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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: MARCH 31, 2000
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: 33-47913
CMC SECURITIES CORPORATION III
(Exact name of Registrant as specified in its Charter)
DELAWARE 75-2431913
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8401 N CENTRAL EXPRESSWAY, SUITE 800, DALLAS, TX 75225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 874-2323
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 May 10, 2000
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CMC SECURITIES CORPORATION III
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PART I. -- FINANCIAL INFORMATION
PAGE
----
<S> <C> <C>
ITEM 1. Financial Statements
Balance Sheet -- March 31, 2000 and December 31, 1999.................................................. 1
Statement of Operations -- Quarter Ended March 31, 2000 and 1999....................................... 2
Statement of Cash Flows -- Quarter Ended March 31, 2000 and 1999....................................... 3
Notes to Financial Statements.......................................................................... 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................................... 6
PART II. -- OTHER INFORMATION
ITEM 1. Legal Proceedings................................................................................. 6
ITEM 5. Other Information................................................................................. 6
ITEM 6. Exhibits and Reports on Form 8-K.................................................................. 6
SIGNATURES................................................................................................ 7
</TABLE>
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PART I. -- FINANCIAL INFORMATION
CMC SECURITIES CORPORATION III
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Mortgage securities collateral $2,207,794 $2,022,622
Cash and other equivalents 6 6
---------- ----------
$2,207,800 $2,022,628
========== ==========
LIABILITIES
Collateralized mortgage securities $2,207,794 $2,022,622
Payable to Parent 63 60
---------- ----------
2,207,857 2,022,682
---------- ----------
STOCKHOLDER'S EQUITY
Common stock - $1.00 par value,
1 shares authorized, issued
and outstanding 1 1
Paid-in capital 569 569
Undistributed loss (627) (624)
---------- ----------
(57) (54)
---------- ----------
$2,207,800 $2,022,628
========== ==========
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION III
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
------------------------------
2000 1999
------- -------
<S> <C> <C>
Interest income on mortgage
securities collateral $34,373 $40,666
Interest expense on collateralized
mortgage securities 34,373 40,666
------- -------
Net interest expense -- --
------- -------
Other expense:
Management fees 3 3
------- -------
Net loss $ (3) $ (3)
======= =======
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION III
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
----------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (3) $ (3)
Noncash item - amortization of discount and premium (8) (345)
--------- ---------
Net cash used by operating activities (11) (348)
--------- ---------
INVESTING ACTIVITIES:
Mortgage securities collateral:
Purchase of collateral (234,082) --
Principal collections on collateral 50,847 131,722
Decrease (increase) in accrued interest receivable (1,623) 1,073
Decrease in short-term investments 3 --
--------- ---------
Net cash provided (used) by investing activities (184,855) 132,795
--------- ---------
FINANCING ACTIVITIES:
Collateralized mortgage securities:
Issuance of securities 234,082 --
Principal payments on securities (50,847) (131,722)
Increase (decrease) in accrued interest payable 1,628 (728)
Increase in payable to Parent 3 3
--------- ---------
Net cash provided (used) by financing activities 184,866 (132,447)
--------- ---------
Net change in cash and cash equivalents -- --
Cash and cash equivalents at beginning of period 6 --
--------- ---------
Cash and cash equivalents at end of period $ 6 $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
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CMC SECURITIES CORPORATION III
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(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, it does 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 ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the calendar year ending
December 31, 2000. For further information refer to the financial statements and
footnotes thereto included in the CMC Securities Corporation III annual report
on Form 10-K for the year ended December 31, 1999.
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, 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 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>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Carrying amount $2,207,794 $2,022,622
Unrealized gains -- 29
Unrealized losses (84,918) (55,475)
---------- ----------
Fair value $2,122,876 $1,967,176
========== ==========
</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 quarter ended March
31, 2000 or during 1999.
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NOTE C -- MORTGAGE SECURITIES COLLATERAL
During March 2000 the Company acquired from an affiliate conventional mortgage
loans with unpaid principal balances of $234 million that were pledged as
collateral for the simultaneous issuance of CMO Series 2000-I. All loans were
acquired at an amount equal to the net proceeds of the related issuance.
NOTE D -- COLLATERALIZED MORTGAGE SECURITIES
During March 2000 the Company issued CMO Series 2000-I with stated maturities
ranging from 15 to 30 years and a total obligation (including accrued interest
and premium) of $236 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. The issuance was accounted for as a
financing.
NOTE E -- NET INTEREST INCOME ANALYSIS
The following table summarizes interest income and interest expense and the
average effective interest rates for mortgage securities collateral and
collateralized mortgage securities (dollars in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
----------------------------------------------
2000 1999
-------------------- ---------------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Interest income on mortgage
securities collateral $ 34,373 6.92% $ 40,666 6.90%
Interest expense on
collateralized mortgage
securities 34,373 6.92 40,666 6.90
-------- --------
Net interest expense $ -- $ --
======== ========
</TABLE>
The following table summarizes the amount of change in interest income and
interest expense due to changes in interest rates versus changes in volume for
the quarter ended March 31, 2000 compared to the same period in 1999 (in
thousands):
<TABLE>
<CAPTION>
RATE* VOLUME* TOTAL
----- ------- -------
<S> <C> <C> <C>
Interest income on mortgage
securities collateral $ 88 $(6,381) $(6,293)
Interest expense on
collateralized mortgage securities 88 (6,381) (6,293)
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CMC Securities Corporation III (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").
During March 2000 the Company issued collateralized mortgage obligation ("CMO")
Series 2000-I with total obligations (including accrued interest and premium) of
$236 million. Since inception the Company has issued 10 series of CMOs with an
aggregate original principal balance of $3,518,009,000, $8,788,000 of which was
issued through private placements, with the remainder being issued under the
registration statement. These issuances have been accounted for as financings.
As of March 31, 2000, the Company had $490,779,000 remaining under the
registration statement for future CMO issuances. Since the Company did not
retain any investment in the CMOs issued, no economic benefit was or will be
received, and therefore no related net income or loss was or will be recognized
other than amortization of unreimbursed shelf issuance costs.
The Company's net losses are due to operational costs incurred (management and
professional fees).
LIQUIDITY AND CAPITAL RESOURCES
All ongoing cash 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 1. LEGAL PROCEEDINGS: None.
ITEM 5. OTHER INFORMATION: None.
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.
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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 III
Date: May 10, 1999 By: /s/ ANDREW F. JACOBS
----------------------------------------
Andrew F. Jacobs
Executive Vice President - Finance
Date: May 10, 1999 By: /s/ PHILLIP A. REINSCH
----------------------------------------
Phillip A. Reinsch
Senior Vice President - Control
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 27 Financial Data Statement
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CMC
SECURITIES CORPORATION III'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,207,800
<CURRENT-LIABILITIES> 63
<BONDS> 2,207,794
0
0
<COMMON> 1
<OTHER-SE> (58)
<TOTAL-LIABILITY-AND-EQUITY> 2,207,800
<SALES> 0
<TOTAL-REVENUES> 34,373
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,373
<INCOME-PRETAX> (3)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
