-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RgEeUz5cCh8VQx1S2vMukoElYdjneCZCgaiUSUDBa1XKdTJuymMAeKje+7zWwa+P OrKqfQFoYXA53l7DrFUVyg== 0000950146-00-000611.txt : 20000510 0000950146-00-000611.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950146-00-000611 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAMPSHIRE FUNDING INC CENTRAL INDEX KEY: 0000205422 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 020277842 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-36140 FILM NUMBER: 623108 BUSINESS ADDRESS: STREET 1: ONE GRANITE PL CITY: CONCORD STATE: NH ZIP: 03301 BUSINESS PHONE: 6032265000 MAIL ADDRESS: STREET 1: ONE GRANITE PLACE STREET 2: ONE GRANITE PLACE CITY: CONCORD STATE: NH ZIP: 03301 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (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, 2000 - --- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [no fee required] For the transition period from _________________________________ to _________________________________ . Commission file number 2-79192 . --------- HAMPSHIRE FUNDING, INC. ---------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW HAMPSHIRE 02-0277842 --------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE GRANITE PLACE, CONCORD, NEW HAMPSHIRE 03301 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (603) 226-5000 -------------- Not Applicable - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock as of March 31, 2000: 50,000 shares, all of which are owned by Jefferson-Pilot Corporation. DOCUMENTS INCORPORATED BY REFERENCE The exhibit index appears on pages 4, 5 and 6 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements. See pages 6 through 9. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company administers investment programs (the "Programs") which coordinate the acquisition of mutual fund shares and insurance over a period of ten years. Under the Programs, Participants purchase life and health insurance from affiliated Insurance Companies. and finance the premiums through a series of loans secured by mutual fund shares. Upon issuance of a policy by an Insurance Company, the Company makes a loan to the Participant in an amount equal to the selected premium mode. As each premium becomes due, if not paid in cash, a new loan equal to the next premium and administrative fee is made and added to the Participant's account indebtedness ("Account Indebtedness"). Thus, interest, as well as principal, is borrowed and mutual fund shares are pledged as collateral. Each loan made by the Company must initially be secured by mutual fund shares which have a value of at least 250% of the loan, except for the initial premium loan of Programs using certain no-load funds, where the collateral requirement is 1800%. In addition, the aggregate value of all mutual fund shares pledged as collateral must be at least 150% of the Participant's total Account Indebtedness. If the value of the shares pledged to the Company declines below 130% of the Account Indebtedness, the Company will terminate the Programs and liquidate shares sufficient to repay the indebtedness. Effective March 31, 1998, the Company discontinued the sale of Programs. The Company, however, will continue to make premium loans to current Participants and administer all Programs until their stated maturity or termination dates. On December 31, 1997, the Company entered into a Receivables Purchase Agreement (the Agreement) with Preferred Receivables Funding Corporation (PREFCO), a wholly-owned subsidiary of Banc One (the Bank), formerly First National Bank of Chicago. The Agreement provides for the initial and periodic purchase of the Company's collateral loans receivable by PREFCO or other investors (for which the Bank serves as agent). On June 29, 1999, the Agreement was amended to extend the termination date to June 27, 2000 and to decrease PREFCOs commitment from $60,000,000 to $55,000,000. The Company anticipates the termination date will be extended under the provisions of the Agreement. PREFCO finances purchases of the Company's collateral loans receivables through the issuance of commercial paper. As of March 31, 2000, the Company sold aggregate loans of $54,014,317 and retained a subordinated interest and servicing rights in the assets transferred aggregating $5,963,127. The cash flows related to the repayment of loans is first used to satisfy all principal and variable interest rate obligations due to PREFCO, investors or the Bank. The retained interest represents the fair value of the Company's future cash flows and obligations that it will receive after all investor obligations are met. The fair value of the Company's retained interest and servicing rights was $4,428,272 at March 31, 1999. The Company is responsible for servicing, managing and collecting all receivables and loan repayments, monitoring the underlying collateral and reporting all activity to the Bank for which it receives an annual service fee (collected monthly in arrears) calculated as 2% of outstanding receivables. The Company received service fees of $245,958 and $257,475 as of March 31, 