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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: December 31, 2007
OR
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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: 001-08896
CAPSTEAD MORTGAGE CORPORATION
(Exact name of Registrant as specified in its Charter)
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Maryland
(State or other jurisdiction of
incorporation or organization)
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75-2027937
(I.R.S. Employer
Identification No.) |
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8401 North Central Expressway, Suite 800, Dallas, TX
(Address of principal executive offices)
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75225
(Zip Code) |
Registrant’s telephone number, including area code: (214) 874-2323
Securities registered pursuant to Section 12(b) of the Act:
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| Title of Each Class |
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Name of Exchange on Which Registered |
Common Stock ($0.01 par value)
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New York Stock Exchange |
$1.60 Cumulative Preferred Stock, Series A ($0.10 par value)
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New York Stock Exchange |
$1.26 Cumulative Convertible Preferred Stock, Series B ($0.10 par value)
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New York Stock Exchange |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. YES o NO þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. YES o NO þ
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, and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is
not contained herein, and will not be contained, to the best of Registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K: þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o |
Accelerated filer þ |
Non-accelerated filer o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act). YES o NO þ
At June 30, 2007 the aggregate market value of the voting common stock held by nonaffiliates was
$182,500,966.
Number of shares of Common Stock outstanding at March 3, 2008: 49,558,108
DOCUMENTS INCORPORATED BY REFERENCE:
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Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31,
2007 are incorporated by reference into Parts I, II and IV. |
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| (2) |
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Portions of the Registrant’s definitive Proxy Statement, issued in connection with the 2008
Annual Meeting of Stockholders of the Registrant, are incorporated by reference into Part III. |
CAPSTEAD MORTGAGE CORPORATION
2007 FORM 10-K/A ANNUAL REPORT
TABLE OF CONTENTS
PART I
EXPLANATORY NOTE — RECLASSIFYING RESTATEMENT
After receiving a request from the Securities and Exchange Commission (the “Commission”) in a
comment letter dated December 18, 2008, management of Capstead Mortgage Corporation (the “Company”)
concluded that the Company’s previously filed consolidated
statements of income for the three
years ending December 31, 2007 should be reclassified and restated to include interest expense from
unsecured borrowings with interest expense from repurchase arrangements and similar borrowings in
arriving at net interest margin rather than including interest expense from unsecured borrowings as
a component of other revenue (expense). Accordingly, the consolidated
statements of income included in this Form 10-K/A have been restated to
reflect interest income from all sources under the caption “Interest income”
and interest expense from all sources under the caption “Interest expense.” The resulting net
interest margin subtotal no longer provides readers of the Company’s consolidated financial
statements with solely the net interest margin earned on its portfolio of mortgage securities and
similar investments after directly-related secured borrowings, but a more all-inclusive measure of
net interest margin that includes interest income earned on overnight cash investments and cash
margin balances and interest costs associated with the unsecured borrowings.
The reclassifications contained in this restatement do not change the Company’s previously reported
net income, earnings per share or stockholders’ equity for any of the aforementioned periods. In
addition, the restatement does not impact the Company’s consolidated balance sheets, statements of
stockholders’ equity or cash flows for the indicated periods.
The impact of the reclassifications in the consolidated statements of income for the three years
ending December 31, 2007 is summarized as follows:
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Year Ended December 31 |
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2007 |
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2006 |
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2005 |
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Interest income: |
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As previously reported |
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$ |
310,698 |
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$ |
242,859 |
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$ |
130,333 |
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Reclassification |
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945 |
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413 |
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332 |
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As amended |
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$ |
311,643 |
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$ |
243,272 |
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$ |
130,665 |
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Interest expense: |
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As previously reported |
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(266,901 |
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$ |
(228,379 |
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$ |
(105,937 |
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Reclassification |
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(8,747 |
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(7,142 |
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(972 |
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As amended |
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$ |
(275,648 |
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$ |
(235,521 |
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$ |
(106,909 |
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Net interest income: |
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As previously reported |
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$ |
43,797 |
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$ |
14,480 |
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$ |
24,396 |
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Reclassification |
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(7,802 |
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(6,729 |
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(640 |
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As amended |
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$ |
35,995 |
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$ |
7,751 |
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$ |
23,756 |
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Other revenue (expense): |
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As previously reported |
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(20,867 |
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$ |
(13,005 |
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$ |
(7,191 |
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Reclassification |
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7,802 |
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6,729 |
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640 |
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As amended |
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(13,065 |
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$ |
(6,276 |
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$ |
(6,551 |
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Impact on net income from
these restatements |
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$ |
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$ |
— |
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1
Management believes its previous presentation was based on a reasonable interpretation of the
applicable rules of the Commission, and as such, management believes the restatement has had no
impact on the conclusion reached at December 31, 2007 that the design and operation of the
Company’s disclosure controls and procedures were effective. This Form 10-K/A has been signed as
of the current date and all certifications of the Company’s Chief Executive Officer and Chief
Financial Officer are given as of a current date. Accordingly, this Form 10-K/A should be read in
conjunction with the Company’s filings made with the Commission subsequent to the March 5, 2008
filing of the original Form 10-K for the year ended December 31, 2007.
Management and the Audit Committee of the Board of Directors have discussed these matters with the
Company’s independent registered public accounting firm, Ernst & Young, LLP.
