-----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, Kmg8ImbeY1IXHZwv7i5B5y8frvv1zKSvXro8NBXYEuQtlTrK4I1/zoz5ORGI8Ctc 5GDsnS1qJlUnYikwZv8vZA== 0000950005-04-000293.txt : 20040324 0000950005-04-000293.hdr.sgml : 20040324 20040324170331 ACCESSION NUMBER: 0000950005-04-000293 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20040324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGAN HOLDING CORP CENTRAL INDEX KEY: 0000870069 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 680211359 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19704 FILM NUMBER: 04687837 BUSINESS ADDRESS: STREET 1: 2090 MARINA AVE CITY: PETALUMA STATE: CA ZIP: 94954 BUSINESS PHONE: 7077788638 MAIL ADDRESS: STREET 1: 2090 MARINA AVE CITY: PETALUMA STATE: CA ZIP: 94954 10-Q/A 1 p18303_10q-a.txt AMENDMENT TO QUARTERLY REPORT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A |X| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2003 or |_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____________ to ____________ REGAN HOLDING CORP. (Exact name of registrant as specified in its charter) California 68-0211359 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2090 Marina Avenue, Petaluma, CA 94954 (Address of principal executive offices) (Zip Code) 707-778-8638 (Registrant's telephone number, including area code) 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| Applicable Only To Corporate Issuers: Indicate the number of shares outstanding of the registrant's common stock, as of November 7, 2003: Common Stock-Series A 23,547,000 Common Stock-Series B 560,000 ================================================================================ Explanatory Note This Quarterly Report on Form 10-Q/A amends the Registrant's Form 10-Q for the quarter ended September 30, 2003. This Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2003 is being filed to restate the Registrant's financial results. In connection with a review of the Registrant's contracts, the Registrant determined that it should have recorded additional revenue during the three and nine month periods ended September 30, 2003 that it earned as marketing allowances and commission overrides for sales of fixed annuity products under the terms of one if its insurance carrier partner contracts. As a result, the Registrant has revised its Consolidated Financial Statements for the three and nine months ended September 30, 2003 for this additional revenue and for related bonus expense accruals. (See Note 2 to the Consolidated Financial Statements for additional information concerning the revisions.) Except for disclosures affected by the revisions to the Registrant's Consolidated Financial Statements, all other information is presented as of the original filing date and has not been updated in this amended filing. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Balance Sheet
September 30, 2003 December 31, 2002 ------------------ ----------------- (Unaudited and Restated) Assets Cash and cash equivalents $ 9,330,000 $ 4,793,000 Trading investments 5,355,000 4,261,000 Available-for-sale investments 6,806,000 4,890,000 Accounts receivable, net of allowance of $776,000 and $760,000 at September 30, 2003 and December 31, 2002 4,294,000 3,274,000 Prepaid expenses and deposits 708,000 2,122,000 ----------- ------------ Total current assets 26,493,000 19,340,000 ----------- ------------ Net fixed assets 24,834,000 25,841,000 Deferred tax assets 2,013,000 1,715,000 Goodwill 679,000 1,170,000 Intangible assets, net 214,000 332,000 Other assets 2,132,000 1,649,000 ----------- ------------ Total non current assets 29,872,000 30,707,000 ----------- ------------ Total assets $56,365,000 $ 50,047,000 =========== ============ Liabilities, redeemable common stock, and shareholders' equity Liabilities Accounts payable and accrued liabilities $11,640,000 $ 8,906,000 Income taxes payable 1,145,000 2,327,000 Current portion of note payable 114,000 109,000 ----------- ------------ Total current liabilities 12,899,000 11,342,000 ----------- ------------ Deferred compensation payable 5,354,000 4,241,000 Other liabilities 186,000 190,000 Note payable, less current portion 7,112,000 7,199,000 ----------- ------------ Total non current liabilities 12,652,000 11,630,000 ----------- ------------ Total liabilities 25,551,000 22,972,000 ----------- ------------ Redeemable common stock, Series A and B 9,152,000 10,115,000 ----------- ------------ Shareholders' equity Preferred stock, no par value: Authorized: 100,000,000 shares; No shares issued or outstanding -- -- Series A common stock, no par value: Authorized: 45,000,000 shares; issued and outstanding: 20,263,000 shares and 20,495,000 shares at September 30, 2003 and December 31, 2002 3,083,000 3,324,000 Common stock committed 25,000 25,000 Paid-in capital 6,508,000 6,499,000 Retained earnings 12,039,000 7,135,000 Accumulated other comprehensive income (loss), net 7,000 (23,000) ----------- ------------ Total shareholders' equity 21,662,000 16,960,000 ----------- ------------ Total liabilities, redeemable common stock, and shareholders' equity $56,365,000 $ 50,047,000 =========== ============
3 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Operations (Unaudited)
For the Three Months Ended For the Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (Restated) (Restated) Revenue Marketing allowances and commission overrides $ 10,984,000 $ 6,829,000 $ 37,419,000 $ 21,826,000 Trailing commissions 1,755,000 1,672,000 5,169,000 5,011,000 Administrative fees 3,542,000 2,904,000 10,678,000 8,691,000 Other income 512,000 187,000 3,052,000 573,000 ------------ ------------ ------------ ------------ Total revenue 16,793,000 11,592,000 56,318,000 36,101,000 ------------ ------------ ------------ ------------ Expenses Selling, general and administrative 13,676,000 10,555,000 41,550,000 33,025,000 Depreciation and amortization 1,009,000 1,129,000 3,129,000 3,218,000 Goodwill impairment losses 491,000 -- 491,000 -- Other 1,134,000 602,000 2,819,000 2,169,000 ------------ ------------ ------------ ------------ Total expenses 16,310,000 12,286,000 47,989,000 38,412,000 ------------ ------------ ------------ ------------ Operating income (loss) 483,000 (694,000) 8,329,000 (2,311,000) ------------ ------------ ------------ ------------ Other income Investment income, net 102,000 93,000 257,000 490,000 Interest expense (6,000) (26,000) (26,000) (62,000) ------------ ------------ ------------ ------------ Total other income, net 96,000 67,000 231,000 428,000 ------------ ------------ ------------ ------------ Income (loss) before income taxes 579,000 (627,000) 8,560,000 (1,883,000) Provision for (benefit from) income taxes 213,000 (232,000) 3,431,000 (688,000) ------------ ------------ ------------ ------------ Net income (loss) before accretion of redeemable common stock 366,000 (395,000) 5,129,000 (1,195,000) Accretion of redeemable common stock -- -- (70,000) -- ------------ ------------ ------------ ------------ Net income (loss) available for common shareholders $ 366,000 $ (395,000) $ 5,059,000 $ (1,195,000) ============ ============ ============ ============ Basic earnings (loss) per share: Earnings (loss) available for common shareholders $ 0.02 $ (0.02) $ 0.21 $ (0.05) Weighted average shares outstanding 24,292,000 24,991,000 24,519,000 25,154,000 Diluted earnings (loss) per share: Earnings (loss) available for common shareholders $ 0.01 $ (0.02) $ 0.18 $ (0.05) Weighted average shares outstanding 27,185,000 24,991,000 27,348,000 25,154,000
4 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Unaudited)
Accumulated Series A Common Stock Common Other --------------------- Stock Paid-in Retained Comprehensive Shares Amount Committed Capital Earnings Income (Loss) Total ------ ------ --------- ------- -------- ------------- ----- (Restated) (Restated) Balance December 31, 2002 20,495,000 $3,324,000 $25,000 $6,499,000 $ 7,135,000 $(23,000) $16,960,000 Comprehensive income, net of tax: Net income 5,129,000 5,129,000 Net unrealized gains on investments 40,000 40,000 Less: reclassification adjustment for losses included in net income (10,000) (10,000) ----------- Total comprehensive income 5,159,000 Retirement upon voluntary repurchases of common stock (232,000) (241,000) (155,000) (396,000) Accretion to redemption value (70,000) (70,000) Producer stock option expense 9,000 9,000 ---------- ----------- ------- ---------- ----------- ------- ----------- Balance September 30, 2003 (unaudited) 20,263,000 $ 3,083,000 $25,000 $6,508,000 $12,039,000 $ 7,000 $21,662,000 ========== =========== ======= ========== =========== ======= ===========
5 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Cash Flows (Unaudited)
