<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED 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, 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.
10,000 SHARES - Common at January 31, 1995.
<PAGE>
SUMMIT SECURITIES, INC.
INDEX
Page No.
Part I - Financial Information:
Condensed Consolidated Balance Sheets --
December 31, 1994
and September 30, 1994
Condensed Consolidated Statements of Operations--
Three Months Ended December 31,
1994 and 1993 (Unaudited)
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1994 and
1993 (Unaudited)
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II - Other Information
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMIT SECURITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,249,315 $ 3,608,764
Investments in Affiliated Company 3,022,425 3,022,425
Real Estate Contracts and Mortgage
Notes, Net of Unrealized Discounts
and Allowance For Losses 31,727,299 27,282,991
Real Estate Held For Sale 509,700 452,700
Deferred Costs 701,533 705,994
Other Assets 18,875 29,114
---------- ----------
TOTAL ASSETS $ 37,229,147 $ 35,101,988
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Investment Certificates and Accrued
Interest $ 32,859,654 $ 31,092,830
Debt Payable 54,680 119,888
Accounts Payable and Accrued Expenses 551,860 416,262
Accrued Income Taxes Due Parent 182,878 151,778
---------- -----------
TOTAL LIABILITIES 33,649,072 31,780,758
---------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $10 Par Value:
2,000,000 Shares Authorized:
10,000 Shares Issued and Outstanding 100,000 100,000
Preferred Stock, $10 Par Value:
10,000,000 Shares Authorized:
34,177 and 31,719 Shares Issued and
Outstanding
(Liquidation Preference $3,417,750 and
$3,171,940, respectively) 341,775 317,194
Additional Paid-In Capital 1,663,229 1,454,063
Retained Earnings 1,475,071 1,449,973
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,580,075 3,321,230
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 37,229,147 $ 35,101,988
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
SUMMIT SECURITIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1994 1993
<S> <C> <C>
REVENUES:
Interest and Earned Discounts $ 909,559 $ 685,751
Realized Net Gains on Sales of
Investment Securities 4,252
Realized Net Gains on Sales of
Receivables 49,103
Real Estate Sales 169,000 39,000
Dividend Income 58,870
Other Income 28,659 14,153
--------- ----------
TOTAL REVENUES 1,215,191 743,156
--------- ----------
EXPENSES:
Interest 758,259 573,021
Cost of Real Estate Sold 169,035 27,882
Provision for Losses on Real
Estate Contracts and Real
Estate Held 89,729 11,627
Operating Expenses 64,976 66,025
--------- ---------
TOTAL EXPENSES 1,081,999 678,555
--------- ---------
Income Before Income Taxes 133,192 64,601
Provision for Income Taxes (31,751) (22,217)
--------- ---------
NET INCOME 101,441 42,384
Preferred Stock Dividends (76,343)
--------- ---------
Income Applicable to Common
Shareholder $ 25,098 $ 42,384
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
SUMMIT SECURITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1994 1993
Restated
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 696,434 $ 565,183
---------- ----------
INVESTING ACTIVITIES:
Proceeds from Advances from Parent
and Affiliate Companies 595,662
Principal Payments on Real Estate
Contracts and Mortgage Notes 1,195,206 1,378,789
Purchase of Real Estate Contacts
And Mortgage Notes (10,814,580) (619,380)
Proceeds From Real Estate Sales 15,500 39,000
Additions to Real Estate Held (29,464) (2,295)
Proceeds from Sale of Receivables 5,305,602
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (4,327,736) 1,391,776
---------- ----------
FINANCING ACTIVITIES:
Proceeds From Sale of Investment
Certificates 1,765,981 2,625,722
Repayment of Investment Certificates (400,058) (500,765)
Repayment to Banks and Others (185,388) (1,642)
Debt Issuance Costs (66,086) (94,572)
Issuance of Preferred Stock 233,747
Cash Dividends (76,343)
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,271,853 2,028,743
---------- ----------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS (2,359,449) 3,985,702
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,608,764 3,594,472
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,249,315 $ 7,580,174
========== ==========
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 $ 120,230
Real Estate Held for Sale and
Development Acquired Through
Foreclosure $ 289,000 $ 91,856
Loans to Facilitate the Sale of
Real Estate $ 153,500
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>
SUMMIT SECURITIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to present fairly the financial position as
of December 31, 1994 and the results of operations and cash flow
for the three months ended December 31, 1994 and 1993. The results
of operations for the three month period ended December 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 $1,250,000 at December 31, 1994
and $1,085,000 at September 30, 1994.
3. Summit Securities, Inc. is a wholly-owned subsidiary of National
Summit Corp. The Company files consolidated federal income tax
returns with its parent. The Company is allocated a current and
deferred tax provision from National Summit Corp. as if the
Company filed a separate tax return.
4. Summit Securities, Inc. had no outstanding material 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. The prior years' condensed statement of cash flows
has been restated to include purchases and sales of available-for-
sale securities in operating activities. In the prior year these
transactions were reported as investing activities. The effect of
this restatement was an increase of $4,293 in cash provided by
operating activities and a similar reduction in net cash provided
by investing activities.
