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 28, 1997
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, 1997.
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 FEBRUARY 28, 1997
INDEX
Part I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements - (unaudited)
Statement of Operations -
Three Months Ended February 28, 1997
and February 29, 1996 ....................... 3
Statement of Financial Condition -
February 28, 1997 and November 30, 1996 ..... 4
Statement of Cash Flows -
Three Months Ended February 28, 1997
and February 29, 1996........................ 5
Notes to Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................... 11
Signatures ...................................................... 12
Exhibits
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------
February 28 February 29
1997 1996
-------------------- -------------------
<S> <C> <C>
Revenues:
Trading $(451,329) $ 5,278,904
Interest - 4,420,535
-------------------- -------------------
(451,329) 9,699,439
-------------------- -------------------
Expenses:
Compensation 7,500 7,500
General and administrative 5,204 2,427,987
-------------------- -------------------
12,704 2,435,487
-------------------- -------------------
(Loss) income before income taxes (464,033) 7,263,952
Income tax (benefit) provision (213,455) 3,345,050
-------------------- -------------------
Net (loss) income $ (250,578) $ 3,918,902
==================== ===================
</TABLE>
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENT of FINANCIAL CONDITION
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
February 28 November 30 1996
1997
-------------------- --------------------
<S> <C> <C>
Cash $ 26,897 $ 459,283
Financial instruments owned 100,050,655 118,807,138
Receivables from brokers, dealers and
financial institutions 311,903 1,398,140
Receivables from affiliates 507,064 119,220
Due from others 1,729,360 1,729,193
Investment in collateralized mortgage obligation trusts 170 170
Deferred registration costs, net of
accumulated amortization of $2,298,857
and $2,182,943 in 1997 and 1996, respectively 2,464,375 2,580,289
-------------------- --------------------
$105,090,424 $125,093,433
==================== ====================
</TABLE>
LIABILITIES and STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities:
Issuance expenses payable $ 601,937 $ 2,045,358
Payables to brokers, dealers and
financial institutions 840,102 2,134,083
Payables to affiliates 2,174,139 2,468,563
Other liabilities and accrued expenses 8,286 4,251
-------------------- --------------------
Total liabilities 3,624,464 6,652,255
-------------------- --------------------
Stockholder's equity:
Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding 1,000 1,000
Additional paid-in capital 77,935,994 94,660,634
Retained earnings 23,528,966 23,779,544
-------------------- --------------------
Total stockholder's equity 101,465,960 118,441,178
-------------------- --------------------
$105,090,424 $125,093,433
==================== =====================
</TABLE>
See notes to financial statements.
<PAGE>
STRUCTURED ASSET SECURITIES CORPORATION
STATEMENTS of CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------
February 28 February 29
1997 1996
-------------------- ---------------------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $(250,578) $ 3,918,902
Adjustments to reconcile net income to net cash
provided by operating
activities:
Amortization 115,914 736,680
Net change in:
Financial instruments owned, at fair value 18,756,483 18,802,758
Receivables from brokers, dealers and financial
institutions 1,086,237 (2,443,462)
Receivables from affiliates (387,844) 60,228
Due from others (167) 62,723
Deferred registration costs - (172,342)
Issuance expenses payable (1,443,421) (741,083)
Payables to brokers, dealers and financial institutions (1,293,981) 2,960,836
Payables to affiliates (294,424) (1,290,981)
Other liabilities and accrued expenses 4,035 319,116
-------------------- ---------------------
Net cash provided by operating activities 16,292,254 22,213,375
-------------------- ---------------------
Cash flows from financing activities:
Capital contributions by parent 141,902,251 20,800,906
Capital distributions to parent (158,626,891) (43,055,202)
-------------------- ---------------------
Net cash used in financing activities (16,724,640) (22,254,296)
-------------------- ---------------------
Net change in cash (432,386) (40,921)
Cash, beginning of the period 459,283 40,921
-------------------- ---------------------
Cash, end of the period $ 26,897 $ -
==================== =====================
</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. 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. All of the outstanding common 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, 1996, 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, 1996.