2000 and 1999, respectively. As servicing agent for the loans sold, the Company collected loan prepayments of $2,422,289 at March 31, 2000 and $3,272,164 for the same period in 1999, which were paid to PREFCO (one month in arrears) to satisfy principal and variable interest obligation due. The Company originated new loans of $1,893,446 and $2,337,068 as of March 31, 2000 and 1999, respectively, which were sold to PREFCO. The Agreement includes a Performance Guarantee by Jefferson-Pilot Corporation that the Company will service the receivables sold and administer all aspects of the Programs in accordance with the terms and conditions of the Agreement. The Performance Guarantee contains restrictions on the debt of the Guarantor and the collateral value monitored by the Company. STS040 2 During 1998, the Company entered into an intercompany loan agreement with Jefferson-Pilot Corporation whereby it may borrow funds for working capital needs at short-term interest rates. At March 31, 2000, and 1999, the Company had borrowed $1,200,000. The continuance of the Program is dependent upon the Company's ability to arrange for the sale of collateral notes receivable or provide for the financing of insurance premiums for Participants. The Company expects that it will be able to continue to sell its collateral notes receivables or arrange for other financing for the foreseeable future. If the Company is unable to sell its collateral notes receivable or borrow funds in the future for the purpose of financing loans to Participants for the payment of insurance premiums, the Programs may be subject to termination. If the Company subsequently defaults on its Agreement with PREFCO for which the Participant's mutual fund shares have been pledged as security, the mutual fund shares may be redeemed by PREFCO (or its agent) and the Programs will be terminated on their renewal dates. The Company's liabilities include amounts due to affiliates for expense reimbursements to JP Life and other working capital needs. JP Life, a wholly-owned subsidiary of Jefferson-Pilot Corporation, provides employee services and office facilities to the Company and its affiliates under a Service Agreement. The Company pays JP Life a monthly fee in accordance with mutually agreed upon cost allocation methods which the Companies believe reflect a proportional allocation of common expenses and are commensurate for the performance of the applicable duties. Working capital in the first quarter of 2000 and 1999 was provided by servicing fees from collateral loans sold, loans from Jefferson-Pilot Corporation and interest earned on investments. During 1999, the Company changed certain of its assumptions supporting the valuation of its interests retained from loan sales. The Company has increased its estimate of early terminations from 15% to 26% to better reflect the Company's actual experience. In addition, the Company has reduced the discount rate used to value its retained interests from 17% to 15%, which Management believes better reflects the risks associated with the securitized assets. Results of Operations The Company concluded the three months ended March 31, 2000 with net income of $181,621 as compared to net income of $220,873 for the same period in 1999. Total revenues through March 31, 2000 were $336,774 versus $360,125 in 1999. The decline in revenue primarily resulted from the reduction in realized gains on collateral loans sold. The Company's revenues are derived from income on its retained interest in the loans transferred to investors. The average interest rate charged to each Participant's outstanding loan balance has remained at 8.95%. Participant's accrued collateral loan interest is capitalized and therefore, became part of the loans sold to investors. The Company receives fee income for continuing to service sold receivables. The Company capitalizes the present value of expected servicing fee income in excess of the related cost of servicing over the estimated life of the sold receivables. Prior to it Purchase Receivable Agreement, the Company's cost to service its collateral loans receivable was included in operating expenses (general and administrative). Program fees include placement, administrative and termination fees as well as charges for special services. For the three months ended March 31, 2000 and 1999 the number of Programs administered by the Company were 3,767 and 4,574, respectively. In the future, the Company may realize a gain or loss on the securitization of future collateral notes receivable which may impact future earnings STS040 3 PART II - OTHER INFORMATION Item 1 - Legal Proceedings - Not Applicable Item 2 - Changes in securities - Not Applicable Item 3 - Defaults upon senior securities - Not Applicable Item 4 - Submission of matters to vote of security holders - Not Applicable Item 5 - Other Information - None Item 6 - Exhibits and Reports on Form 8-K. (a) Pursuant to Rule 12b-23 and General Instruction G, the following exhibits required to be filed with this Report incorporated by reference from the reference source cited in the table below.
