<PAGE>
This is an amended filing due to an inadvertent
error discovered after the original filing dated 8/13/96.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark one)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
/ / 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 General Instruction 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 .
--- ---
As of August 13, 1996 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 Six Months Ended June 30, 1996
and 1995............................................................. 3
Balance Sheets - June 30, 1996 and December 31, 1995.................. 4
Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995.... 5
Notes to Financial Statements......................................... 6
Item 2. Management's Narrative Analysis of Results of Operations*
Six Months Ended June 30, 1996 and 1995........................ 8
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............................... 9
Signature............................................................... 10
Exhibit Index........................................................... 11
(*) Item prepared in accordance with General Instruction H (2) of Form 10-Q.
2
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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>
Quarter Ended For the Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- -------- -------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Interest income $ 1,477 $ 2,338 2,062 6,162
Program income 5,136 1,627 9,631 2,463
----------- --------- --------- --------
Total revenues 6,613 3,965 11,693 8,625
Less: Interest on borrowings 3,573 620 6,964 1,289
----------- --------- --------- --------
Net interest and program income 3,040 3,345 4,729 7,336
----------- --------- --------- --------
NONINTEREST EXPENSES:
Accounting and administrative services 45,225 51,787 90,450 103,575
Legal and state fees 1,735 1,025 11,235 11,950
Other operating expenses 10,885 15,410 23,876 32,778
----------- --------- --------- --------
Total expenses 57,845 68,222 125,561 148,303
----------- --------- --------- --------
Loss before tax (54,805) (64,877) (120,832) (140,967)
Income tax benefit (19,182) (22,708) (42,291) (49,339)
----------- --------- --------- --------
Net loss $ (35,623) $(42,169) (78,541) (91,628)
----------- --------- --------- --------
----------- --------- --------- --------
</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>
As of As of
June 30, December 31,
1996 1995
----------------- ------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 182,968 $ 68,582
Premium loans receivable 220,833 189,361
Prepaid SEC registration fees 23,195 23,230
Interest and administrative fees receivable on loans 16,816 7,185
Organizational costs 26,339 40,206
Federal income tax receivable 55,204 195,216
Deferred tax asset 10,243 28,165
-------------- --------------
Total assets $ 535,598 $ 551,945
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Intercompany payable $ 57,857 $ 27,134
Intercompany loan payable 220,833 189,361
-------------- --------------
Total liabilities 278,690 216,495
-------------- --------------
Common stock, 100 shares authorized,
$1 par value, issued and
outstanding 100 shares 100 100
Capital surplus 749,900 749,900
Retained earnings (deficit) (493,092) (414,550)
-------------- --------------
Total stockholder's equity 256,908 335,450
-------------- --------------
Total liabilities and stockholder's equity $ 535,598 $ 551,945
-------------- --------------
-------------- --------------
</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>
For the Six Months Ended
June 30,
1996 1995
----------- ----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (78,541) $ (91,628)
Adjustments to reconcile net loss to
net cash used for operating activities:
Amortization of organizational costs 13,867 13,867
Decrease (increase) in intercompany payable 30,723 (252,516)
Increase in other assets (9,597) (1,558)
Decrease (increase) in Federal income tax receivable 140,012 (50,938)
Decrease in deferred tax asset 17,922 1,599
----------- ----------
Cash used for operating activities 114,386 (381,174)
----------- ----------
INVESTING ACTIVITIES:
Premium loans (31,472) (33,541)
Organizational costs 0 0
----------- ----------
Cash used for investing activities (31,472) (33,541)
----------- ----------
FINANCING ACTIVITIES:
Intercompany loans 31,472 33,541
Capital contribution and stock issuance 0 0
----------- ----------
Cash provided by financing activities 31,472 33,541
----------- ----------
Net increase (decrease) in cash 114,386 (381,174)
Cash at beginning of period 68,582 621,507
----------- ----------
Cash at end of period $ 182,968 $ 240,333
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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HL FUNDING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - ORGANIZATION
HL Funding Company, Inc. (HLFC) was 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 Hartford
Group, Inc. On March 26, 1993, HLFC issued 100 shares ($1 par) of stock to HLIC
for $100. On May 28, 1993 and September 30, 1994, additional capital
contributions of $99,900 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, an
affiliate of HLIC. 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 a program's conclusion,
the related loan balances and accrued interest become due.
Management expects the administrative costs of issuing and maintaining the
programs will 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
June 30, 1996, sixteen 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 are amortized over a three year period.
CASH AND CASH EQUIVALENTS
Cash equivalents include an investment ($180,795 and $66,408 as of June 30, 1996
and December 31, 1995, respectively) in Hartford Liquid Asset Trust (see
Note 3).
