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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from..........to...........
The registrant meets the conditions set forth in GeneralInstruction H (1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
Commission file number 33-58862
HL FUNDING COMPANY, INC.
Incorporated in the State of Connecticut 06-1362143
(I.R.S. Employer
Identification No.)
P.O. Box 2999, Hartford, Connecticut 06104-2999
(Principal Executive Offices)
Telephone number 203-843- 8213
Indicate by check mark whether the registrant (1) has filed all reports 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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As of May 10, 1995 there were outstanding 100 shares of common stock, $1 par
value per share, of the registrant, all of which were directly owned by
Hartford Life Insurance Company.
(1)
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HL FUNDING COMPANY, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Statements of Income - Quarter and
Three Months Ended March 31, 1995 and 1994............................3
Balance Sheets -March 31, 1995 and
December 31, 1994.....................................................4
Statements of Cash Flows - Three Months
Ended March 31, 1995 and 1994.........................................5
Notes to Financial Statements..........................................6
Item 2. Management's Narrative Analysis of
Results of Operations*
Three Months Ended March 31, 1995 and 1994..............................7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K..................................8
Signature..................................................................9
Exhibit Index.............................................................10
(*) Item prepared in accordance with General Instruction H (2) of Form 10-Q.
(2)
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HL FUNDING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
NOTE 1 - ORGANIZATION
HL Funding Company, Inc. (HLFC) is a corporation formed in the state of
Connecticut on February 8, 1993. HLFC is a wholly owned subsidiary of Hartford
Life Insurance Company (HLIC). All of the outstanding shares of HLIC are
ultimately owned by Hartford Fire Insurance Company (Hartford Fire), which is
owned by ITT Group Inc., a subsidiary of ITT Corporation (ITT). On March 26,
1993 HLFC issued 100 shares ($1 par) of stock to HLIC for $1,000. On May 28,
1993, and September 30, 1994, additional capital contributions of $99,000 and
$650,000, respectively, were made by HLIC.
HLFC offers and administers programs whereby participants obtain life insurance
coverage from HLIC and Hartford Life and Accident Insurance Company. Under the
programs, insurance premiums are paid on behalf of participants through a series
of loans from HLFC. Loans to participants are secured by participants'
ownership in shares of regulated investment companies. Premium loans receivable
are funded with proceeds from a loan arrangement with HLIC. Programs can be up
to ten years in length. Upon program conclusion, loan balances and accrued
interest become due.
The administrative costs of issuing and maintaining the programs are expected to
be offset by: a) fees charged to program participants, b) interest charged to
participants for insurance premium loans to the extent that the interest charged
exceeds the cost to HLFC of obtaining funds to finance the programs, and c)
interest income earned on investments held by HLFC. Through March 31, 1995,
four programs were sold.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles.
REVENUES AND EXPENSES
Interest and fees from investments and premium loans receivable are recognized
as revenue when earned. Expenses, which are primarily allocated from
affiliates, are recognized when incurred.
ORGANIZATIONAL COSTS
Organizational costs include software development and are amortized over a three
year period.
INVESTMENT IN HARTFORD LIQUID ASSET TRUST
Investment in Hartford Liquid Asset Trust is considered a cash equivalent.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
HLIC provides administrative services to HLFC, including use of its facilities
and personnel, and will allocate a portion of its expense to HLFC.
HLFC invested the capital contributions in the Hartford Liquid Asset Trust.
Pursuant to the terms of the terms of the Trust Agreement, the purpose of the
Trust is to invest funds in a less costly manner in assets which achieve a high
level of current income as well as maintain liquidity and preserve capital. The
Trust investments are restricted to cash and investments having a stated
maturity date 12 months or less from the date of purchase. Interest earned by
the Trust is allocated to each participant based on their pro-rata share of
principle contributions.
HLFC's funds for financing the programs are currently obtained through a
promissory note agreement with HLIC. The agreement allows HLIC to advance to
HLFC funds in an amount of up to $7,000,000. The interest rate for the note is
equal to the 90 day LIBOR plus 125 basis points. The rate was 7.75% at March
31, 1995.
(6)
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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Premium loans receivable and intercompany loan payable amounts reflected in the
balance sheet approximate fair value.
NOTE 5 - INCOME TAXES
HLFC is included in ITT's consolidated U.S. Federal income tax return and remits
to (receives from) ITT a current income tax provision (benefit) computed in
accordance with the tax sharing arrangements between ITT and its subsidiaries.
