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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 DECEMBER 31, 1993
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE AT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 033-36775
SUMMIT SECURITIES, INC.
(Exact name of registrant as specified in its charter)
IDAHO 82-0438135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
W. 929 Sprague Avenue, Spokane, WA 99204
(Address of principal executive offices) (Zip Code)
(509)838-3111
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal
year, if changed since last report)
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 / /
Applicable only to issuers involved in bankruptcy proceedings during
the preceding five years: (Not Applicable)
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes / / No / /
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
20,000 SHARES - Common at January 31, 1994.
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SUMMIT SECURITIES, INC.
INDEX
Page No.
Part I - Financial Information:
Condensed Balance Sheets --
December 31, 1993 and September 30, 1993 3
Condensed Statements of Operations--
Three Months Ended December 31, 1993
and 1992 (Unaudited) 4
Condensed Statements of Cash Flows
Three Months Ended December 31, 1993 and
1992 (Unaudited) 5
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II - Other Information 10
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PART I - FINANCIAL INFORMATION
SUMMIT SECURITIES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1993 1993
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 7,580,174 $ 3,594,472
Real Estate Contracts and Mortgage
Notes, Net of Unrealized Discounts
and Allowance For Losses 18,575,313 19,527,225
Real Estate Held For Sale 120,458 60,816
Deferred Costs 557,552 524,376
Advances to Parent and Affiliated
Companies 1,115,081 1,710,743
Other Assets 36,848 23,973
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TOTAL ASSETS $27,985,426 $25,441,605
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Investment Certificates and Accrued
Interest $ 24,404,335 $ 21,959,425
Debt Payable 84,656 22,653
Accounts Payable and Accrued Expenses 22,047 49,353
Accrued Income Taxes Due Parent 243,980 222,150
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TOTAL LIABILITIES 24,755,018 22,253,581
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STOCKHOLDER'S EQUITY:
Common Stock, $10 Par Value:
2,000,000 Shares Authorized:
20,000 Shares Issued and Outstanding 200,000 200,000
Preferred Stock, $10 Par Value:
10,000,000 Shares Authorized: - -
None Issued and Outstanding
Additional Paid-In Capital 1,800,000 1,800,000
Retained Earnings 1,230,408 1,188,024
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TOTAL STOCKHOLDER'S EQUITY 3,230,408 3,188,024
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TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $27,985,426 $25,441,605
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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SUMMIT SECURITIES INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1993 1992
<S> <C> <C>
REVENUES:
Interest and Earned Discounts $ 685,751 $ 480,700
Realized Net Gains on Sales of
Investment Securities 4,252 -
Real Estate Sales 39,000 37,500
Other Income 14,153 10,083
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TOTAL REVENUES 743,156 528,283
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EXPENSES:
Interest 573,021 384,025
Cost of Real Estate Sold 27,882 47,167
Provision for Losses on Real
Estate Contracts and Real
Estate Held 11,627 (2,845)
Operating Expenses 66,025 80,029
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TOTAL EXPENSES 678,555 508,376
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Income Before Income Taxes 64,601 19,907
Provision for Income Taxes (22,217) (6,750)
--------- ---------
NET INCOME $ 42,384 $ 13,157
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
SUMMIT SECURITIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1993 1992
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 560,890 $ 221,830
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INVESTING ACTIVITIES:
Repayment of Advances to Parent
and Affiliate Companies 595,662 -
Principal Payments on Real Estate
Contracts and Mortgage Notes 1,378,789 520,206
Purchase of Real Estate Contacts
And Mortgage Notes (619,380) (7,505,625)
Proceeds From Real Estate Sales 39,000 7,500
Additions to Real Estate Held (2,295) (5,262)
Purchase of Investment Securities (20,073,050) -
Proceeds from Sale of Investment
Securities 20,077,343 -
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,396,069 (6,983,181)
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FINANCING ACTIVITIES:
Proceeds From Sale of Investment
Certificates 2,625,722 1,729,900
Repayment of Investment Certificates (500,765) (417,542)
Repayment to Banks and Others (1,642) (142,336)
Borrowings From Parent - 3,210,659
Debt Issuance Costs (94,572) (55,612)
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NET CASH PROVIDED BY FINANCING
ACTIVITIES 2,028,743 4,325,069
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NET INCREASE (DECREASE)IN CASH
EQUIVALENTS 3,985,702 (2,436,282)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,594,472 5,647,202
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 7,580,174 $ 3,210,920
========== ==========
NON CASH INVESTING AND FINANCING
ACTIVITIES OF THE COMPANY:
Assumption of Other Debt Payable in
Conjunction With Purchase of Real
Estate Contracts and Mortgage Notes $ - $ 235,880
Real Estate Held for Sale and
Development Acquired Through
Foreclosure $ 91,856 $ 101,000
Loans to Facilitate the Sale of
Real Estate $ - $ 30,000
Assumption of Other Debt Payable in
Conjunction with Acquisition of
Real Estate Held for Sale $ 63,650 $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.<PAGE>
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SUMMIT SECURITIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments necessary
to present fairly the financial position as of December 31, 1993
and the results of operations and changes in cash flow for the
three months ended December 31, 1993 and 1992. The results of
operations for the three month period ended December 31, 1993 and
1992 are not necessarily indicative of the results to be expected
for the full year.
2. The principal amount of receivables as to which payments were in
arrears more than three months was $1,110,000 at December 31, 1993
and $1,662,000 at September 30, 1992. Included in the amount for
December 31, 1993 is approximately $320,000 of delinquent
contracts purchased from an affiliate during 1993. The Company
has a performance hold back of approximately $482,500 to cover
losses related to these delinquent contracts. At September 30,
1993, the delinquent contracts purchased from the affiliate were
approximately $680,000 with a performance holdback of $600,000.
