Interest 6,674,204 4,582,808
-------------- --------------
12,062,070 10,123,143
-------------- --------------
Expenses:
Compensation 15,000 15,000
General and administrative 3,025,544 2,538,344
-------------- --------------
3,040,544 2,553,344
-------------- --------------
Income before taxes 9,021,526 7,569,799
Provision for income taxes 4,154,413 3,485,892
-------------- --------------
Net income $ 4,867,113 $ 4,083,907
============== ==============
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of FINANCIAL CONDITION
(Unaudited)
ASSETS
May 31, November 30,
1996 1995
-------------- --------------
Cash $ 486 $ 40,921
Financial instruments owned, at fair value 103,137,027 145,971,295
Receivables from brokers, dealers and
financial institutions 3,597,848 1,575,758
Receivables from affiliates 1,144,261 121,260
Due from others 1,729,361 1,791,245
Investment in collateralized mortgage 170 170
obligation trusts
Deferred registration costs, net of
accumulated amortization of $1,848,534
and $981,562 in 1996 and 1995, 2,914,698 3,609,329
respectively -------------- --------------
$112,523,851 $153,109,978
============== ==============
LIABILITIES and STOCKHOLDER'S EQUITY
Liabilities:
Issuance expenses payable $ 1,573,157 $ 1,316,880
Payables to brokers, dealers and
financial institutions 4,230,868 1,431,682
Payables to affiliates - 1,315,028
Other liabilities and accrued expenses 955 18,958
-------------- --------------
Total liabilities 5,804,980 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 86,118,302 133,293,973
Retained earnings 20,599,569 15,732,457
-------------- --------------
Total stockholder's equity 106,718,871 149,027,430
-------------- --------------
$112,523,851 $ 153,109,978
============== ===============
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of CASH FLOWS
(Unaudited)
Six months ended
-------------------------------
May 31, May 31,
1996 1995
--------------- --------------
Cash flows from operating activities:
Net income $4,867,113 $ 4,083,907
Adjustments to reconcile net income to net
cash
provided by (used in) operating
activities:
Amortization 866,972 181,448
Net change in:
Financial instruments owned, at fair 42,834,268 (39,058,810)
value
Receivables from brokers, dealers and
financial institutions (2,022,090) (259,896)
Receivables from affiliates (1,023,001) 1,029,768
Due from others 61,884 (30,523)
Deferred registration costs (172,342) (34,098)
Issuance expenses payable 256,277 (393,113)
Payables to brokers, dealers and 2,799,186 (162,453)
financial institutions
Payables to affiliates (1,315,028) 1,599,685
Income taxes payable to affiliate - (8,416,262)
Other liabilities and accrued expenses (18,003) (25,401)
--------------- --------------
Net cash provided by (used in) 47,135,236 (41,485,748)
operating activities --------------- --------------
Cash flows from financing activities:
Capital contributions by parent 25,138,321 102,782,161
Capital distributions to parent (72,313,992) (61,407,017)
--------------- --------------
Net cash (used in) provided by (47,175,671) 41,375,144
financing activities --------------- --------------
Net change in cash (40,435) (110,604)
Cash, beginning of the period 40,921 111,735
--------------- --------------
Cash, end of the period $ 486 $ 1,131
=============== ==============
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"), a wholly owned
subsidiary of Lehman Brothers Holdings Inc. ("Holdings"). The Company's
financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission with respect to the
Form 10-Q and reflect all normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the results
for the interim periods presented. The Statement of Financial Condition at
November 30, 1995 was derived from the audited financial statements. It is
recommended that these financial statements be read in conjunction with
the audited financial statements included in the Company's Annual Report
on Form 10-K for the twelve months ended November 30, 1995.
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 six months ended May 31, 1996, the
Company issued Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1996-2 totaling approximately $196.2
million principal amount, Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1996-1 totaling approximately $182.1
million principal amount, 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. In addition, the Company
issued Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1996-1 and 1996-2 totaling approximately $2.0 million
and $4.5 million principal amount, respectively, in a private placement.