For the Nine Months Ended September 30, ------------- 2003 2002 ------------ ----------- (Restated) Cash flows from operating activities: Net income (loss) $ 5,129,000 $(1,195,000) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization 3,129,000 3,218,000 Write-off of fixed assets 648,000 243,000 Impairment of goodwill and intangible assets 538,000 -- Provision for bad debts 249,000 238,000 Producer stock option expense 9,000 4,000 Amortization premium or discount on investments 61,000 57,000 Realized (gains) losses on sales of investments, net 17,000 (219,000) Unrealized (gains) losses on trading securities, net (986,000) 1,226,000 Changes in operating assets and liabilities: Purchases of trading securities, net (108,000) (5,063,000) Accounts receivable (1,269,000) (64,000) Prepaid expenses and deposits 1,414,000 (906,000) Income taxes receivable and payable (1,182,000) (592,000) Deferred tax assets (317,000) (111,000) Accounts payable and accrued liabilities 2,734,000 291,000 Deferred compensation payable 1,113,000 (494,000) Other operating assets and liabilities (487,000) (817,000) ------------ ----------- Net cash provided by (used in) operating activities 10,692,000 (4,184,000) ------------ ----------- Cash flows from investing activities: Purchases of available-for-sale securities (5,876,000) (959,000) Proceeds from sales and maturities of available-for-sale securities 3,931,000 8,107,000 Purchases of fixed assets (2,699,000) (4,580,000) Acquisition of prospectdigital assets -- (225,000) ------------ ----------- Net cash provided by (used in) investing activities (4,644,000) 2,343,000 ------------ ----------- Cash flows from financing activities: Proceeds from loan payable -- 4,831,000 Payments of loan payable -- (8,541,000) Proceeds from note payable -- 7,350,000 Payments toward note payable (82,000) (17,000) Repurchases of redeemable common stock (1,033,000) (832,000) Voluntary repurchases of common stock (396,000) (456,000) ------------ ----------- Net cash provided by (used in) financing activities (1,511,000) 2,335,000 ------------ ----------- Net increase in cash and cash equivalents 4,537,000 494,000 Cash and cash equivalents, beginning of period 4,793,000 1,376,000 ------------ ----------- Cash and cash equivalents, end of period $ 9,330,000 $ 1,870,000 ============ ===========
6 REGAN HOLDING CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The accompanying Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts of Regan Holding Corp. (the "Company") and its wholly owned subsidiaries. All intercompany transactions have been eliminated. The statements are unaudited but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company's consolidated financial position and results of operations. The results for the three months and nine months ended September 30, 2003 are not necessarily indicative of the results to be expected for the entire year. These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 filed by the Company with the Securities and Exchange Commission on March 31, 2003. 2. Restatement of Financial Results In connection with a review of the Company's contracts, the Company determined that it should have recorded additional revenue during the third quarter of 2003 that it earned as marketing allowances and commission overrides for sales of fixed annuity and life products under the terms of one of its insurance carrier partner contracts. Accordingly, the Company has recorded additional revenue of $772,000, additional expense of $51,000 associated with bonus accruals during the third quarter of 2003 and an additional tax provision of $297,000 resulting in an increase to net income of $424,000. The Company has restated its results for the three and nine months ended September 30, 2003. The effects of the restatement on the Company's Consolidated Financial Statements are as follows: Statement of Operations Data:
For the Three Months Ended For the Nine Months Ended September 30, 2003 September 30, 2003 ------------------------------ ---------------------------- As originally As originally reported As restated reported As restated ------------ ----------- ----------- ----------- Total Revenue $ 16,021,000 $16,793,000 $55,545,000 $56,318,000 Total Expenses 16,259,000 16,310,000 47,937,000 47,989,000 ------------ ----------- ----------- ----------- Operating income (loss) (238,000) 483,000 7,608,000 8,329,000 Other income 96,000 96,000 231,000 231,000 ------------ ----------- ----------- ----------- Income (loss) before income taxes (142,000) 579,000 7,839,000 8,560,000 Provision for (benefit from) income taxes (84,000) 213,000 3,134,000 3,431,000 ------------ ----------- ----------- ----------- Net income (loss) $ (58,000) $ 366,000 $ 4,705,000 $ 5,129,000 ============ =========== =========== =========== Earnings (loss) per share - basic $ 0.00 $ 0.02 $ 0.19 $ 0.21 ============ =========== =========== =========== Earnings (loss) per share - diluted $ 0.00 $ 0.01 $ 0.17 $ 0.18 ============ =========== =========== ===========
