<PAGE>
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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, 1997
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 13, 1997
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CMC SECURITIES CORPORATION IV
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
PART I. -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ITEM 1. Financial Statements
Balance Sheet -- September 30, 1997 (Unaudited)
and December 31, 1996................................... 1
Statement of Operations -- Quarter and Nine Months
Ended September 30, 1997 and 1996 (Unaudited)........... 2
Statement of Cash Flows -- Nine Months Ended
September 30, 1997 and 1996 (Unaudited)................. 3
Notes to Financial Statements (Unaudited)................. 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 7
PART II. -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................. 7
SIGNATURES.................................................. 8
</TABLE>
<PAGE>
PART I. -- FINANCIAL INFORMATION
CMC SECURITIES CORPORATION IV
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Mortgage securities collateral $842,994 $609,210
======== ========
LIABILITIES
Collateralized mortgage securities $842,708 $608,858
Accrued expenses 30 22
-------- --------
842,738 608,880
-------- --------
STOCKHOLDER'S EQUITY
Common stock -- $1 par value,
1,000 shares authorized, issued
and outstanding 1 1
Paid-in capital 486 474
Accumulated deficit (231) (145)
-------- --------
256 330
-------- --------
$842,994 $609,210
======== ========
</TABLE>
See accompanying notes to financial statements.
-1-
<PAGE>
CMC SECURITIES CORPORATION IV
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -------------------------
1997 1996 1997 1996
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $12,846 $13,799 $38,067 $42,074
Interest expense on
collateralized mortgage securities 12,868 13,821 38,133 42,140
------- ------- ------- -------
Net interest income (22) (22) (66) (66)
------- ------- ------- -------
Other expenses:
Management fees 3 3 8 8
Professional fees and other 1 1 12 13
------- ------- ------- -------
Total other expenses 4 4 20 21
------- ------- ------- -------
Net loss $ (26) $ (26) $ (86) $ (87)
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION IV
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------
1997 1996
---------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (86) $ (87)
Net change in other assets and
accrued expenses 8 8
Noncash item - amortization of
discount and premium 48 50
--------- --------
Net cash used by operating
activities (30) (29)
--------- --------
INVESTING ACTIVITIES:
Mortgage securities collateral:
Mortgage collateral acquired
from affiliate (284,672) -
Principal collections on collateral 57,096 62,055
Decrease (increase) in accrued
interest receivable (1,536) 389
Increase in short-term investments - (7)
--------- --------
Net cash provided (used) by
investing activities (229,112) 62,437
--------- --------
FINANCING ACTIVITIES:
Collateralized mortgage securities:
Issuance of securities 284,672 -
Principal payments on securities (57,096) (62,055)
Increase (decrease) in accrued
interest payable 1,554 (366)
Capital contribution 12 11
--------- --------
Net cash provided (used) by
financing activities 229,142 (62,410)
--------- --------
Net change in cash and cash equivalents - (2)
Cash and cash equivalents at
beginning of period - 2
--------- --------
Cash and cash equivalents at end
of period $ - $ -
========= ========
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1997 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information refer to the financial
statements and footnotes thereto included in the CMC Securities Corporation IV
annual report on Form 10-K for the year ended December 31, 1996.
NOTE B -- DISCLOSURES REGARDING FAIR VALUES OF MORTGAGE SECURITIES COLLATERAL
The estimated fair values of mortgage securities collateral have been determined
by 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 could be realized 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 values of mortgage securities collateral were estimated using quoted
market prices, when available, including quotes made by Capstead Mortgage
Corporation's lenders in connection with designating collateral for repurchase
arrangements.
The following table summarizes the fair values of mortgage securities collateral
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Carrying amount $842,994 $609,210
Unrealized gains 47,893 36,799
Unrealized losses - -
-------- --------
Fair value $890,887 $646,009
======== ========
</TABLE>
All mortgage securities collateral is held-to-maturity. The maturity of
mortgage securities collateral is directly affected by the rate of principal
prepayments by mortgagors. In addition, upon the redemption of remaining bonds
outstanding pursuant to clean-up calls, released collateral may be sold. Such
sales are deemed maturities under the provisions of Statement of Financial
Accounting Standards No. 115. No such redemptions occurred during the nine
months ended September 30, 1997 or during 1996.