The total outstanding contracts, both current and delinquent,
backed by the performance holdback were approximately $4.5 million
at December 31, 1993 and $5.5 million at September 30, 1993.
3. Summit Securities, Inc. is a wholly-owned subsidiary of
Metropolitan Mortgage & Securities Co., Inc. The Company files
consolidated federal income tax returns with its parent. The
Company has allocated a current and deferred tax provision from
Metropolitan as if the Company filed a separate tax return.
Effective October 1, 1992, Metropolitan adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS No. 109). There was no effect on the
Company's financial statements of adopting SFAS No. 109. In prior
years, Metropolitan and the Company accounted for income taxes as
required by Accounting Principles Board Opinion No. 11.
4. Summit Securities, Inc. had no outstanding legal proceedings other
than normal proceedings associated with receivable foreclosures.
5. Certain amounts in the prior years' condensed financial statements
have been reclassified to conform with the current years'
presentation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition:
As of December 31, 1993, the Company had cash or cash equivalents
of over $7.5 million as compared to $3.6 million at September 30, 1993.
These cash and cash equivalents are considered by management to be
adequate to finance any required debt retirements or planned asset
additions. At December 31, 1993, the real estate receivable portfolio
totaled $18.6 million as compared to $19.5 million at September 30,
1993. Real estate held for sale, acquired through receivable
foreclosures, totaled $120,000 at December 31, 1993 as compared to
$61,000 at September 30, 1993. Sales of Investment Certificates
generated approximately $2.1 million net cash flow during the three
months ended December 31, 1993, while cash flows from real estate
receivable investments provided additional liquidity as principal
payments received exceeded new investments by approximately $760,000.
The cash flows from Investment Certificate sales, real estate
receivables investments, and the approximately $600,000 reduction in
advances to its parent accounted for the majority of the $3.9 million
increase in cash and cash equivalents during the three months ended
December 31, 1993.
Results of Operations:
Net income was $42,384 on revenues of $743,156 for the three
months ended December 31, 1993. For the similar period in the prior
year, the Company reported net income of $13,157 on revenues of
$528,283. The increase in net income resulted primarily from: (1) an
increase in spread between interest sensitive income and interest
sensitive expense; (2) gains realized on the sale of investment
securities; (3) gains realized from the sale of foreclosed real estate
in the current year's period as compared to losses in the prior year's
period; (4) and a reduction in other operating expenses; which were
partially offset by (5) an increase in the provision for losses on real
estate contracts and real estate held.
For the three months ended December 31, 1993 the interest spread
was $112,700 while in the prior year's period the spread was $96,700.
This increase was primarily the result of management's decision to
accumulate cash liquidity in the prior year in order to fund a contract
purchase commitment in excess of $7 million. This purchase commitment
was completed in late December 1992. Included in the receivables
purchased were approximately $6.0 million of timeshare receivables.
All of the receivables were collateralized by property in a single time
share project in Hawaii which had been developed by its parent and an
affiliated company. At time of purchase, the Company held an
approximate $600,000 performance holdback to cover any losses related
to these certain timeshare receivables. Again at December 31, 1993,
the Company has accumulated excess cash and cash equivalents through
the sale of investment certificates and accelerated prepayments of real
estate receivables. The Company is currently in the process of
acquiring additional real estate receivable investments which should
enable the Company to maintain or improve its interest spread.
During the three months ended December 31, 1993, the Company
realized gains on the sale of investment securities of $4,300 with no
sales being recorded in the prior year. Gains on the sale of
foreclosed real estate of $11,000 was realized as compared to losses of
$9,700 in the prior year. The Company, through various cost cutting
measures, was able to reduce other operating expenses by approximately
$14,000, primarily through the reduction of advertising expenses by
$37,000 offset by increases in various expenses related to both the
real estate contract portfolio and to its real estate held for sale.
Additionally, during the three months ended December 31, 1993, the
Company provided approximately $11,600 for losses on real estate
receivables and real estate held for sale as compared to a recovery of
approximately $2,800 in the comparable period of the prior year.
New Accounting Rules:
In May, 1993, Statement of Financial Accounting Standards No. 114
(SFAS No. 114) "Accounting by Creditors for Impairment of a Loan" was
issued. SFAS No. 114 requires that certain impaired loans be measured
based on the present value of expected future cash flows discounted at
the loans' effective interest rate or the fair value of the collateral.
The Company is required to adopt this new standard by October 1, 1995.
The Company does not anticipate that the adoption of SFAS No. 114 will
have a material effect on the financial statements.
Statement of financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS
No. 112, "Employers' Accounting for Postretirement Benefits" are not
applicable because the Company maintains no programs designed to
provide employees with post-retirement or post-employment benefits.
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PART II - OTHER INFORMATION
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.
SUMMIT SECURITIES, INC.
(Registrant)
/S/ C. PAUL SANDIFUR, JR.
Date February 17, 1994 ____________________________________
C. Paul Sandifur, Jr., President
/S/ ALTON R. COGERT
Date February 17, 1994 ________________________________________
Alton R. Cogert, Ass't Vice President
and Chief Financial Officer
(Principal Financial Officer)
/S/ STEVEN CROOKS
Date February 17, 1994 ____________________________________
Steven Crooks, Controller
Metropolitan Mortgage & Securities
Co., Inc.
(Principal Accounting Officer)
