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 August 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 October 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 AUGUST 31, 1996
INDEX
Part I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements - (unaudited)
Statement of Operations -
Three and Nine Months Ended August 31, 1996
and 1995 ................................................. 3
Statement of Financial Condition -
August 31, 1996 and November 30, 1995 ..................... 5
Statement of Cash Flows -
Nine Months Ended August 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
-----------------------------------------------
August 31, August 31,
1996 1995
-------------------- -------------------
Revenues
Trading $ 4,253,378
Interest $1,017,562 1,553,879
-------------------- -------------------
1,017,562 5,807,257
-------------------- -------------------
Expenses
Compensation 1,250 7,500
General and administrative 255,318 1,453,666
-------------------- -------------------
256,568 1,461,166
-------------------- -------------------
Income before taxes 760,994 4,346,091
Provision for income taxes 350,438 2,001,374
-------------------- -------------------
Net income $ 410,556 $ 2,344,717
==================== ===================
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of OPERATIONS
(Unaudited)
Nine months ended
------------------------------------------------
August 31, August 31,
1996 1995
-------------------- --------------------
Revenues
Trading $ 5,387,866 $ 9,793,713
Interest 7,691,766 6,136,687
-------------------- --------------------
13,079,632 15,930,400
-------------------- --------------------
Expenses
Compensation 16,250 22,500
General and administrative 3,280,862 3,992,010
-------------------- --------------------
3,297,112 4,014,510
-------------------- --------------------
Income before taxes 9,782,520 11,915,890
Provision for income taxes 4,504,851 5,487,266
-------------------- --------------------
Net income $ 5,277,669 $ 6,428,624
==================== ====================
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of FINANCIAL CONDITION
(Unaudited)
ASSETS
August 31, November 30,
1996 1995
---------------- -------------
Cash $ 87,971 $ 40,921
Financial instruments owned, at fair value 84,186,780 145,971,295
Receivables from brokers, dealers and
financial institutions 1,319,007 1,575,758
Receivables from affiliates 515,229 121,260
Due from others 1,729,529 1,791,245
Investment in collateralized mortgage
obligation trusts 170 170
Deferred registration costs, net of
accumulated amortization of $1,941,442
and $981,562 in 1996 and 1995, respectively 2,821,791 3,609,329
------------------ ------------
$90,660,477 $153,109,978
================== =========
LIABILITIES and STOCKHOLDER'S EQUITY
Liabilities
Issuance expenses payable $ 917,443 $ 1,316,880
Payables to brokers, dealers and
financial institutions 2,048,657 1,431,682
Payables to affiliates 399,357 1,315,028
Other liabilities and accrued expenses 18,958
------------------ -------------
Total liabilities 3,365,457 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 66,283,895 33,293,973
Retained earnings 21,010,125 15,732,457
-------------------- -------------
Total stockholder's equity 87,295,020 149,027,430
-------------------- -------------
$90,660,477 $153,109,978
==================== ===========
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of CASH FLOWS
(Unaudited)
Nine months ended
------------------------------
August 31, August 31,
1996 1995
-------------------- ------
Cash flows from operating activities:
Net income $ 5,277,669 $ 6,428,624
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization 959,880 378,384
Net change in:
Financial instruments owned, at fair value 61,784,515 (139,057,722)
Receivables from brokers, dealers and financial
institutions 256,751 216,224
Receivables from affiliates (393,969) 926,205
Due from others 61,716 (45,952)
Deferred registration costs (172,343) (34,098)
Issuance expenses payable (399,437) 210,374)
Payables to brokers, dealers and financial
institutions 616,975 628,973
Payables to affiliates (915,671) 665,442
Income taxes payable to affiliate (8,416,262)
Other liabilities and accrued expenses (18,958) (25,401)
----------------- ------------
Net cash provided by (used in)
operating activities 67,057,128 (138,545,957)
----------------- ------------
Cash flows from financing activities:
Capital contributions by parent 28,667,514 214,046,082
Capital distributions to parent (95,677,592) (75,022,017)
------------------ ------------
Net cash (used in) provided by
financing activities (67,010,078) 139,024,065
------------------ ------------
Net change in cash 47,050 478,108
Cash, beginning of the period 40,921 111,735
------------------- ------------
Cash, end of the period $ 87,971 $ 589,843
==================== ==========
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 nine
months ended August 31, 1996, the Company issued Structured Asset
Securities Corporation Mortgage Pass-Through Certificates, Series
1996-3 totaling approximately $124.9 million principal amount,
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series Greenpoint 1996-A totaling approximately $144.5
million principal amount, 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 August
31, 1996, approximately $8.6 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 nine months ended August 31, 1996, LCPI contributed $28.7
million in capital to the Company, and the Company made capital
distributions to LCPI of $95.7 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.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
NOTES to FINANCIAL STATEMENTS
----------
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.