Balance Sheet Data September 30, 2003 ------------------------------ As originally reported As restated -------- ----------- Total Assets $55,593,000 $56,365,000 Total Liabilities $25,203,000 $25,551,000 Redeemable common stock $ 9,152,000 $ 9,152,000 Shareholders Equity $21,238,000 $21,662,000 7 3. Stock Options The Company has a stock-based employee compensation plan and accounts for this plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under the plan had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation:
For the Three Months Ended For the Nine Months Ended September 30, September 30, ------------------------- ----------------------------- 2003 2002 2003 2002 ---- ---- ---- ---- (Restated) (Restated) Net income (loss) available for common shareholders, as reported: $ 366,000 $ (395,000) $ 5,059,000 $ (1,195,000) Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax effects (115,000) (125,000) (312,000) (354,000) ----------- ----------- ------------- ------------- Pro forma net income (loss) available for common shareholders $ 251,000 $ (520,000) $ 4,747,000 $ (1,549,000) =========== =========== ============= ============= Earnings (loss) per share: Basic - as reported $ 0.02 $ (0.02) $ 0.21 $ (0.05) Basic - pro forma $ 0.01 $ (0.02) $ 0.19 $ (0.06) Diluted - as reported $ 0.01 $ (0.02) $ 0.18 $ (0.05) Diluted - pro forma $ 0.01 $ (0.02) $ 0.17 $ (0.06)
4. Recent Accounting Pronouncements In May 2003, the Financial Accounting Standards Board issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. Many of these instruments were previously classified as equity. The provisions of SFAS 150 will require that some of these instruments now be classified as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for existing financial instruments beginning on July 1, 2003. The implementation of SFAS 150 had no material effect on the Company's consolidated results of operations or financial position. In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21 ("EITF 00-21"), "Accounting for Revenue Arrangements with Multiple Deliverables". EITF 00-21 provides guidance on when and how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The Company adopted EITF 00-21 on July 1, 2003. The adoption of EITF 00-21 did not have a material effect on the Company's consolidated financial position and results of operations. 5. Performance Bonus During the first six months of 2003, Legacy Marketing Group earned a performance bonus from sales of fixed annuity and life products under the terms of one of its insurance carrier partner contracts. Amounts were earned when fixed and determinable and all revenue recognition criteria had been met. The Company recorded revenue of $2 million for the six months ended June 30, 2003. These amounts are included in Other income. During the third quarter of 2003, the carrier paid Legacy Marketing Group in full and both parties agreed to terminate the bonus program effective July 1, 2003. 8 6. Sales Incentive Program During 2003, Legacy Marketing Group initiated a sales incentive program for its top independent insurance producers ("Wholesalers"). This program offers bonuses to Wholesalers based primarily on their achievement of predetermined annual sales targets. Bonuses will be paid to qualifying Wholesalers during the first quarter of 2004. The Company recorded expenses of $696,000 and $2.7 million for the three months and nine months ended September 30, 2003 related to the sales incentive program. These amounts are included in Selling, general and administrative expenses. 