<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1996
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ______________
COMMISSION FILE NUMBER: 33-47912
CMC SECURITIES CORPORATION IV
(Exact name of Registrant as specified in its Charter)
DELAWARE 75-2431915
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2711 NORTH HASKELL, DALLAS, TEXAS 75204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 874-2323
(Former name, former address and former fiscal year, if changed from last
report)
The Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) for Form 10-Q and is therefore filing this Form under the reduced disclosure
format.
Indicate by check mark whether the Registrant (1) has filed all documents and
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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock ($1.00 par value) 1,000 as of November 4, 1996
<PAGE>
CMC SECURITIES CORPORATION IV
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I. -- FINANCIAL INFORMATION
PAGE
----
ITEM 1. Financial Statements
Balance Sheet -- September 30, 1996 and December 31, 1995.. 3
Statement of Operations - Quarter and Nine Months
Ended September 30, 1996 and 1995........................ 4
Statement of Cash Flows - Nine Months Ended
September 30, 1996 and 1995.............................. 5
Notes to Financial Statements............................. 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 8
PART II. -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................. 8
SIGNATURES................................................. 9
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<PAGE>
PART I. -- FINANCIAL INFORMATION
CMC SECURITIES CORPORATION IV
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
ASSETS
Mortgage securities collateral $623,597 $681,287
Cash and other equivalents - 2
-------- --------
$623,597 $681,289
======== ========
LIABILITIES
Collateralized mortgage securities $623,223 $680,847
Accrued expenses 20 12
-------- --------
623,243 680,859
-------- --------
STOCKHOLDER'S EQUITY
Common stock - $1 par value,
1,000 shares authorized, issued
and outstanding 1 1
Paid-in capital 472 461
Accumulated deficit (119) (32)
-------- --------
354 430
-------- --------
$623,597 $681,289
======== ========
See accompanying notes to financial statements.
-3-
<PAGE>
CMC SECURITIES CORPORATION IV
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Mortgage securities collateral $13,799 $15,158 $42,074 $44,628
Receivable from Parent - 4 - 13
------- ------- ------- -------
Total interest income 13,799 15,162 42,074 44,641
Interest expense on
collateralized mortgage securities 13,821 15,158 42,140 44,628
------- ------- ------- -------
Net interest income (22) 4 (66) 13
------- ------- ------- -------
Other expenses:
Management fees 3 3 8 8
Professional fees and other 1 2 13 18
------- ------- ------- -------
Total other expenses 4 5 21 26
------- ------- ------- -------
Net loss $ (26) $ (1) $ (87) $ (13)
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
CMC SECURITIES CORPORATION IV
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (87) $ (13)
Net change in other assets and
accrued expenses 8 6
Noncash item - amortization of
discount and premium 50 207
-------- --------
Net cash provided by operating
activities (29) 200
-------- --------
INVESTING ACTIVITIES:
Mortgage securities collateral:
Principal collections on collateral 62,055 35,673
Decrease in accrued interest receivable 389 217
Increase in short-term investments (7) -
-------- --------
Net cash provided by
investing activities 62,437 35,890
-------- --------
FINANCING ACTIVITIES:
Collateralized mortgage securities:
Principal payments on securities (62,055) (35,673)
Decrease in accrued interest payable (366) (424)
Capital contribution 11 6
-------- --------
Net cash used by
financing activities (62,410) (36,091)
-------- --------
Net change in cash and cash equivalents (2) (1)
Cash and cash equivalents at
beginning of period 2 3
-------- --------
Cash and cash equivalents at end
of period $ - $ 2
======== ========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CMC SECURITIES CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter and nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information refer to the balance sheet and
footnotes thereto included in the CMC Securities Corporation IV (the "Company")
annual report on Form 10-K for the period ended December 31, 1995.
NOTE B -- DISCLOSURES REGARDING FAIR VALUES OF MORTGAGE SECURITIES COLLATERAL
Mortgage securities collateral is classified as held-to-maturity and,
accordingly, is carried at amortized cost in the balance sheet. Estimated fair
values of mortgage securities collateral have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop these estimates. In addition, fair values fluctuate on a daily basis.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The fair value of mortgage securities collateral was estimated using quoted
market prices, including quotes made by Capstead Mortgage Corporation's lenders
in connection with designating collateral for repurchase arrangements or offer
prices by the Parent for similar mortgage assets.