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 $3,280,862 for the nine months ended August 31,
1996, and $3,992,010 for the nine months ended August 31, 1995 are
recorded as 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 $4,504,851 were paid by the Company to LCPI in
accordance with the terms of the Company's tax allocation agreement
during the nine months ended August 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 August 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 nine months and quarters
ended August 31, 1996 and August 31, 1995.
Financial Condition
The Company's assets decreased from $153.1 million at November 30,
1995 to $90.7 million at August 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 $87.3 million at August 31, 1996 as a result of net capital
distributions to LCPI partially offset by income earned during the
nine months ended August 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 nine months ended August 31, 1996, the Company issued
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1996-3 totaling approximately $124.9 million
principal amount, Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series Greenpoint 1996-A totaling
approximately $144.5 million principal amount, 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 nine months ended August 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, Structured Asset Securities Corporation
Mortgage Pass-Through Certificates, Series 1995-1 totaling
approximately $73.2 million principal amount, Structured Asset
Securities Corporation
<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
Multiclass Pass-Through certificates, Series 1995-C3 totaling
approximately $322.8 million principal amount, Structured Asset
Securities Corporation Mortgage Pass-Through Certificates, Series
1995-2, Group II, totaling approximately $74.1 million principal
amount, and Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1995-2, Group I, totaling
approximately $174.2 million principal amount.
Trading revenues totaled $5,387,866 and $9,793,713 for the nine
months ended August 31, 1996 and 1995, respectively, and $4,253,378
for the quarter ended August 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 $6,136,687 during the nine months
ended August 31, 1995 to $7,691,766 during the nine months ended
August 31, 1996 and decreased from $1,553,879 during the quarter
ended August 31, 1995 to $1,017,562 during the quarter ended August
31, 1996. Interest income is driven by the level of interest earning
securities held during the period. Management fees totaled $3,992,010
and $1,453,666 during the nine months and quarter ended August 31,
1995 compared to $3,280,862 and $255,318 during the nine months and
quarter ended August 31, 1996. Management fees reflect the level of
operating activities of the Company. Management fees are recorded as
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:
October 8, 1996
October 8, 1996
October 7, 1996
October 4, 1996
September 11, 1996
September 6, 1996
August 30, 1996
August 29, 1996
August 7, 1996
August 6, 1996
July 23, 1996
July 10, 1996
July 10, 1996
<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: October 11, 1996 /S/ Theodore P. Janulis
Theodore P. Janulis
President
Date: October 11, 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 August 31, 1996 (Unaudited) and
the Statement of Operations for the nine months ended August 31, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000808851
<NAME> Structured Asset Securities Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 87,971
<RECEIVABLES> 3,563,765
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 84,186,780
<PP&E> 0
<TOTAL-ASSETS> 90,660,477
<SHORT-TERM> 0
<PAYABLES> 3,365,457
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
<COMMON> 1,000
0
0
<OTHER-SE> 87,294,020
<TOTAL-LIABILITY-AND-EQUITY> 90,660,477
<TRADING-REVENUE> 5,387,866
<INTEREST-DIVIDENDS> 7,691,766
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 16,250
<INCOME-PRETAX> 9,782,520
<INCOME-PRE-EXTRAORDINARY> 5,277,669
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,277,669
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