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NOTE C -- NET INTEREST INCOME ANALYSIS
The following table summarizes interest income and interest expense and average
effective interest rates for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
------------------------------------------------------
1997 1996
--------------------------- ---------------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ------- ------ -------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $ 12,846 8.08% $ 13,799 8.81%
Interest expense on
collateralized mortgage securities 12,868 8.09 13,821 8.83
-------- --------
Net interest income $ (22) $ (22)
======== ========
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------------------------
1997 1996
--------------------------- ---------------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ------- ------ -------
Interest income on mortgage
securities collateral $ 38,067 8.33% $ 42,074 8.70%
Interest expense on
collateralized mortgage securities 38,133 8.34 42,140 8.72
-------- --------
Net interest income $ (66) $ (66)
======== ========
</TABLE>
The following table summarizes changes in interest income and interest expense
due to changes in interest rates, versus changes in volume for the quarter and
nine months ended September 30, 1997, compared to the same periods in 1996 (in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1997
---------------------------------------------------
RATE* VOLUME* TOTAL
------- ------- ------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $ (1,160) $ 207 $ (953)
Interest expense on
collateralized mortgage securities (1,161) 208 (953)
-------- -------- ------
$ 1 $ (1) $ -
======== ======== ======
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------
RATE* VOLUME* TOTAL
------- ------- ------
Interest income on mortgage
securities collateral $ (1,770) $ (2,237) $ (4,007)
Interest expense on
collateralized mortgage securities (1,769) (2,238) (4,007)
-------- -------- --------
$ (1) $ 1 $ -
======== ======== ========
</TABLE>
* 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>
NOTE D -- MORTGAGE SECURITIES COLLATERAL
On September 30, 1997, the Company acquired from an affiliate conventional
mortgage loans with an unpaid principal balance of $281.2 million and an average
coupon interest rate of 8.04% as collateral for the issuance of CMO Series 1997-
NAMC 3 (See Note E). These loans were acquired at an amount equal to the net
proceeds of the issuance.
NOTE E -- COLLATERALIZED MORTGAGE SECURITIES
On September 30, 1997, the Company issued CMO Series 1997-NAMC 3 with a 30-year
stated maturity, an average coupon interest rate of 8.04% and a total obligation
(including accrued interest and premium) of $287 million. The Company retained
no beneficial interest in this CMO and as such, no economic benefit will be
received and no related net income or loss will be recognized other than the
amortization of unrecovered shelf issuance costs. The issuance was accounted
for as a financing.
NOTE F -- SUBSEQUENT EVENT
On October 29, 1997, the Company issued CMO Series 1997-II with an issue balance
of $938 million secured by $938 million of mortgage collateral obtained from an
affiliate. The Company retained no beneficial interest in this CMO and as such,
no economic benefit will be received and no related net income or loss will be
recognized other than the amortization of unrecovered shelf issuance costs. The
issuance was accounted for as a financing. Capstead Mortgage Corporation, the
parent of the Company, retained a $126 million interest in the issuance.
-6-
<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.
During the quarter ended September 30, 1997, the Company issued CMO Series 1997-
I with an issue balance of $285 million. The issuance has been accounted for as
a financing.
Since inception the Company has issued approximately $1.07 billion of
collateralized mortgage obligations ("CMOs"). The Company has not retained any
investment in the CMOs issued; therefore, no related economic benefit will be
received and no related net income or loss will be recognized other than the
amortization of unrecovered shelf issuance costs. These issuances were
accounted for as financings, and accordingly, the collateral and bonds are
reflected on the Company's balance sheet.
The Company's net losses are due to operational costs incurred (management and
professional fees) and the amortization of unrecovered shelf issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
All ongoing CMO expenses of the Company are paid out of 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
ongoing CMO expenses. Cash flow requirements due to ongoing operational costs
are funded by CMC.
PART II. -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits:
Exhibit 27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None.
-7-
<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 13, 1997 By /s/ RONN K. LYTLE
------------------------------------
Ronn K. Lytle
Chairman and Chief Executive Officer
Date: November 13, 1997 By /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Senior Vice President - Control
and Treasurer
-8-
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BT REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 842,994
<CURRENT-LIABILITIES> 30
<BONDS> 842,708
0
0
<COMMON> 1
<OTHER-SE> 255
<TOTAL-LIABILITY-AND-EQUITY> 842,994
<SALES> 0
<TOTAL-REVENUES> 38,067
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,133
<INCOME-PRETAX> (86)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