For the convenience of the reader, this Form 10-K/A only includes those portions of the Company’s
original Annual Report on Form 10-K for the year ended December 31, 2007 that have been affected by
the restatement, with appropriate explanations of the changes made. Exhibit 13 includes the
Company’s consolidated financial statements, selected financial data, management’s discussion and
analysis of financial position and results of operations, and related reports and certifications,
as restated for the reclassifications described above.
ITEM 1. BUSINESS (updated for page references to Exhibit 13).
Capstead Mortgage Corporation (together with its subsidiaries, “Capstead” or the “Company”) formed
in 1985 and based in Dallas, Texas, is a self-managed real estate investment trust (“REIT”) for
federal income tax purposes. Capstead’s core strategy is managing a leveraged portfolio of
residential mortgage securities consisting almost exclusively of ARM securities issued and
guaranteed by government-sponsored entities, either Fannie Mae or Freddie Mac, or by an agency of
the federal government, Ginnie Mae. Agency-guaranteed residential mortgage securities carry an
implied AAA credit rating with limited, if any, credit risk. Capstead may also augment its core
portfolio with investments in credit-sensitive commercial real estate-related assets.
For further discussion of the Company’s business and financial condition, see the Registrant’s
Amended Annual Report to Stockholders for the year ended December 31, 2007 on pages 33 through 56,
which is incorporated herein by reference.
Regulation and Related Matters
Operating as a REIT that primarily invests in financial assets subjects the Company to various
federal regulatory requirements. For further discussion, see the Registrant’s Amended Annual
Report to Stockholders for the year ended December 31, 2007 on pages 50 through 54, which is
incorporated herein by reference.
Forward-looking Statements
For information on forward-looking statements made in this report, see the Registrant’s Amended
Annual Report to Stockholders for the year ended December 31, 2007 on page 56, which is
incorporated herein by reference.
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ITEM 1A. RISK FACTORS (updated for page references to Exhibit 13).
Under the captions “Risk Factors” and “Critical Accounting Policies” on pages 46 through 56 of the
Registrant’s Amended Annual Report to Stockholders for the year ended December 31, 2007 which is
incorporated herein by reference, are discussions of risk factors and critical accounting policies
affecting Capstead’s financial condition and results of operations that are an integral part of
this discussion and analysis. Readers are strongly urged to consider the potential impact of these
factors and accounting policies on the Company while reading this document.
ITEM 1B. UNRESOLVED STAFF COMMENTS
With the submission of this Amendment No. 1 on Form 10-K/A, management believes there are no
unresolved staff comments relative to the Company’s filings with the Commission.
PART II
(updated for page references to Exhibit 13)
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The information required by this item regarding the market price of, dividends on, and number of
holders of the Registrant’s common shares is included in the Registrant’s Amended Annual Report to
Stockholders for the year ended December 31, 2007 on page 28 under the caption “Note 14 — Market
and Dividend Information,” and is incorporated herein by reference. See ITEM 12 for information
regarding equity compensation plans. Capstead did not sell any unregistered securities during the
past three fiscal years.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is included in the Registrant’s Amended Annual Report to
Stockholders for the five years ended December 31, 2007 on page 32 under the caption “Selected
Financial Data,” and is incorporated herein by reference.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is included in the Registrant’s Amended Annual Report to
Stockholders for the year ended December 31, 2007 on pages 33 through 56 under the caption
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS.
The information required by this item is included in the Registrant’s Amended Annual Report to
Stockholders for the year ended December 31, 2007 on pages 33 through 56 under the caption
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and is
incorporated herein by reference.
3
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included in the Registrant’s Amended Annual Report to
Stockholders for the year ended December 31, 2007 on pages 6 through 30 and page 60, and is
incorporated herein by reference.
ITEM 9A. CONTROLS AND PROCEDURES.
The information required by this item is included in the Registrant’s Amended Annual Report to
Stockholders for the year ended December 31, 2007 on pages 58 and 59 and is incorporated herein by
reference.
PART III
(Omitted from this Amendment No. 1)
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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Documents filed as part of this report: |
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The following restated consolidated financial statements of the Company, included
in the Amended 2007 Annual Report to Stockholders, are incorporated herein by reference: |
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Financial Statement Schedules — All schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have been
omitted. |
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Incorporated herein by reference from the Company’s Amended Annual Report to
Stockholders for the year ended December 31, 2007, filed herewith as Exhibit 13. |
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3. Exhibits:
Exhibits unaffected by this Amendment No. 1 have been omitted.
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| Exhibit |
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DESCRIPTION |
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Portions of the Company’s Amended Annual Report to Stockholders for the year
ended December 31, 2007.* |
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.* |
31.1
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Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.* |
31.2
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Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.* |
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Company has duly caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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CAPSTEAD MORTGAGE CORPORATION
Registrant
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| Date: January 12, 2009 |
By: |
/s/ ANDREW F. JACOBS
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Andrew F. Jacobs |
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President and Chief Executive Officer |
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| Date: January 12, 2009 |
By: |
/s/ PHILLIP A. REINSCH
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Phillip A. Reinsch |
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Executive Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer) |
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5
INDEX TO EXHIBITS
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| EXHIBIT |
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DESCRIPTION |
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13
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Portions of the Company’s Amended Annual Report to Stockholders for the year
ended December 31, 2007.* |
23
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.* |
31.1
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Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.* |
31.2
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Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.* |
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |