-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UQyBvZFrldMmvUZgNjD7sS70BOL2ArdDk0HX2N0BXmKdUqftcike+HdEsuygxWsE YryiPx8VQORMDBDAvpDFtQ== 0000950134-02-014060.txt : 20021113 0000950134-02-014060.hdr.sgml : 20021113 20021113125644 ACCESSION NUMBER: 0000950134-02-014060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTEAD SECURITIES CORPORATION IV CENTRAL INDEX KEY: 0000878517 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 752390594 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19477 FILM NUMBER: 02819168 BUSINESS ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: SUITE 800 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214-874-2323 MAIL ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: SUITE 800 CITY: DALLAS STATE: TX ZIP: 75225-4410 10-Q 1 d01178e10vq.txt FORM 10-Q =============================================================================== 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, 2002 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: 33-42337 CAPSTEAD SECURITIES CORPORATION IV (Exact name of Registrant as specified in its Charter) DELAWARE 75-2390594 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8401 NORTH 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 November 11, 2002 =============================================================================== CAPSTEAD SECURITIES CORPORATION IV FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002 INDEX
PAGE ---- PART I. -- FINANCIAL INFORMATION ITEM 1. Financial Statements Balance Sheets -- September 30, 2002 and December 31, 2001............................................. 1 Statements of Operations -- Quarter and Nine Months Ended September 30, 2002 and 2001.......................................................................... 2 Statements of Cash Flows -- Nine Months Ended September 30, 2002 and 2001.......................................................................... 3 Notes to Financial Statements.......................................................................... 4 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 6 ITEM 3. Quantitative and Qualitative Disclosure of Market Risk...................................... 6 ITEM 4. Controls and Procedures..................................................................... 6 PART II. -- OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K............................................................ 7 SIGNATURES................................................................................................ 7 CERTIFICATIONS............................................................................................ 8
ITEM 1. FINANCIAL STATEMENTS PART I. -- FINANCIAL INFORMATION CAPSTEAD SECURITIES CORPORATION IV BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2002 DECEMBER 31, 2001 ------------------ ----------------- (UNAUDITED) ASSETS Mortgage securities collateral $ 46,236 $ 72,309 Cash and cash equivalents 14 14 -------- -------- $ 46,250 $ 72,323 ======== ======== LIABILITIES Collateralized mortgage securities $ 45,653 $ 71,402 -------- -------- STOCKHOLDER'S EQUITY Common stock - $1.00 par value, 1 shares authorized, issued and outstanding 1 1 Paid-in capital 29 18 Undistributed loss (10) -- Accumulated other comprehensive income 577 902 -------- -------- 597 921 -------- -------- $ 46,250 $ 72,323 ======== ========
See accompanying notes to financial statements. 1 CAPSTEAD SECURITIES CORPORATION IV STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------------- ----------------------- 2002 2001 2002 2001 ------- ------- ------- ------- Interest income: Mortgage securities collateral $ 748 $ 1,838 $ 2,529 $ 7,001 Receivable from (payable to) parent -- -- (1) 1 ----- ------- ------- ------- Total interest income 748 1,838 2,528 7,002 ----- ------- ------- ------- Interest expenses on collateralized mortgage securities 708 1,795 2,392 6,797 ----- ------- ------- ------- Net interest income 40 43 136 205 ----- ------- ------- ------- Other operating expense: Management fee 3 3 8 8 Professional fee and other -- 4 1 16 Pool insurance 40 74 137 259 ----- ------- ------- ------- Total other operating expense 43 81 146 283 ----- ------- ------- ------- Net loss (3) (38) (10) (78) Other comprehensive income (loss) (58) 33 (325) (590) ----- ------- ------- ------- Comprehensive loss $ (61) $ (5) $ (335) $ (668) ===== ======= ======= =======
See accompanying notes to financial statements. 2 CAPSTEAD SECURITIES CORPORATION IV STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 ---------------------------------- 2002 2001 ------------ ------------ OPERATING ACTIVITIES: Net loss $ (10) $ (78) Noncash item - amortization of discount and premium (148) (21) Net change in other assets and accrued expenses -- (70) ------------ ------------ Net cash used in operating activities (158) (169) ------------ ------------ INVESTING ACTIVITIES: Mortgage securities collateral: Principal collections on collateral 25,039 40,894 Decrease in accrued interest receivable 157 273 Increase in short-term investments -- (371) ------------ ------------ Net cash provided by investing activities 25,196 40,796 ------------ ------------ FINANCING ACTIVITIES: Collateralized mortgage securities: Principal payments on securities (25,039) (40,503) Decrease in accrued interest payable (10) (155) Capital contributions (distributions) 11 (34) ------------ ------------ Net cash used in financing activities (25,038) (40,692) ------------ ------------ Net change in cash and cash equivalents -- (65) Cash and cash equivalents at beginning of period 14 120 ------------ ------------ Cash and cash equivalents at end of period $ 14 $ 55 ============ ============
See accompanying notes to financial statements. 3 CAPSTEAD SECURITIES CORPORATION IV NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (UNAUDITED) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles accepted in the United States ("GAAP") 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 GAAP 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, 2002 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2002. For further information refer to the financial statements and footnotes thereto included in the Capstead Securities Corporation IV (the "Company") annual report on Form 10-K for the year ended December 31, 2001. NOTE B -- DISCLOSURES REGARDING FAIR VALUES OF MORTGAGE SECURITIES COLLATERAL The estimated fair values of mortgage securities collateral have been determined 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. Fair values are 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 summarizes fair value disclosures for mortgage securities collateral held available-for-sale for the periods indicated (in thousands):