6. On December 15, 1994, the Company reached an agreement with
Metropolitan Mortgage & Securities Co., Inc. (Metro), the
Company's former parent company, whereby it will acquire
Metropolitan Investment Securities, Inc. (MIS) effective January
31, 1995. Additionally, the Company is negotiating the purchase
of Old Standard Life Insurance Company (OSL) from Metro. Both MIS
and OSL are wholly-owned subsidiaries of Metro.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Pending Transactions:
On December 15, 1994, Metropolitan Mortgage & Securities Co., Inc.
(Metro) and Summit Securities Inc. (Summit or the Company) entered into
an understanding that on January 31, 1995 Metropolitan Investment
Securities (MIS) would be sold to Summit. The purchase price is
currently estimated at $287,000, the approximate net book value of MIS.
MIS is a limited-purpose broker dealer and the exclusive broker/dealer
for the securities sold by Metro and Summit. It is not anticipated
that this sale will materially affect the business of MIS. Also on
December 15, 1994, Metro and Summit entered into an understanding that
on January 31, 1995, Metro will discontinue its property development
division, which consists of a group of employees experienced in real
estate development. On the same date, Summit will commence the
operation of a property development subsidiary employing those same
individuals who had previously been employed by Metro. Summit Property
Development Corporation is negotiating an agreement with Metro to
provide property development services to Metro.
Summit is also currently negotiating the acquisition of Old
Standard Life Insurance Company (OSL) from Metro. OSL is engaged in
the business of acquiring receivables using funds derived from the sale
of annuities, and funds derived from receivable cash flows. It is
currently anticipated that this sale will occur during the first
quarter of calendar 1995. The purchase price is currently estimated at
$2.6 million, the approximate net book value of OSL, with future
contingency payments based on the earnings of OSL. The final purchase
price will be established based upon an actuarial valuation of OSL.
The source of funds will be cash or cash equivalents transferred from
Summit to Metro in exchange for all the common stock of OSL.
Financial Condition and Liquidity:
As of December 31, 1994, the Company had cash or cash equivalents
of approximately $1.2 million as compared to $3.6 million at September
30, 1994. Management believes that cash, cash equivalents and liquidity
provided by other investments are adequate to meet planned asset
additions, debt retirements or other business requirements during the
next twelve months. At December 31, 1994, the real estate receivable
portfolio totaled $31.7 million as compared to $27.3 million at
September 30, 1994. Real estate held for sale, acquired through
receivable foreclosures, totalled $509,700 at December 31, 1994 as
compared to $452,700 at September 30, 1994. Sales of Investment
Certificates and Preferred Stock generated approximately $1.6 million
net cash flow during the three months ended December 31, 1994, while
sales of receivables and principal payments on receivables added
additional cash flow of approximately $6.5 million during the period.
The cash flows from these sources along with cash provided by operating
activities and cash from the beginning of the period were used to
invest approximately $10.8 million in real estate receivables during
the three months ended December 31, 1994.
Results of Operations
Net income was $101,441 on revenues of $1,215,191 for the three
months ended December 31, 1994. For the similar period in the prior
year, the Company reported net income of $42,384 on revenues of
$743,156. The increase in net income resulted primarily from: (1)
increased spread between interest income and interest expense, due
principally to the increase investment in real estate contracts
receivables; (2) dividend income of $59,000 from investments in
affiliated companies; (3) increased gains realized on the sale of
receivables and investment securities; both of which were partially
offset by; (4) losses realized on the sale of foreclosed real in the
current year's period as compared to gains realized in the prior year's
period; and (5) an increase in the provision for loss on real estate
assets in the current year's period.
For the three months ended December 31, 1994, the interest spread
was $151,300 while in the prior year's period the spread was $112,730.
In the current period, the Company received approximately $59,000
in dividends from its preferred stock investment in Metro. The Company
acquired this investment in September 1994 through an exchange of its
own preferred stock for a similar preferred stock investment in Metro.
While this transaction has increased net income to the Company, the
resulting benefit to common shareholders is not significant as a
similar preferred dividend is now paid by the Company to its preferred
shareholders.
During the three months ended December 31, 1994, the Company
realized gains on the sale of receivables of $49,103 compared to a gain
from investment securities sales of $4,252 in the prior year. The gain
in the current year resulted from the sale of approximately $5.3
million in receivables to Western United Life Assurance Company, an
affiliated company to Summit. This sale of financial instruments was
priced at estimated current market value at date of sale. In the
current period, sales of foreclosed real estate were at breakeven
compared to an approximate $11,100 in gains in the prior period. In
conjunction with increased investments in the real estate receivable
portfolio, along with the valuation of foreclosed real estate, the
Company expensed a provision for loss on real estate assets of
approximately $90,000 in the current year's period compared to
approximately $12,000 in the prior year's period.
<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/ JOHN TRIMBLE
Date 2/14/95 ____________________________________
John Trimble, President
/S/ STEVEN CROOKS
Date 2/14/95 ____________________________________
Steven Crooks
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 1,249
<SECURITIES> 3,022
<RECEIVABLES> 32,015
<ALLOWANCES> 288
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,229
<CURRENT-LIABILITIES> 0
<BONDS> 32,914
<COMMON> 100
0
342
<OTHER-SE> 3,138
<TOTAL-LIABILITY-AND-EQUITY> 37,229
<SALES> 0
<TOTAL-REVENUES> 1,215
<CGS> 0
<TOTAL-COSTS> 234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 758
<INCOME-PRETAX> 133
<INCOME-TAX> 32
<INCOME-CONTINUING> 101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.51
</TABLE>
