<PAGE>
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 MARCH 31, 1994
/ / 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 April 30, 1994.
<PAGE>
SUMMIT SECURITIES, INC.
INDEX
Page No.
Part I - Financial Information:
Condensed Balance Sheets --
March 31, 1994 (Unaudited)
and September 30, 1993 4
Condensed Statements of Operations--
Three and Six Months Ended March 31,
1994 and 1993 (Unaudited) 5
Condensed Statements of Cash Flows
Six Months Ended March 31, 1994 and
1993 (Unaudited) 6
Notes to Condensed Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II - Other Information 11
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMIT SECURITIES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1994 1993
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 4,326,082 $ 3,594,472
Real Estate Contracts and Mortgage
Notes, Net of Unrealized Discounts
and Allowance For Losses 25,084,908 19,527,225
Real Estate Held For Sale 296,895 60,816
Deferred Costs 599,768 524,376
Advances to Parent and Affiliated
Companies - 1,710,743
Other Assets 35,279 23,973
---------- ----------
TOTAL ASSETS $ 30,342,932 $ 25,441,605
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Investment Certificates and Accrued
Interest $ 25,483,017 $ 21,959,425
Debt Payable 84,213 22,653
Accounts Payable and Accrued Expenses 33,519 49,353
Accrued Income Taxes Due Parent 268,150 222,150
Advances From Parent and Affiliated
Companies 1,196,716 -
---------- -----------
TOTAL LIABILITIES 27,065,615 22,253,581
---------- -----------
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 1,277,317 1,188,024
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 3,277,317 3,188,024
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $ 30,342,932 $ 25,441,605
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
SUMMIT SECURITIES INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES:
Interest and Earned Discounts $ 728,502 $ 615,038 $1,414,253 $1,095,738
Realized Net Gains on Sales of
Investment Securities - - 4,252 -
Realized Net Gains on Sales of
Receivables 36,494 - 36,494 -
Real Estate Sales 35,000 114,000 74,000 151,500
Other Income 15,667 11,045 29,820 21,128
--------- --------- --------- ---------
TOTAL REVENUES 815,663 740,083 1,558,819 1,268,366
--------- --------- --------- ---------
EXPENSES:
Interest 602,250 435,710 1,175,271 819,735
Cost of Real Estate Sold 34,861 122,272 62,743 169,439
Provision for Losses on Real
Estate Contracts and Real
Estate Held 38,104 59,482 49,731 56,637
Operating Expenses 68,546 41,088 134,571 121,117
--------- --------- --------- ---------
TOTAL EXPENSES 743,761 658,552 1,422,316 1,166,928
--------- --------- --------- ---------
Income Before Income Taxes 71,902 81,531 136,503 101,438
Provision for Income Taxes (24,993) (27,750) (47,210) (34,500)
--------- --------- --------- ---------
NET INCOME $ 46,909 $ 53,781 $ 89,293 $ 66,938
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUMMIT SECURITIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1994 1993
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 983,977 $ 445,373
---------- ----------
INVESTING ACTIVITIES:
Repayment of Advances to Parent
and Affiliate Companies 1,710,743 -
Principal Payments on Real Estate
Contracts and Mortgage Notes 1,943,974 1,370,483
Purchase of Real Estate Contacts
And Mortgage Notes (12,190,354) (7,684,934)
Proceeds From Real Estate Sales 37,000 30,425
Additions to Real Estate Held (81,222) (12,094)
Purchase of Investment Securities (20,073,050) (2,047,812)
Proceeds from Sale of Investment
Securities 20,077,343 -
Proceeds from Sale of Receivables 4,453,031 -
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (4,122,535) (8,343,932)
---------- ----------
FINANCING ACTIVITIES:
Proceeds From Sale of Investment
Certificates 4,234,607 4,729,078
Repayment of Investment Certificates (1,319,143) (820,588)
Repayment to Banks and Others (42,497) (484,522)
Borrowings From Parent 1,196,716 117,349
Debt Issuance Costs (199,515) (130,564)
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,870,168 3,410,753
---------- ----------
NET INCREASE (DECREASE)IN CASH
EQUIVALENTS 731,610 (4,487,806)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,594,472 5,647,202
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,326,082 $ 1,159,396
========== ==========
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 $ 40,119 $ 235,374
Real Estate Held for Sale and
Development Acquired Through
Foreclosure $ 247,331 $ 132,379
Loans to Facilitate the Sale of
Real Estate $ 37,000 $ 121,075
Assumption of Other Debt Payable in
Conjunction with Acquisition of
Real Estate Held for Sale $ 63,650 $ 14,255
Changes in Net Unrealized (Losses)
Gains on Available-For-Sale
Securities $ - $ (9,755)
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
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 March 31, 1994 and
the results of operations and changes in cash flow for the three
and six months ended March 31, 1994 and 1993. The results of
operations for the three and six month period ended March 31, 1994
and 1993 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 $826,000 at March 31, 1994 and
$1,662,000 at September 30, 1993. Included in the amount for
September 30, 1993 is approximately $680,000 of delinquent
timeshare receivables purchased from an affiliate during 1993.