Reg. S-K Item 601 Exhibit Table No. Document Reference Source --------- -------- ---------------- (1) Distribution Agreement Form 10-K, filed between the Company and March 15, 1990, for the Chubb Securities Corporation year ended December 31, dated March 1, 1990 1989, pp. 23-24 (3) (i) Articles of Incorporation Form 10-K, filed of Company March 15, 1990, for the year ended December 31, 1989, pp. 25-27 (ii) By-Laws of Company Form 10-K filed March 15, 1990 for the year ended December 31, 1989, pp. 28-46 (22) Subsidiaries of The Registrant Form 10-K, filed March 15, 1990, for the year ended December 31, 1989, p. 66 (4) (i) Agency Agreement and Form 10-K, filed Limited Power of Attorney March 19, 1997, for the
Reg. S-K Item 601 Exhibit Table No. Document Reference Source --------- -------- ---------------- year ended December 31, 1996, pp. 24-26 STS040 4 (ii) Change in Participant in Form 10-K filed Program March 19, 1997, for the year ended December 31, 1996, pp. 27-28 (iii) Disclosure Statement Form 10-K filed March 19, 1997, for the year ended December 31, 1996, p. 29 (10) (a) Revolving Credit Agreement Form 10-K filed between the Company and March 19, 1997, for the SunTrust Bank, dated year ended December 31, October 23, 1996 1996, pp. 30-44 (b) Revolving Credit Note Form 10-K filed between the Company and March 19, 1997, for the SunTrust Bank, dated year ended December 31, October 23, 1996 1996, pp. 45-46 (c) Guaranty between Chubb Life Form 10-K filed and SunTrust Bank, dated March 19, 1997, for the October 23, 1996 year ended December 31, 1996, pp. 47-53 (d) Receivables Purchase Agreement Form 10-K filed among the Company, Investors March 31, 1998, for the Preferred Receivables Funding year ended December 31, Bank of Chicago dated 1997, pp. 27-75 December 31, 1997 (e) Performance Guarantee by Form 10-K filed Jefferson-Pilot Corporation March 31, 1998, for the year ended December 31, 1997, pp. 76-83 (f) Amendment No. 1 to the Form 10-K filed Receivables Purchase Agreement March 31, 1999, for the among the Company, Investors, year ended December 31, Preferred Receivables Funding 1999, pp. 31-33 Corporation and First National Bank of Chicago dated June 29, 1998 (g) Amendment No. 2 to the Form 10-K filed Receivables Purchase Agreement March 30, 2000, for the among the Company, Investors, year ended December 31, Preferred Receivables Funding 2000, pp. 28-33 Corporation and First National Bank of Chicago dated June 29, 1999
STS040 5 (27) Financial Data Schedule (b) Reports on Form 8-K No Reports on Form 8-K were filed by the Company during the quarter ended March 31, 2000. STS040 6 Hampshire Funding, Inc. Statements of Financial Condition
March 31 December 31 2000 1999 ----------------------------------- Assets Cash and cash equivalents $ 2,250,546 $ 1,801,081 Accounts receivable from customers 62,175 5,951 ----------------------------------- Total current assets 2,312,721 1,807,032 Interests retained from loan sales 5,963,127 5,509,426 Deferred asset 189,818 204,420 ----------------------------------- Total assets $ 8,465,666 $ 7,520,878 =================================== Liabilities and stockholder's equity Liabilities: Due to affiliates $ 1,962,712 $ 1,531,050 Due to parent 1,200,000 1,200,000 Accrued expenses and other liabilities 686,735 518,503 ----------------------------------- Total liabilities 3,849,447 3,249,553 ----------------------------------- Stockholder's equity: Common stock, par value $1 per share; authorized 100,000 shares; issued and outstanding 50,000 shares 50,000 50,000 Additional paid-in capital 789,811 789,811 Accumulated other comprehensive loss (95,587) (258,860) Retained earnings 3,871,995 3,690,374 ----------------------------------- Total stockholder's equity 4,616,219 4,271,325 ----------------------------------- Total liabilities and stockholder's equity $ 8,465,666 $ 7,520,878 ===================================