The effective tax rate in 1995 and 1994 approximated the U.S. Statutory tax rate
of 35%. The provision (benefit) for income taxes was as follows:
March 31, 1995 1994
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Current $(27,592) $(115,288)
Deferred 960 (16,002)
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$(26,632) $(131,290)
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The deferred tax asset at March 31, 1995, was due to expenses capitalized for
tax purposes until the start of business of HLFC. Income taxes paid were $162
and $0 in 1994 and 1993, respectively.
(7)
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Item 2. MANAGEMENT'S NARRATIVE ANALYSIS OF
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
OPERATING RESULTS
For the first quarter of 1995 HL Funding Company, Inc. (the Company or HL
Funding) had a net loss of $(49,458) compared to income of $16 for the first
quarter of 1994. This decrease was due to general operating expenses of HLFC
exceeding short term interest and interest income from premium principal loans
for the quarter. Through March 31, 1995 four programs were sold by the Company.
(8)
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PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index
(b) None.
(9)
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SIGNATURE
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.
H. L. Funding Company, Inc.
(Registrant)
by
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May 10, 1995 G. R. Jay
Secretary and Director
(10)
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION LOCATION
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession None
(4) Instruments defining the rights of security holders,
including indenture None
(11) Statement re computation of per share earnings None
(15) Letter re unaudited interim financial information None
(18) Letter re change in accounting principles None
(19) Previously unfiled documents None
(20) Report furnished to security holders None
(23) Published report regarding matters submitted to
vote of security holders None
(24) Consents of experts and counsel None
(25) Power of attorney None
(28) Additional exhibits None
(11)
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PART I. FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
The following unaudited financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, the results
of operations and the cash flows for the periods presented. Interim results are
not indicative of the results which may be expected for any other interim period
or the full year. For a description of accounting policies, see notes to
financial statements.
HL FUNDING COMPANY, INC.
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
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(unaudited)
<S> <C> <C>
Revenues:
Net Interest Income from Hartford Liquid Asset Trust $ 3,824 $ 16
Other Income 836 0
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4,660 16
Expenses:
Accounting and Administrative Services 51,788 0
Legal and State Fees 10,925 0
Other Operating Expenses 18,037 0
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Total Expenses 80,750 0
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Income (Loss) before tax (76,090) 16
Income Tax Expense (Benefit) (26,632) 0
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Net Income (Loss) $ (49,458) $ 16
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</TABLE>
The accompanying notes are an integral part of these financial statements.
(3)
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HL FUNDING COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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ASSETS (unaudited)
<S> <C> <C>
Cash $ 716 $ 3,641
Investment in Hartford Liquid Asset Trust 209,287 617,866
Premium loans receivable 38,473 18,473
Prepaid SEC registration fees 23,438 23,438
Interest receivable on loans 937 177
Intercompany receivable 13,530 0
Organizational costs 61,006 67,939
Federal income tax receivable 142,880 115,288
Deferred tax asset 15,042 16,002
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Total Assets $ 505,308 $ 862,824
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LIABILITIES AND STOCKHOLDER'S EQUITY
Intercompany payable $ 9,816 $ 337,874
Intercompany Loan Payable 38,473 18,473
Federal income tax payable 0 0
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Total Liabilities 48,289 356,347
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Common stock, 100 shares authorized,
$1 par value, issued and
outstanding 100 shares 100 100
Capital surplus 749,900 749,900
Retained earnings (deficit) (292,981) (243,523)
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Total Stockholder's Equity 457,019 506,477
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Total Liabilities and Stockholder's Equity $ 505,308 $ 862,824
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</TABLE>
The accompanying notes are an integral part of these financial statements.
(4)
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HL FUNDING COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
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(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (49,458) $ 16
Adjustments to net income:
Amortization of organizational costs 6,933 0
Decrease (Increase) in intercompany accounts (341,588) (1,638)
Decrease (Increase) in other assets and liabilities (760) 0
Decrease (Increase) in Federal income tax receivable (27,592) 0
Decrease (Increase) in deferred tax asset 960 0
Increase (Decrease) in Federal income tax payable 0 0
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Cash and cash equivalents (used for) provided by operating activities (411,504) (1,622)
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INVESTING ACTIVITIES:
Premium loans (20,000) 0
Organizational costs 0 (2,247)
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Cash and cash equivalent (used for) provided by investing activities (20,000) (2,247)
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FINANCING ACTIVITIES:
Intercompany loans 20,000 0
Hartford Life capital contribution 0 0
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Cash and cash equivalent (used for) provided by financing activities 20,000 0
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Net increase in cash and cash equivalents (411,504) (3,869)
Cash and cash equivalent at beginning of period 621,507 4,641
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Cash and cash equivalent at end of period $ 210,003 $ 772
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</TABLE>
The accompanying notes are an integral part of these financial statements.
(5)
