UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30,1997
COMMISSION FILE NO. 0-19564
FGIC SECURITIES PURCHASE, INC.
A DELAWARE CORPORATION
IRS EMPLOYER IDENTIFICATION NO. 13-3633082
115 BROADWAY, NEW YORK, NEW YORK 10006
TELEPHONE - (212) 312-3000
Indicate by check mark whether the Registrant (1) has filed all 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 X No _____
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SHARES OUTSTANDING
TITLE OF CLASS AT AUGUST 6, 1997
- -------------- ------------------
Common Stock (voting), $10.00 par value 10
Registrant meets the conditions set forth in general instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Unaudited Interim Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 1 - Item 6 9
Signatures 10
ITEM 1. Financial Statements and Supplementary Data.
FGIC SECURITIES PURCHASE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FGIC HOLDINGS, INC.)
BALANCE SHEETS
ASSETS JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
Short-term investments $ 109,277 $ 109,277
Liquidity fees receivable 2,707,887 1,905,938
Due from affiliates 18,151,286 13,284,308
Deferred tax asset 1,555,895 1,377,427
Other assets 322,079 322,079
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Total assets $22,846,424 $16,999,029
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deferred liquidity fee income $ 330,596 $ 347,223
Commitment fees payable to GE Capital 734,459 643,741
Accounts payable and accrued expenses 418,260 412,619
Taxes payable 10,501,570 8,094,410
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Total liabilities 11,984,885 9,497,993
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Stockholder's Equity:
Common stock, par value $10.00 per
share; 10 shares authorized,
issued and outstanding 100 100
Retained earnings 10,861,439 7,500,936
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Total stockholder's equity 10,861,539 7,501,036
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Total liabilities and
stockholder's equity $22,846,424 $16,999,029
========== ==========
See accompanying notes to interim financial statements.
FGIC SECURITIES PURCHASE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FGIC HOLDINGS, INC.)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Liquidity fee Income $2,959,403 $2,940,090 $5,900,449 $6,009,933
Investment Income - - - 1,414
Total Revenues 2,959,403 2,940,090 5,900,449 6,011,347
General and administrative expenses 187,006 83,100 311,253 154,649
--------- --------- --------- ---------
Income before provision for
income taxes 2,772,397 2,856,990 5,589,196 5,856,698
--------- --------- --------- ---------
Provisions for income taxes
Federal 897,564 925,408 1,809,502 1,896,106
State and Local 207,930 214,380 419,190 439,252
--------- --------- --------- ---------
Total provisions for income taxes 1,105,494 1,139,788 2,228,692 2,335,358
--------- --------- --------- ---------
Net income $1,666,903 $1,717,202 $3,360,503 $3,521,340
========= ========= ========= =========
</TABLE>
See accompanying notes to interim financial statements
FGIC SECURITIES PURCHASE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FGIC HOLDINGS, INC.)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30,
1997 1996
--------- ----------
OPERATING ACTIVITIES:
Net income $3,360,503 $3,521,340
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred income tax expense (178,468) (184,573)
Change in taxes payable 2,407,160 2,519,932
Change in due from affiliates (4,866,978) (6,212,272)
Change in due to affiliates - 41,371
Change in liquidity fees receivable (801,949) 22,428
Change in deferred liquidity fee income (16,627) 180,162
Change in accounts payable and accrued expenses 5,641 24,926
Change in commitment fees payable to GE Capital 90,718 88,100
--------- ---------
Cash provided by operating activities - 1,414
--------- ---------
FINANCING ACTIVITIES:
Net change in cash and cash equivalents - 1,414
--------- ---------
Cash and cash equivalents at beginning of period 109,277 107,863
--------- ---------
Cash and cash equivalents at end of period $109,277 $109,277
========= =========
See accompanying notes to interim financial statements.