7. Impairment of Goodwill, Intangible Assets, and Fixed Assets When the Company purchased Values Financial Network, Inc. ("VFN") in 2000, part of the purchase price was for goodwill. Before January 1, 2002, the Company amortized the goodwill on a straight-line basis over 10 years, which was its estimated useful life. Pursuant to Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," the Company ceased amortizing goodwill on January 1, 2002. As required by SFAS 142, the Company performed a transitional and annual goodwill impairment test during 2002. The impairment test of SFAS 142 required the Company to measure fair value of the reporting unit. The Company established fair value by preparing a forecast of the discounted value of future cash flows expected to be derived from VFN. During 2002, the Company revised the business model for VFN to focus on corporate and individual producer sales and its projections supported the balance of goodwill. During 2003 the Company further refined its business model for VFN, including identifying a new market and committing additional resources to develop the business. During the third quarter of 2003 the Company updated its annual measurement of fair value of VFN due to the failure of VFN to produce revenues as projected. The fair value measurement based on a revised cash flow forecast was predicated on VFN realizing a lower level of sales. This forecast of cash flows did not support the balance of goodwill, and the Company recorded a preliminary goodwill impairment loss of $491,000 during the third quarter of 2003. Additionally, when the Company purchased VFN in 2000, among the assets acquired were long-lived assets comprised of a website, which incorporates sales lead management, investment screening and asset allocation functionalities, and copyrights related to two books. These assets were recorded at fair value, as determined by an independent appraisal. In connection with the updated measurement of the fair value of the VFN asset group as discussed above, the Company recorded a long-lived asset impairment loss of $394,000 during the third quarter of 2003, included in Other expenses. 8. Commitments and Contingencies During the second quarter of 2003, the Company amended its Shareholder Agreement with Lynda L. Regan, Chief Executive Officer of the Company and Chairman of the Company's Board of Directors. Under the terms of the amended agreement, upon the death of Ms. Regan, the Company would have the option (but not the obligation) to purchase from Ms. Regan's estate all shares of common stock that were owned by Ms. Regan at the time of her death, or were transferred by her to one or more trusts prior to her death. In addition, upon the death of Ms. Regan, her heirs would have the option (but not the obligation) to sell their inherited shares to the Company. The purchase price to be paid by the Company shall be equal to 125% of the fair market value of the shares. As of September 30, 2003, the Company believes that 125% of the fair market value of the shares owned by Ms. Regan was equal to $28.2 million. The Company has purchased two life insurance policies with a combined face amount of $29 million for the purpose of funding this potential obligation upon Ms. Regan's death. The Company is involved in various claims and legal proceedings arising in the ordinary course of business. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on discussions with legal counsel, that the ultimate disposition of these claims will not have a material adverse effect on its financial condition, cash flows or results of operations. 9 9. Earnings (Loss) per Share
Income/(Loss) Shares Amount ------------- ------ ------ For the three months ended September 30, 2003 (Restated) Income available to common shareholders $ 366,000 24,292,000 $ 0.02 Effect of dilutive securities--employee and producer stock options -- 2,893,000 ----------- ---------- Diluted earnings per share $ 366,000 27,185,000 $ 0.01 =========== ========== ======== For the three months ended September 30, 2002 Basic and diluted loss available to common shareholders $ (395,000) 24,991,000 $ (0.02) =========== ========== ======== For the nine months ended September 30, 2003 (Restated) Net income $ 5,129,000 Accretion of redeemable common stock (70,000) ----------- Income available to common shareholders 5,059,000 24,519,000 $ 0.21 Effect of dilutive securities--employee and producer stock options -- 2,829,000 ----------- ---------- Diluted earnings per share $ 5,059,000 27,348,000 $ 0.18 =========== ========== ======== For the nine months ended September 30, 2002 Basic and diluted loss available to common shareholders $(1,195,000) 25,154,000 $ (0.05) =========== ========== ========