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 28, 1997, the Company issued Structured Asset
Securities Corporation Mortgage Pass-Through Certificates, Series
1997-1 totaling approximately $169.3 million principal amount and
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1996-5 totaling approximately $166.9 million
principal amount. As of February 28, 1997, approximately $7.5 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 28, 1997, LCPI contributed
$141.9 million in capital to the Company, and the Company made capital
distributions to LCPI of $158.6 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 related
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:
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 and are valued at fair value with unrealized gains
and losses reflected in trading revenue in the Statement of Operations.
Fair value is determined based on other relevant factors, such as,
broker or dealer price quotations and valuation pricing models which
take into account time value and volatility factors underlying the
financial instruments.
The Company uses the trade date basis of accounting for recording
trading revenues.
Income taxes:
The Company's (loss) income 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 benefit/provision on a separate return basis in accordance
with the terms of a tax allocation agreement between Holdings and its
subsidiaries. The income tax benefit/ 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:
Mortgage collateral purchased from affiliates and the resulting bonds
and pass-through securities sold to affiliates are all recorded at fair
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 $5,000 for the three months ended February 28, 1997,
and $2,427,987 for the three months ended February 29, 1996 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.
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 28, 1997, 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. Due from Others:
At February 28, 1997 and November 30, 1996, the Company had interest
bearing deposits of $1,729,360 and $1,729,193, respectively, with
independent trustees in accordance with the terms of a securitization
transaction.
7. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures About Fair Value of Financial Instruments", requires the
Company to report the fair value of most 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 financial instruments, 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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company's assets decreased from $125.1 million at November 30, 1996 to
$105.1 million at February 28, 1997, primarily due to the decrease in financial
instruments owned. Financial instruments owned represent the portion of issued
securities retained by the Company and are carried at fair value.
Stockholder's equity decreased from $118.4 million at November 30, 1996 to
$101.5 million at February 28, 1997 primarily as a result of net capital
distributions to LCPI during the three months ended February 28, 1997. Capital
contributions from LCPI are made to fund securities retained by the Company from
new issuances or to fund operating expenses including income taxes. 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
For the three months ended February 28, 1997 and February 29, 1996
During the three months ended February 28, 1997, the Company issued Structured
Asset Securities Corporation Mortgage Pass-Through Certificates, Series 1997-1
totaling approximately $169.3 million principal amount and Structured Asset
Securities Corporation Mortgage Pass-Through Certificates, Series 1996-5
totaling approximately $166.9 million principal amount. 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 Mortgage
Pass-Through Certificates, Series 1996-CFL totaling approximately $1.6 billion
principal amount.
The Company derives it income from trading and/or interest earned on financial
instruments owned. Trading (losses) revenues are primarily due to the revaluing
of financial instruments owned on a fair value basis.
Management fees totaled $5,000 and $2,427,987 during the three months ended
February 28, 1997 and February 29, 1996, respectively, reflecting the decreased
trading 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
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: April 11, 1997 /S/ Theodore P. Janulis
----------------------------
Theodore P. Janulis
President
Date: April 11, 1997 /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 28, 1997 (Unaudited) and
the Statement of Operations for the three months ended February 28, 1997
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000808851
<NAME> STRUCTURED ASSET SECURITIES CORPORATION
<MULTIPLIER> 1,000,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 26,897
<RECEIVABLES> 2,548,327
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 100,050,655
<PP&E> 0
<TOTAL-ASSETS> 105,090,424
<SHORT-TERM> 0
<PAYABLES> 3,616,178
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
<COMMON> 1,000
0
0
<OTHER-SE> 100,464,960
<TOTAL-LIABILITY-AND-EQUITY> 105,090,424
<TRADING-REVENUE> (451,329)
<INTEREST-DIVIDENDS> 0
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 7,500
<INCOME-PRETAX> (464,033)
<INCOME-PRE-EXTRAORDINARY> (250,578)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (250,578)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