STS040 7 Hampshire Funding, Inc. Statements of Income
Three months ending March 31, 2000 1999 -------------------------------------- Revenues: Interest income on securities $ 244,112 $ 128,501 Realized gain on sale of collateral loans 24,285 137,966 Program participant fees 68,377 93,658 -------------------------------------- 336,774 360,125 Operating expenses: Interest on affiliated loan agreements 17,490 10,465 -------------------------------------- Income before income taxes 319,284 349,660 Income tax expense 137,663 128,787 -------------------------------------- Net income $ 181,621 $ 220,873 ======================================
STS040 8 Hampshire Funding, Inc. Statements of Changes in Stockholder's Equity Three months ending March 31, 2000
Accumulated Other Additional Comprehensive Total Common Paid-in Retained Income Stockholder's Stock Capital Earnings (Loss) Equity --------------- --------------- ---------------- ------------------- ------------------ Balance at December 31, 1998 50,000 789,811 2,967,330 (426,185) 3,380,956 Comprehensive income Net income 220,873 220,873 Unrealized loss on securities available for sale, net of tax of $37,291 (69,256) (69,256) --------------- --------------- ---------------- ------------------- ------------------ Balance at March 31, 1999 $ 50,000 $ 789,811 $ 3,188,203 $ (495,441) $ 3,532,573 =============== =============== ================ =================== ================== Balance at December 31, 1999 50,000 789,811 3,690,374 (258,860) 4,271,325 Comprehensive income Net income 181,621 181,621 Unrealized gain on securities available for sale, net of tax of $128,598 163,273 163,273 --------------- --------------- ---------------- ------------------- ------------------ Balance at March 31, 2000 $ 50,000 $ 789,811 $ 3,871,995 (95,587) $ 4,616,219 =============== =============== ================ =================== ==================
STS040 9 Hampshire Funding, Inc. Statements of Cash Flows
Three months ending March 31, 2000 1999 --------------------------------------- Operating activities Net income $ 181,621 $ 220,873 Adjustments to reconcile net income to net cash provided (used) by operating activities: Gain on sale (24,285) (137,966) Net change in other assets and liabilities 69,136 1,143,374 Change in due to affiliates 303,064 134,407 Decrease in deferred asset 14,602 14,601 --------------------------------------- Net cash used by operating activities 544,138 1,375,289 Financing activities Proceeds from sale of collateral notes receivable 1,798,774 2,736,846 Loans originated (1,893,447) (2,880,891) --------------------------------------- Net cash used (provided) by financing activities (94,673) (144,045) --------------------------------------- Increase in cash and cash equivalents 449,465 1,231,244 Cash and cash equivalents at beginning of year 1,801,081 1,284,375 --------------------------------------- Cash and cash equivalents at end of period $ 2,250,546 $ 2,515,619 =======================================
STS040 10 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hampshire Funding, Inc. Registrant /s/ John A. Weston Date: May 15, 2000 John A. Weston Treasurer, Principal Financial and Accounting Officer STS040 11 EX-27 2
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 2,250,546 5,963,127 62,175 0 0 2,312,721 0 0 8,465,666 3,849,447 0 0 0 50,000 4,566,219 4,616,219 0 336,774 0 0 17,490 0 0 319,284 137,663 181,621 0 0 0 181,621 3.63 0
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