As of May 31, 1996, approximately $8.8 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 six months ended May 31, 1996, LCPI
contributed $25.1 million in capital to the Company, and the Company made
capital distributions to LCPI of $72.3 million.
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 $3,025,520 for the six months ended May 31, 1996, and $2,538,300
for the six months ended May 31, 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 $4,154,413 were paid by the Company to LCPI in accordance
with the terms of the Company's tax allocation agreement during the six
months ended May 31, 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 May 31, 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 Results
of Operations
Set forth below is management's discussion and analysis of financial
condition and results of operations for the six months and quarters
ended May 31, 1996 and May 31, 1995.
Financial Condition
The Company's assets decreased from $153.1 million at November 30, 1995
to $112.5 million at May 31, 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 $106.7 million at May 31, 1996 as a result of net capital
distributions to LCPI partially offset by income earned during the six
months ended May 31, 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 six months ended May 31, 1996, the Company issued Structured
Asset Securities Corporation Mortgage Pass-Through Certificates, Series
1996-2 totaling approximately $196.2 million principal amount,
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1996-1 totaling approximately $182.1 million
principal amount, 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. In addition, the
Company issued Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1996-1 and 1996-2 totaling
approximately $2.0 million and $4.5 million principal amount,
respectively, in a private placement. During the six months ended May
31, 1995, the Company issued Structured Asset Securities Corporation
Multiclass Pass-Through Certificates, Series 1995-C1 totaling
approximately $394.3 million principal amount, Structured Asset
Securities Corporation Multiclass Pass-Through Certificates, Series
1995-3 totaling approximately $99.5 million principal amount, and
Structured Asset Securities Corporation Multiclass Pass-Through
Certificates, Series 1995-1 totaling approximately $73.2 million.
<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 Results
of Operations
Trading revenues totaled $5,387,866 and $108,962 for the six months and
quarter ended May 31, 1996, and $5,540,335 and $1,072,430 for the six
months and quarter ended May 31, 1995. Trading revenues are principally
attributable to the issuance and sale of securities and valuing
financial instruments owned at market or fair value.
Interest income increased from $4,582,808 during the six months ended
May 31, 1995 to $6,674,204 during the six months ended May 31, 1996 and
increased from $1,914,143 during the quarter ended May 31, 1995 to
$2,253,669 during the quarter ended May 31, 1996. These increases were
principally due to an increase in interest earning securities held
during the first six months of fiscal 1996. Management fees totaled
$2,538,300 and $749,767 during the six months and quarter ended May 31,
1995 compared to $3,025,520 and $597,533 during the six months and
quarter ended May 31, 1996. Management fees reflect the level of
operating activities of the Company. Management fees are included in
general and administrative expenses in the accompanying Statements of
Operations.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits and reports on Form 8-K are filed as part of this
Quarterly Report, or where indicated, were heretofore filed and are hereby
incorporated by reference:
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
<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: July 10, 1996 /S/ Theodore P. Janulis
Theodore P. Janulis
President
Date: July 10, 1996 /S/ Dave Goldfarb
Dave Goldfarb
Controller
<PAGE>
Exhibit 27
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
STRUCTURED ASSET SECURITIES CORPORATION
This schedule contains summary financial information extracted from the
Company's Statement of Financial Condition at May 31, 1996 (Unaudited) and the
Statement of Operations for the six months ended May 31, 1996 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 486
<RECEIVABLES> 6,471,470
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 103,137,027
<PP&E> 0
<TOTAL-ASSETS> 112,523,851
<SHORT-TERM> 0
<PAYABLES> 5,804,025
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
<COMMON> 1,000
0
0
<OTHER-SE> 106,717,871
<TOTAL-LIABILITY-AND-EQUITY> 112,523,851
<TRADING-REVENUE> 5,387,866
<INTEREST-DIVIDENDS> 6,674,204
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 15,000
<INCOME-PRETAX> 9,021,526
<INCOME-PRE-EXTRAORDINARY> 4,867,113
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,867,113
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
