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 March 31, 2000
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 _____
--------
Shares Outstanding
Title of Class at May 12, 2000
- --------------
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.
<PAGE>
TABLE OF CONTENTS
PAGE
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 6-8
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
<PAGE>
Item 1. Financial Statements and Supplementary Data.
FGIC Securities Purchase, Inc.
(a wholly-owned subsidiary of FGIC Holdings, Inc.)
Balance Sheets
ASSETS March 31, December 31,
2000 1999
(Unaudited)
Short-term investments $ - $ 132,383
Liquidity fees receivable 1,142,549 728,904
Due from GE Capital 26,285,433 25,253,791
Other assets 209,872 339,990
------------- -------------
Total assets $27,637,854 $26,455,068
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deferred liquidity fee income $ 333,289 $ 251,324
Due to affiliates 141,881 40,000
Commitment fees payable to GE Capital 360,740 320,831
Accounts payable and accrued expenses 332,760 326,759
Deferred tax liability - 1,111
Taxes payable 4,745,554 4,655,157
--------- ---------
Total liabilities 5,914,224 5,595,182
---------- ----------
Stockholder's Equity:
Common stock, par value $10.00 per share;
10 shares authorized, issued and
outstanding 100 100
Additional paid in capital 822,145 822,145
Retained earnings 20,901,385 20,037,641
----------- -----------
Total stockholder's equity 21,723,630 20,859,886
----------- -----------
Total liabilities and stockholder's
equity $27,637,854 $26,455,068
=========== ===========
See accompanying notes to interim financial statements.
FGIC Securities Purchase, Inc.
(a wholly-owned subsidiary of FGIC Holdings, Inc.)
Statements of Operations
(Unaudited)
For The Three Months Ended
March 31,
2000 1999
---- ----
Liquidity fee income $1,611,308 $1,635,466
Investment income 1,339 1,406
---------- ----------
Total revenues 1,612,647 1,636,872
General and administrative expenses 183,790 187,954
---------- ----------
Income before provision for income taxes 1,428,857 1,448,918
---------- ----------
Provisions for income taxes
Federal 465,093 471,623
State and local 100,020 101,424
---------- ----------
Total provisions for income taxes 565,113 573,047
---------- ----------
Net income $ 863,744 $ 875,871
========== ==========
See accompanying notes to interim financial statements
<PAGE>
<TABLE>
<CAPTION>
FGIC Securities Purchase, Inc.
(a wholly-owned subsidiary of FGIC Holdings, Inc.)
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2000 1999
Operating activities:
<S> <C> <C>
Net income $863,744 $875,871
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred income tax expense (1,111) (35,498)
Change in taxes payable 90,397 608,545
Change in due from affiliates (1,031,642) (1,559,405)
Change in due to affiliates 101,881 -
Change in other assets 130,118 -
Change in liquidity fees receivable (413,645) 66,540
Change in deferred liquidity fee income 81,965 5,516
Change in accounts payable and accrued expenses 6,001 -
Change in commitment fees payable to GE Capital 39,909 39,837
---------- ----------
Cash provided by operating activities (132,383) 1,406
----------- ----------
Net change in cash and cash equivalents (132,383) 1,406
----------- ----------
Cash and cash equivalents at beginning of period 132,383 126,285
---------- ----------
Cash and cash equivalents at end of period $ - $127,691
========== ==========
</TABLE>
See accompanying notes to interim financial statements.
FGIC Securities Purchase, Inc.
(a wholly-owned subsidiary of FGIC Holdings, Inc.)
Notes to Interim Financial Statements
March 31, 2000
(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 March 31, 2000, 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 $5.0 billion at March 31, 2000, 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
three months ending March 31, 2000 and 1999, (b) the financial
position at March 31, 2000 and December 31, 1999, and (c) cash flows
for the three months ended March 31, 2000 and 1999.
These interim financial statements should be read in conjunction with
the financial statements and related notes included in the 1999
audited financial statements.
Significant accounting policies are as follows:
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost, which approximates
fair value. For purposes of the statement of cash flows, FGIC-SPI
considers all highly liquid investments with original maturities of
three 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.
<PAGE>
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 reimbursable to FGIC-SPI, as a separate
item at the closing, by issuers, as transactions are consummated.
Such fees are deferred when paid, and netted against the related
reimbursement as transactions are consummated. Management evaluates
the recoverability of such deferred fees at each reporting date.
Expenses
Direct expenses incurred by the Parent are fully allocated to
FGIC-SPI on a specific identification basis. Employee related
expenses are allocated by affiliates to FGIC-SPI based on the
percentage of time such employees devote to the activities of
FGIC-SPI. Management believes that such allocation method is
reasonable. Management believes that such expenses, as reported in
the statement of income, would not differ materially from what
expenses would have been on a stand-alone basis.
Commitment Fees
The commitment fees are accrued on the outstanding liquidity
facilities (see Note 4).
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 March 31, 2000, management does not anticipate any losses
relative to such arrangements.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases, on a stand alone basis, as provided in
SFAs No. 109, "Accounting for Income Taxes". Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(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 three months
ended March 31, 2000, FGIC-SPI earned liquidity fees of
$1,611,308 compared to $1,635,466 for the three months ended
1999. The decrease in earnings is primarily due to a renewal of
existing deals at lower basis points. FGIC-SPI incurred
$183,790 and $187,594 of general and administrative expenses
for the three months ended March 31, 2000 and 1999,
respectively. The expenses incurred primarily include fees
associated with establishing the liquidity facilities.
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
FGIC-SPI is not involved in any pending legal proceedings.
Item 2. Changes in Securities
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None.
b) Reports on Form 8-K
None.
<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.
FGIC SECURITIES PURCHASE, INC.
------------------------------
(Registrant)
Date: May 11, 2000
------------ -----------------------------
Ann C. Stern
President (principal
executive officer)
Date: May 11, 2000
------------ ------------------------------
Rick J. Filippelli
Treasurer (principal
financial and
accounting officer)
