<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, 1995
/ / 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 April 30, 1995.
<PAGE>
SUMMIT SECURITIES, INC.
INDEX
Page No.
Part I - Financial Information:
Condensed Consolidated Balance Sheets --
March 31, 1995 (unaudited)
and September 30, 1994
Condensed Consolidated Statements of Operations--
Three and Six Months Ended March 31,
1995 and 1994 (Unaudited)
Condensed Consolidated Statements of Cash Flows
Six Months Ended March 31, 1995 and
1994 (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>
March 31, September 30,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,075,468 $ 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 33,188,824 27,282,991
Real Estate Held For Sale 400,050 452,700
Deferred Costs 800,212 705,994
Other Assets 12,104 29,114
---------- ----------
TOTAL ASSETS $ 38,499,083 $ 35,101,988
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Investment Certificates and Accrued
Interest $ 33,898,903 $ 31,092,830
Debt Payable 51,168 119,888
Accounts Payable and Accrued Expenses 647,983 416,262
Accrued Income Taxes Due Parent 259,548 151,778
---------- -----------
TOTAL LIABILITIES 34,857,602 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:
34,536 and 31,719 Shares Issued and
Outstanding
(Liquidation Preference $3,453,630 and
$3,171,940, respectively) 345,363 317,194
Additional Paid-In Capital 1,694,036 1,454,063
Retained Earnings 1,502,082 1,449,973
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,641,481 3,321,230
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 38,499,083 $ 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 Six Months Ended
March 31, March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Interest and Earned Discounts $ 904,022 $ 728,502 $1,813,581 1,414,253
Realized Net Gains on Sales of
Investment Securities - - - 4,252
Realized Net Gains on Sales of
Receivables - 36,494 49,103 36,494
Real Estate Sales 342,500 35,000 511,500 74,000
Dividend Income 93,208 - 152,078 -
Fees, Commissions, Service and
Other Income 814,768 15,667 843,427 29,820
--------- --------- --------- ---------
TOTAL REVENUES 2,154,498 815,663 3,369,689 1,558,819
--------- --------- --------- ---------
EXPENSES:
Interest 777,923 602,250 1,536,182 1,175,271
Cost of Real Estate Sold 334,223 34,861 503,258 62,743
Provision for Losses on Real
Estate Contracts and Real
Estate Held 78,092 38,104 167,821 49,731
Salaries and Employee Benefits 228,772 - 228,772 -
Commissions to Agents 399,236 - 399,236 -
Operating Expenses 151,467 68,546 216,443 134,571
--------- --------- --------- ---------
TOTAL EXPENSES 1,969,713 743,761 3,051,712 1,422,316
--------- --------- --------- ---------
Income Before Income Taxes 184,785 71,902 317,977 136,503
Provision for Income Taxes (77,126) (24,993) (108,877) (47,210)
--------- --------- --------- ---------
NET INCOME 107,659 46,909 209,100 89,293
Preferred Stock Dividends (80,648) - (156,991) -
--------- --------- --------- ---------
Income Applicable to Common
Shareholder $ 27,011 $ 46,909 $ 52,109 $ 89,293
========= ========= ========= =========
</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>
Six Months Ended
March 31,
1995 1994
Restated
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 1,546,061 $ 988,270
---------- ----------
INVESTING ACTIVITIES:
Proceeds from Advances from Parent
and Affiliate Companies - 1,710,743
Principal Payments on Real Estate
Contracts and Mortgage Notes 3,051,587 1,943,974
Purchase of Real Estate Contacts
And Mortgage Notes (14,206,670) (12,190,354)
Proceeds From Real Estate Sales 136,050 37,000
Additions to Real Estate Held (54,650) (81,222)
Proceeds from Sale of Receivables 5,305,602 4,453,031
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (5,768,081) (4,126,828)
---------- ----------
FINANCING ACTIVITIES:
Proceeds From Sale of Investment
Certificates 3,341,937 4,234,607
Repayment of Investment Certificates (1,334,906) (1,319,143)
Repayment to Banks and Others (188,625) (42,497)
Borrowings From Parent - 1,196,716
Debt Issuance Costs (240,833) (199,515)
Issuance of Preferred Stock 268,142 -
Cash Dividends (156,991) -
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,688,724 3,870,168
---------- ----------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS (2,533,296) 731,610
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 3,608,764 3,594,472
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,075,468 $ 4,326,082
========== ==========
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 $ 40,119
Real Estate Held for Sale and
Development Acquired Through
Foreclosure $ 518,629 $ 247,331
Loans to Facilitate the Sale of
Real Estate $ 375,450 $ 37,000
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>
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 March 31, 1995 and the results of operations and change in cash
flow for the three and six months ended March 31, 1995 and 1994.
The results of operations for the three and six month period ended
March 31, 1995 and 1994 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 $1,255,000 at March 31, 1995
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 for the six months ended March 31, 1995.
6. On January 31, 1995 the Company concluded an agreement with
Metropolitan Mortgage & Securities Co., Inc. (Metro), the
Company's former parent company, whereby it acquired Metropolitan
Investment Securities, Inc. (MIS) effective January 31, 1995, at
a purchase price of $288,950, which approximated the current book
value of MIS at date of purchase. Additionally, the Company is
negotiating the purchase of Old Standard Life Insurance Company
(OSL) from Metro. MIS was and OSL is currently wholly-owned
subsidiaries of Metro.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Completed Transactions:
On January 31, 1995, Summit Securities, Inc. (Summit or the
Company) and Metropolitan Mortgage & Securities Co., Inc. (Metro)
completed a purchase/sale transaction whereby the 100% owned interest
in Metropolitan Investment Securities, Inc. (MIS) was sold to Summit.
The cash purchase/sale price was $288,950, the approximate net book
value of MIS at closing. MIS is a limited-purpose broker dealer and
the exclusive broker/dealer for the securities sold by Summit and
Metro. It is anticipated that this sale will not materially affect the
future business operations of MIS. Additionally, by agreement,
effective January 31, 1995, Metro discontinued its property development
division, which consisted of a group of employees experienced in real
estate development. On the same date, Summit commenced the operation
of a property development subsidiary employing those same individuals
who had previously been employed by Metro. Summit Property Development
Corporation, a 100% owned subsidiary of Summit, has negotiated an
agreement with Metro to provide future property development services.
Pending Transaction:
Summit is currently negotiating the acquisition of Old Standard
Life Insurance Company (OSL) from Metro. OSL is a wholly-owned
subsidiary of Metro, 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 second quarter of calendar 1995. The purchase price
is currently estimated at $2.7 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 the 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 March 31, 1995, the Company had cash or cash equivalents of
approximately $1.1 million as compared to $1.2 million at December 31,
1994 and $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 March 31,
1995, the real estate receivable portfolio totaled approximately $33.2
million as compared to $31.7 million at December 31, 1994 and $27.3
million at September 30, 1994. Real estate held for sale, acquired
through receivable foreclosures, totalled $400,050 at March 31, 1995 as
compared to $509,700 at December 31, 1994 and $452,700 at September 30,
1994.
Sales of Investment Certificates and Preferred Stock generated
approximately $2.3 million net cash flow during the six months ended
March 31, 1995, while sales of receivables and principal payments on
receivables added additional cash flow of approximately $8.4 million
during the six month 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 $14.2 million in real
estate receivables during the six months ended March 31, 1995.
Results of Operations:
Net income was $209,000 on revenues of approximately $3.4 million
for the six months ended March 31, 1995. For the similar period in the
prior year, the Company reported net income of $89,000 on revenues of
approximately $1.6 million. The increase in net income resulted
primarily from: (1) a $38,000 increase in the spread between interest
income and interest expense, due principally to the increase investment
in real estate contract receivables; (2) dividend income of $152,000
from investments in affiliated companies; (3) and increase in earnings
of approximately $103,000 generated from fees, commissions, service and
other income less the related operating expenses; all of which were
partially offset by; (4) an increase in the charge for provision for
loss on real estate assets of $118,000; and (5) a resulting increase in
the provision for income taxes.
For the six months ended March 31, 1995, the interest spread was
$277,000, while in the prior year's period the spread was $239,000.
This increase is the result of additional investment in real estate
receivables coupled with a slight decrease in the weighted average
interest rate on the outstanding Investment Certificates issued by the
Company.
In the current period, the Company received approximately $152,000
in dividends from its preferred and common stock investment in Metro.
The Company acquired this investment in September 1994 through the
exchange of its own preferred stock for a similar preferred and common
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 stock dividend is now paid by
the Company to its preferred shareholders.
Commencing January 31, 1995, with the purchase of MIS and the
creation of a property development subsidiary, the Company has began to
generate significant fee revenues along with increased operating
expenses associated with these revenues. During the six months ended
March 31, 1995 the Company generated $843,000 of fee revenues offset by
$844,000 of total operating expenses. In the prior year the Company
realized $30,000 of fee revenues offset by $135,000 of total operating
expenses. To date, the purchase of MIS and the creation of the
property development subsidiary has had a positive affect on the
consolidated operating profits of the Company.
During the six months ended March 31, 1995, the Company realized
gains on the sale of receivables of $49,000 compared to a gain from
sale of receivables and investment securities of $41,000 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. The sale of
financial instruments was priced at current market value at date of
sale. In the current period, sales of foreclosed real estate were at
a profit of $8,000 compared to $11,000 in gains in the prior year. In
conjunction with the increased investments in the real estate
receivable portfolio, along with the valuation of foreclosed real
estate, the Company provided a provision for loss on real estate assets
of approximately $168,000 in the current year's period compared to
approximately $50,000 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 5/4/95 ____________________________________
John Trimble, President
/S/ ERNEST JURDANA
Date 5/4/95 ________________________________________
Ernest Jurdana
Chief Financial Officer
/S/ STEVEN CROOKS
Date 5/4/95 ____________________________________
Steven Crooks, Controller
(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>