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
6
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RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
HLIC provides administrative services to HLFC, including use of its facilities
and personnel, and allocates a portion of its expenses to HLFC.
HLFC invests a portion of its assets in Hartford Liquid Asset Trust, a short
term investment pool of liquid securities, in which companies of the ITT
Hartford Insurance Group, Inc. participate. Pursuant to 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 of 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 principal contributions.
HLFC's funds for financing the programs are obtained through a promissory note
agreement with HLIC. The agreement allows HLIC to advance to HLFC funds in an
amount up to $7,000,000. The interest rate for the note is equal to the 90 day
LIBOR plus 125 basis points. The interest rate was 6.625% at June 30, 1996.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalent, interest, fees and tax receivable, premium loans
receivable and intercompany loan payable amounts reflected in the balance sheet
approximate fair value.
NOTE 5 - INCOME TAXES
From inception of the company through December 31, 1995, HLFC was included in
ITT Hartford Group, Inc.'s consolidated U.S. Federal income tax return and
received from ITT Hartford Group, Inc. current income tax benefits computed in
accordance with the tax sharing arrangements between ITT Hartford Group, Inc.
and its subsidiaries. Subsequent to the spin-off of the ITT Hartford Insurance
Group, Inc. from its former parent ITT Corp., HLFC will not be included in the
consolidated U.S. Federal income tax return of ITT Hartford Group, Inc., and
accordingly as of June 30, 1996 HLFC will file a stand-alone U.S. Federal income
tax return. The effective tax rate in 1996 and 1995 approximated the U.S.
Statutory tax rate of 35%. The provision (benefit) for income taxes was as
follows:
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
Current $ (44,211) $ (195,216)
Deferred 1,920 (28,165)
--------- ----------
$ (42,291) $ (223,381)
--------- ----------
--------- ----------
As of June 30, 1996 and December 31, 1995, the deferred tax asset was primarily
due to organizational expenses capitalized for tax return purposes until the
start of business of HLFC. Income taxes paid were $ 0, $162 and $ 0 in 1995,
1994 and 1993, respectively.
7
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NOTE 6 - PREMIUM LOANS
All premium loans to participants are secured by participants' share of mutual
funds, which include open-end investment companies registered under the
Investment Company Act of 1940. When loans are originated, customers must
pledge mutual fund shares valued at 2.5 times the yearly premiums being
financed. During the life of the loan, the fair market value of the
collateralized mutual fund shares must equal at least 1.5 times the amount of
the total loan, or the participant must pledge additional shares to achieve this
level. The loan will be liquidated if the fair market value of the collateral-
to-loan ratio falls below 1.3. Effective January 1, 1995, HL Funding Company,
Inc. adopted Statement of Financial Accounting Standard Nos. 114 and 118,
"Accounting by Creditors for Impairment of a Loan." These standards change the
method by which the allowance for loan losses is determined for impaired loans.
Since all premium loans are secured by collateral, with fair market value
exceeding the loan value, there was no impact to the financial position or
future results of operations of HL Funding Company, Inc. as a result of the
adoption of the new accounting standards on January 1, 1995.
Item 2. MANAGEMENT'S NARRATIVE ANALYSIS OF
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
OPERATING RESULTS
For the first half of 1996 HL Funding Company, Inc. (the Company) had a net loss
of $78,541 compared to a net loss of $91,628 for the first half of 1995. Net
losses in the comparative periods were principally due to general operating
expenses of the Company exceeding short term interest and program income for the
six months ended June 30, 1996 and 1995. The decrease in the net loss between
June 30, 1996 and 1995 was principally due to lower expenses for salary and
overhead in 1996, partially offset by a decrease in non program interest income.
Through June 30, 1996, sixteen 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.
August 14, 1996 HL Funding Company, Inc.
(Registrant)
by /s/ George R. Jay
-----------------------------------
George R. Jay
Secretary and Director
10
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EXHIBIT INDEX
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 None
vote of security holders
(24) Consents of experts and counsel None
(25) Power of attorney None
(28) Additional exhibits None
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 182,968
<RECEIVABLES> 352,630
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 0
<TOTAL-ASSETS> 535,598
<SHORT-TERM> 0
<PAYABLES> 278,690
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 100
<OTHER-SE> 256,808
<TOTAL-LIABILITY-AND-EQUITY> 535,598
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 2,062
<COMMISSIONS> 0
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 9,631
<INTEREST-EXPENSE> 6,964
<COMPENSATION> 125,561
<INCOME-PRETAX> (120,832)
<INCOME-PRE-EXTRAORDINARY> (120,832)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,541)
<EPS-PRIMARY> (78,541)
<EPS-DILUTED> 0
</TABLE>
