<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 JUNE 30, 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 July 31, 1994.
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SUMMIT SECURITIES, INC.
INDEX
Page No.
Part I - Financial Information:
Condensed Balance Sheets --
June 30, 1994 (Unaudited)
and September 30, 1993 4
Condensed Statements of Operations--
Three and Nine Months Ended June 30,
1994 and 1993 (Unaudited) 5
Condensed Statements of Cash Flows
Nine Months Ended June 30, 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>
June 30, September 30,
1994 1993
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,475,086 $ 3,594,472
Real Estate Contracts and Mortgage
Notes, Net of Unrealized Discounts
and Allowance For Losses 25,808,491 19,527,225
Real Estate Held For Sale 386,100 60,816
Deferred Costs 664,976 524,376
Advances to Parent and Affiliated
Companies 3,143,587 1,710,743
Other Assets 24,446 23,973
---------- ----------
TOTAL ASSETS $ 31,502,686 $ 25,441,605
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Investment Certificates and Accrued
Interest $ 27,590,109 $ 21,959,425
Debt Payable 80,989 22,653
Accounts Payable and Accrued Expenses 76,132 49,353
Accrued Income Taxes Due Parent 317,075 222,150
Advances From Parent and Affiliated
Companies - -
---------- -----------
TOTAL LIABILITIES 28,064,305 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:
705 and -0- Shares Issued and
Outstanding
(Liquidation Preference $70,520 and
$-0-, Respectively) 7,052 -
Additional Paid-In Capital 1,859,773 1,800,000
Retained Earnings 1,371,556 1,188,024
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 3,438,381 3,188,024
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $ 31,502,686 $ 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 Nine Months Ended
June 30, June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES:
Interest and Earned Discounts $ 897,902 $ 707,297 $2,312,155 $1,803,035
Realized Net Gains on Sales of
Investment Securities - 4,724 4,252 4,724
Realized Net Gains on Sales of
Receivables - - 36,494 -
Real Estate Sales 14,000 - 88,000 151,500
Other Income 14,034 10,083 43,854 31,211
--------- --------- --------- ---------
TOTAL REVENUES 925,936 722,104 2,484,755 1,990,470
--------- --------- --------- ---------
EXPENSES:
Interest 662,203 461,177 1,837,474 1,280,912
Cost of Real Estate Sold 13,530 309 76,273 169,748
Provision for Losses on Real
Estate Contracts and Real
Estate Held 49,912 37,118 99,643 93,755
Operating Expenses 53,898 54,159 188,469 175,276
--------- --------- --------- ---------
TOTAL EXPENSES 779,543 552,763 2,201,859 1,719,691
--------- --------- --------- ---------
Income Before Income Taxes 146,393 169,341 282,896 270,779
Provision for Income Taxes (51,622) (57,600) (98,832) (92,100)
--------- --------- --------- ---------
NET INCOME $ 94,771 $ 111,741 $ 184,064 $ 178,679
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUMMIT SECURITIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1994 1993
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 1,502,352 $ 622,201
---------- ----------
INVESTING ACTIVITIES:
Proceeds from Advances from Parent
and Affiliate Companies (1,432,844) -
Principal Payments on Real Estate
Contracts and Mortgage Notes 2,326,057 2,279,494
Purchase of Real Estate Contacts
And Mortgage Notes (15,581,464) (13,810,941)
Proceeds From Real Estate Sales 6,200 30,425
Additions to Real Estate Held (82,753) (12,403)
Purchase of Investment Securities (20,073,050) (2,047,812)
Proceeds from Sale of Investment
Securities 20,077,343 2,052,187
Proceeds from Sale of Receivables 6,711,624 -
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (8,048,887) (11,509,050)
---------- ----------
FINANCING ACTIVITIES:
Proceeds From Sale of Investment
Certificates 6,799,446 6,337,329
Repayment of Investment Certificates (2,051,190) (1,739,268)
Repayment to Banks and Others (45,718) (870,980)
Borrowings From Parent - 2,712,816
Debt Issuance Costs (341,482) (220,869)
Issuance of Preferred Stock 66,825 -
Cash Dividends (732) -
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 4,427,149 6,219,028
---------- ----------
NET INCREASE (DECREASE)IN CASH
EQUIVALENTS (2,119,386) (4,667,821)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,594,472 5,647,202
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,475,086 $ 979,381
========== ==========
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 $ 363,447 $ 209,000
Loans to Facilitate the Sale of
Real Estate $ 81,800 $ 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 $ - $ -
</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 June 30, 1994 and
the results of operations and changes in cash flow for the three
and nine months ended June 30, 1994 and 1993. The results of
operations for the three and nine month period ended June 30, 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 $947,000 at June 30, 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 June 30, 1994, the Company had cash or cash equivalents of
approximately $1.5 million as compared to $4.3 million at March 31,
1994, $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 June 30, 1994, the real estate receivable
portfolio totaled $25.8 million as compared to $25.1 million at March
31, 1994, $18.6 million at December 31, 1993 and $19.5 million at
September 30, 1993. Real estate held for sale, acquired through
receivable foreclosures, total $386,100 at June 30, 1994 as compared to
$297,000 at March 31, 1993, $120,000 at December 31, 1993 and $61,000
at September 30, 1993. Sales of Investment Certificates and Preferred
Stock generated approximately $4.8 million net cash flow during the
nine months ended June 30, 1994, while sales of receivables, including
timeshare receivables sold to its parent on February 18, 1994 and real
estate receivables sold to an affiliate on June 6, 1994, added
additional cash flow of approximately $6.7 million and approximately
$2.3 million additional principal payments were collected on real
estate receivables during the period. The cash flows from these
sources were used to invest approximately $15.6 million in real estate
receivables during the nine months ended June 30, 1994.
Results of Operations:
Net income was $184,064 on revenues of $2,484,755 for the nine
months ended June 30, 1994. For the similar period in the prior year,
the Company reported net income of $178,679 on revenues of $1,990,470.
The small 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 almost totally offset by (3) a decrease in the spread between
interest sensitive income and interest sensitive expense.
For the nine months ended June 30, 1994, the interest spread was
$475,000 while in the prior year's period the spread was $522,000. The
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 and $2.4 million (face amount) or real
estate receivables to an affiliate on June 6, 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. In addition to the approximate $1.5 million in cash and cash
equivalents at June 30, 1994, the Company had approximately $3.1
million in advances to its parent or affiliates which will be
reinvested in real estate receivables as the receivables become
available for purchase.
During the nine months ended June 30, 1994, the Company realized
gains on the sale of investment securities and receivables of $40,700
with $4,700 from the sale of investment securities being realized in
the prior year. Gains in the sale of foreclosed real estate of $11,700
was realized in the current year's nine month period as compared to
losses of $18,200 in the prior year's similar period.
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-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 ____________________________________
C. Paul Sandifur, Jr., President
/S/ ERNEST JURDANA
Date ________________________________________
Ernest Jurdana
Chief Financial Officer
Metropolitan Mortgage & Securities
Co., Inc.
/S/ STEVEN CROOKS
Date ____________________________________
Steven Crooks, Controller
(Principal Accounting Officer)