The Company had a performance hold back of $600,000 to cover
losses related to these delinquent receivables. The total
outstanding timeshare receivables, both current and delinquent,
backed by the performance holdback were approximately $5.5 million
at September 30, 1993. On February 18, 1994, the Company sold the
remaining timeshare receivables related to the holdback provisions
at net book value to its parent company.
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition:
As of March 31, 1994, the Company had cash or cash equivalents of
over $4.3 million as compared to $7.5 million at December 31, 1993 and
$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 March 31, 1994, the
real estate receivable portfolio totaled $25.1 million as compared to
$18.6 million at December 31, 1993 and $19.5 million at September 30,
1993. Real estate held for sale, acquired through receivable
foreclosures, totaled $297,000 at March 31, 1994 as compared to
$120,000 at December 31, 1993 and $61,000 at September 30, 1993. Sales
of Investment Certificates generated approximately $2.9 million net
cash flow during the six months ended March 31, 1994, while borrowings
from its parent and repayment of advances by its parent added
additional cash flow of approximately $2.9 million, sales of
receivables, including timeshare receivables sold to its parent on
February 18, 1994, added additional cash flow of approximately $4.5
million and approximately $1.9 million was collected on real estate
receivables. The cash flows from these sources were used to invest
approximately $12.2 million in real estate receivables during the six
months ended March 31, 1994.
Results of Operations:
Net income was $89,293 on revenues of $1,558,819 for the six
months ended March 31, 1994. For the similar period in the prior year,
the Company reported net income of $66,938 on revenues of $1,268,366.
The increase in net income resulted primarily from: (1) gains realized
on the sale of investment securities and receivables; (2) 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; which were
partially offset by (3) a decrease in the spread between interest
sensitive income and interest sensitive expense.
For the six months ended March 3, 1994 the interest spread was
$239,000, while in the prior year's period the spread was $276,000.
This decrease was primarily the result of management's decision to sell
approximately $4.6 million (face amount) of timeshare receivables to
its parent on February 18, 1994. The Company is currently in the
process of acquiring additional real estate receivable investments
which should enable the Company to improve its interest spread.
During the six months ended March 31, 1994, the Company realized
gains on the sale of investment securities and receivables of $40,700
with no sales of either item being recorded in the prior year. Gains
on the sale of foreclosed real estate of $11,300 was realized in the
current year's six month period as compared to losses of $17,900 in 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 by 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-employment benefits.
<PAGE>
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 May 5, 1994 ____________________________________
C. Paul Sandifur, Jr., President
/S/ ALTON R. COGERT
Date May 5, 1994 ________________________________________
Alton R. Cogert, Ass't Vice President
and Chief Financial Officer
(Principal Financial Officer)
/S/ STEVEN CROOKS
Date May 5, 1994 ____________________________________
Steven Crooks, Controller
Metropolitan Mortgage & Securities
Co., Inc.
(Principal Accounting Officer)