FGIC SECURITIES PURCHASE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FGIC HOLDINGS, INC.)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30,1997
(UNAUDITED)
(1) BUSINESS
--------
FGIC Securities Purchase, Inc. ("FGIC-SPI") is a wholly-owned subsidiary
of FGIC Holdings, Inc. (the "Parent") which, in turn, is wholly-owned by
General Electric Capital Corporation ("GE Capital"). FGIC-SPI provides
liquidity for certain floating rate municipal securities whereby FGIC-
SPI will, under certain circumstances, purchase such securities in the
event they are tendered by the holders thereof as permitted under the
terms of the respective bond indentures. As of June 30,1997, FGIC-SPI
had approximately $2.9 billion (par and interest) of potential
obligations under such arrangements. In order to obtain funds to
purchase the securities, FGIC-SPI has entered into standby loan
agreements with GE Capital totaling $4.0 billion at June 30,1997, under
which GE Capital will be irrevocably obligated to lend funds as needed
for FGIC-SPI to purchase the securities.
(2) SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The interim financial statements of FGIC-SPI in this report reflect all
normal recurring adjustments necessary, in the opinion of management,
for a fair statement of (a) results of operations for the six months
ended June 30,1997 and 1996, (b) the financial position at June 30,1997
and December 31, 1996, and (c) cash flows for the six months ended June
30,1997 and 1996.
These interim financial statements should be read in conjunction with
the financial statements and related notes included in the 1996 audited
financial statements.
Significant accounting policies are as follows:
SHORT TERM INVESTMENTS
Short-term investments are carried at cost which approximates market
value. For purposes of the statements of cash flows, FGIC-SPI considers
all highly liquid investments with original maturities of six months or
less to be cash equivalents.
REVENUE RECOGNITION
Fees are paid up-front and in installments. Up-front fees are earned on
a straight-line basis over the life of the liquidity commitment, and
installment fees are earned straight-line over the installment period.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of FGIC-SPI's financial instruments, relating
primarily to short term investments and liquidity fees, approximate
their fair values.
SEC REGISTRATION FEES
SEC Registration fees are recognized as prepaid assets and are expensed
as FGIC-SPI is reimbursed for such fees by issuers as transactions are
consummated.
RESERVE FOR LOSSES
It is management's policy to establish a reserve for losses based upon
its estimate of the ultimate aggregate losses relative to its
obligations under the liquidity facility arrangements written.
At June 30,1997, management does not anticipate any losses relative to
such arrangements.
(3) INCOME TAXES
------------
Under an intercompany tax-sharing agreement with its parent, FGIC-SPI is
included in the consolidated Federal income tax returns filed by GE
Capital. FGIC-SPI provides for taxes as if it filed a separate tax
return in accordance with SFAS No. 109.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity fees are received up-front at the inception of the
contract and in installments over the life of the contract. Up-
front fees are earned on a straight-line basis over the life of the
liquidity commitment, and installment fees are earned straight-line
over the installment period. For the six months ended June 30,
1997, FGIC-SPI earned liquidity fees of $5,900,449 compared to
$6,009,933 for the six months ended 1996. FGIC-SPI incurred
$311,253 and $154,649 of general and administrative expenses for
the six months ended June 30,1997 and 1996, respectively. The
increase in general and administrative expenses is primarily due to
an increase in the number of facilities. The expenses incurred
primarily include fees associated with establishing the liquidity
facilities.
Liquidity fees are received up-front at the inception of the
contract and in installments over the life of the contract.
Up-front fees are earned on a straight-line basis over the life
of the liquidity commitment, and installment fees are earned
straight-line over the installment period. For the second quarter
of 1997, FGIC-SPI earned liquidity fees of $2,959,403 compared to
$2,940,090 for the three months ended June 30, 1996. FGIC-SPI
incurred $187,006 and $83,100 of general and administrative
expenses for the three months ended June 30, 1997 and 1996,
respectively. The increase in general and administrative expenses
is primarily due to an increase in the number of facilities. The
expenses incurred primarily include fees associated with
establishing the liquidity facilities.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
FGIC-SPI is not involved in any pending legal proceedings.
Item 2. Changes in Securities
Omitted.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None.
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.
FGIC SECURITIES PURCHASE, INC.
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(Registrant)
Date:
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Ann C. Stern
President (principal
executive officer)
Date:
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Christopher Jacobs
Treasurer (principal
financial and
accounting officer)