Disclosures regarding fair values of mortgage securities collateral are
summarized as follows (in thousands):
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
Carrying amount $623,597 $681,287
Unrealized gains 20,061 43,871
Unrealized losses - -
-------- --------
Fair value $643,658 $725,158
-------- --------
The maturity of mortgage securities collateral is directly affected by the rate
of principal prepayments by mortgagors. In addition, upon the Company's
redemption of remaining bonds outstanding pursuant to clean-up calls, released
collateral may be sold. Such sales are deemed maturities under the provisions
of SFAS 115. No such redemptions have occurred.
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<PAGE>
NOTE C -- NET INTEREST INCOME ANALYSIS
The following tables summarize the amount of interest income and interest
expense and the average effective interest rate for mortgage securities
collateral and collateralized mortgage securities for the periods shown (dollar
amounts in thousands):
QUARTER ENDED SEPTEMBER 30
-------------------------------------
1996 1995
------------------ -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
-------- -------- ------- --------
Interest income on mortgage
securities collateral $13,799 8.81% $15,158 8.71%
Interest expense on
collateralized mortgage securities 13,821 8.83 15,158 8.71
------- -------
Net interest income $ (22) $ -
------- -------
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------
1996 1995
----------------- ----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ------- ------- -------
Interest income on mortgage
securities collateral $42,074 8.70% $44,628 8.41%
Interest expense on
collateralized mortgage securities 42,140 8.72 44,628 8.41
------- -------
Net interest income $ (66) $ -
======= =======
The following tables summarize the amount of change in interest income on
mortgage securities collateral and interest expense on collateralized mortgage
securities due to changes in effective interest rates, versus changes in volume
for the quarter and nine months ended September 30, 1996, compared to the same
periods in 1995 (in thousands):
QUARTER ENDED SEPTEMBER 30, 1996
-----------------------------------
RATE* VOLUME* TOTAL
---------- ----------- ----------
Interest income on mortgage
securities collateral $ 174 $(1,533) $(1,359)
Interest expense on
collateralized mortgage securities 208 (1,545) (1,337)
------ ------- ---------
$ (34) $ 12 $ (22)
------ ------- ---------
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------
RATE* VOLUME* TOTAL
------ ------- ---------
Interest income on mortgage
securities collateral $1,527 $(4,081) $(2,554)
Interest expense on
collateralized mortgage securities 1,629 (4,117) (2,488)
------ ------- ---------
$ (102) $ 36 $ (66)
====== ======= =========
* THE CHANGE IN INTEREST DUE TO BOTH VOLUME AND RATE HAS BEEN ALLOCATED TO
VOLUME AND RATE CHANGES IN PROPORTION TO THE RELATIONSHIP OF THE ABSOLUTE
DOLLAR AMOUNTS OF THE CHANGE IN EACH.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
CMC Securities Corporation IV (the "Company") was incorporated in Delaware on
May 6, 1992 as a limited purpose finance corporation, and is a wholly-owned
subsidiary of Capstead Mortgage Corporation ("CMC").
Since inception the Company has issued approximately $784 million of
collateralized mortgage obligations ("CMOs"). Because an affiliate retained
investments in the CMOs, the issuances were accounted for as financings, and
accordingly, the collateral and bonds are reflected on the Company's balance
sheet. The Company's investment in the CMOs issued is limited to $374,000 of
debt issuance costs, which are reflected as bond discount in the accompanying
balance sheet. Other than the ongoing amortization of these debt issuance
costs, no related economic benefit will be received and no related net income or
loss will be recognized. The Company did not issue any CMOs in 1996.
Net operating losses are due to operational expenses not directly related to
previous CMO issuances and the amortization of debt issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
All ongoing CMO-related cash expenses are paid out to the excess cash flows on
the CMOs issued before the residual holders receive their residual interest.
The Company believes that the excess cash flows will be sufficient to pay these
ongoing costs. Cash flow requirements due to ongoing operational expenses are
funded by CMC.
PART II. -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
-8-
<PAGE>
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.
CMC SECURITIES CORPORATION IV
Date: November 4, 1996 By /s/ RONN K. LYTLE
------------------------------------
Ronn K. Lytle
Chairman and Chief Executive Officer
Date: November 4, 1996 By /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Senior Vice President - Control
and Treasurer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from CMC
Securities Corporation IV's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 623,597
<CURRENT-LIABILITIES> 20
<BONDS> 623,223
0
0
<COMMON> 1
<OTHER-SE> 353
<TOTAL-LIABILITY-AND-EQUITY> 623,597
<SALES> 0
<TOTAL-REVENUES> 42,074
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,140
<INCOME-PRETAX> (87)
<INCOME-TAX> 0
<INCOME-CONTINUING> (87)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