SEPTEMBER 30, 2002 DECEMBER 31, 2001 ------------------ ----------------- Carrying amount $ 45,659 $ 71,407 Unrealized gains 577 902 ---------- ---------- Fair value $ 46,236 $ 72,309 ========== ==========
4 The maturity of mortgage securities collateral is directly affected by the rate of principal prepayments by mortgagors. In addition, upon redemption of remaining bonds outstanding pursuant to clean-up calls, released collateral may be sold provided the collateral has paid down to within 15% of its original issue amount. Such sales are deemed maturities under the provisions of Statement of Financial Accounting Standards No. 115. There was no collateral released during the first six months of 2002 or 2001. NOTE C -- NET INTEREST INCOME ANALYSIS The following summarizes interest income and interest expense and the average effective interest rates (dollars in thousands):
QUARTER ENDED SEPTEMBER 30 --------------------------------------------------- 2002 2001 -------------------- ---------------------- AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ------ ------- ------ ------- Interest income on mortgage securities collateral $ 748 6.37% $1,838 6.50% Interest expense on collateralized mortgage securities 708 6.00 1,795 6.36 ------ ------ $ 40 $ 43 ====== ======
NINE MONTHS ENDED SEPTEMBER 30 -------------------------------------------------- 2002 2001 ------------------- ---------------------- AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE ------ ------- ------ ------- Interest income on mortgage securities collateral $2,529 6.09% $7,001 7.29% Interest expense on collateralized mortgage securities 2,392 5.72 6,797 7.09 ------ ------ $ 137 $ 204 ====== ======
Changes in interest income and interest expense due to changes in interest rates versus changes in volume were as follows (in thousands):
QUARTER ENDED SEPTEMBER 30, 2002 ----------------------------------------------- RATE* VOLUME* TOTAL ----- ------- ------- Interest income on mortgage securities collateral $ (36) $(1,054) $(1,090) Interest expense on collateralized mortgage securities (96) (991) (1,087) ----- ------- ------- $ 60 $ (63) $ (3) ===== ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 2002 ------------------------------------------------- RATE* VOLUME* TOTAL ------- ------- ------- Interest income on mortgage securities collateral $(1,009) $(3,463) $(4,472) Interest expense on collateralized mortgage securities (1,120) (3,285) (4,405) ------- ------- ------- $ 111 $ (178) $ (67) ======= ======= =======
* 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. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capstead Securities Corporation IV (the "Company") was incorporated on August 16, 1991, as a special-purpose finance subsidiary of Capstead Mortgage Corporation ("CMC") and commenced operations on December 23, 1991 with the issuance of its first collateralized mortgage obligation ("CMO"), Series 1991-VIII. As of September 30, 2002, the Company had issued 19 CMOs with an aggregate initial principal balance of $4,572,644,000, including two CMOs with an aggregate initial principal balance of $551,537,000, which were recorded as sales when issued in 1992. The Company has not issued any CMOs since September 30, 1998. The Company's net losses are due to operational costs incurred (management and administrative fees). Other comprehensive loss reflects the decline in pledged CMO collateral since year-end as a result of relatively high mortgage prepayments. As the underlying mortgages pay off, related unrealized gains are eliminated. LIQUIDITY AND CAPITAL RESOURCES All ongoing cash CMO expenses of the Company are paid out of the excess cash flow on the CMO 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISKS The information required by this Item is incorporated by reference to the information included in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 4. CONTROLS AND PROCEDURES As of September 30, 2002, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Senior Vice President - Control ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2002. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to September 30, 2002. 6 PART II. -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: The following Exhibit is presented herewith: Exhibit 99.1 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: None 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. CAPSTEAD SECURITIES CORPORATION IV Date: November 11, 2002 By: /s/ ANDREW F. JACOBS ---------------------------------------- Andrew F. Jacobs Chairman, Chief Executive Officer and President Date: November 11, 2002 By: /s/ PHILLIP A. REINSCH ---------------------------------------- Phillip A. Reinsch Senior Vice President - Control 7 CERTIFICATIONS I, Andrew F. Jacobs, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Capstead Securities Corporation IV; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 11, 2002 By: /s/ ANDREW F. JACOBS ----------------------------------------- Andrew F. Jacobs Chairman, Chief Executive Officer and President 8 CERTIFICATIONS I, Phillip A. Reinsch, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Capstead Securities Corporation IV; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 11, 2002 By: /s/ PHILLIP A. REINSCH ------------------------------------------ Phillip A. Reinsch Senior Vice President - Control 9 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-99.1 3 d01178exv99w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.1 CAPSTEAD SECURITIES CORPORATION IV CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Capstead Securities Corporation IV (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Andrew F. Jacobs, Chairman, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 11, 2002 By: /s/ ANDREW F. JACOBS ------------------------------ Andrew F. Jacobs Chairman and Chief Executive Officer and President In connection with the Quarterly Report of Capstead Securities Corporation IV (the "Company") on Form 10-Q for the period ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Phillip A. Reinsch, Senior Vice President - Control of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 11, 2002 By: /s/ PHILLIP A. REINSCH ------------------------------ Phillip A. Reinsch Senior Vice President - Control -----END PRIVACY-ENHANCED MESSAGE-----