The diluted loss per share calculations for both the three months and nine months ended September 30, 2002 exclude antidilutive stock options of 4.1 million. 10. Comprehensive Income (loss) Total comprehensive income (loss) for the three months ended September 30, 2003 and 2002 was $350,000 and $(447,000). For the nine months ended September 30, 2003 and 2002, total comprehensive income (loss) was $5,159,000 and $(1,321,000). 11. Segment Information Total Revenue --------------------------------------------------------- Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2003 2002 2003 2002 ------------- ------------- ------------ -------------- (Restated) (Restated) Legacy Marketing Group $15,983,000 $11,033,000 $ 54,378,000 $ 34,446,000 Legacy Financial Services, Inc. 821,000 651,000 2,057,000 1,877,000 Imagent Online, LLC 98,000 20,000 186,000 61,000 Values Financial Network, Inc. 9,000 2,000 20,000 5,000 Other 37,000 37,000 149,000 100,000 Intercompany Eliminations (155,000) (151,000) (472,000) (388,000) ----------- ----------- ------------ ------------ Total $16,793,000 $11,592,000 $ 56,318,000 $ 36,101,000 =========== =========== ============ ============ Net Income (Loss) ------------------------------------------------------------ Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2003 2002 2003 2002 -------------- -------------- -------------- -------------- (Restated) (Restated) Legacy Marketing Group $ 1,255,000 $ (2,000) $7,027,000 $ 157,000 Legacy Financial Services, Inc. (118,000) (119,000) (605,000) (485,000) Imagent Online, LLC (137,000) (160,000) (437,000) (491,000) Values Financial Network, Inc. (656,000) (133,000) (941,000) (421,000) Other 22,000 19,000 85,000 45,000 Intercompany Eliminations -- -- -- -- ---------- ---------- ---------- ---------- Total $ 366,000 $ (395,000) $5,129,000 $(1,195,000) ========== ========== ========== =========== 10 Total Assets ----------------------------- September 30, December 31, 2003 2002 ---- ---- (Restated) Legacy Marketing $ 54,497,000 $51,294,000 Group Legacy Financial 1,265,000 1,188,000 Services, Inc. Imagent Online, LLC 706,000 852,000 Values Financial 2,040,000 2,969,000 Network, Inc. Other 406,000 194,000 Intercompany (2,549,000) (6,450,000) Eliminations ------------- ----------- Total $ 56,365,000 $50,047,000 ============= =========== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain statements contained in this document, including Management's Discussion and Analysis of Financial Condition and Results of Operations, that are not historical facts, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of Regan Holding Corp. and its businesses to be materially different from that expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, among other things, the following: general economic and business conditions; political and social conditions; government regulations, especially regulations affecting the insurance industry; demographic changes; the ability to adapt to changes resulting from acquisitions or new ventures; and various other factors referred to in Management's Discussion and Analysis of Financial Condition and Results of Operations. Regan Holding Corp. assumes no obligation to update forward-looking statements to reflect actual results or changes in or additions to the factors affecting such forward-looking statements. Regan Holding Corp. Consolidated We had consolidated net income of $366,000 during the three months ended September 30, 2003 compared to consolidated net losses of $395,000 during the same period in 2002. For the nine months ended September 30, 2003, we had consolidated net income of $5.1 million compared to consolidated net losses of $1.2 million during the nine months ended September 30, 2002. These favorable changes of $761,000 and $6.3 million are primarily due to increased net income at Legacy Marketing Group ("Legacy Marketing"), partially offset by increased losses by Values Financial Network, Inc. ("VFN") primarily due to asset impairment losses. Legacy Marketing During the third quarter of 2003, Legacy Marketing earned net income of $1.3 million compared to net losses of $2,000 during the third quarter of 2002. For the nine months ended September 30, 2003, Legacy Marketing had net income of $7.0 million, compared to net income of $157,000 during the same period in 2002. These improved results are primarily due to increased revenue, partially offset by increased expenses. During the three months and nine months ended September 30, 2003, Legacy Marketing commissions and marketing allowances increased $4.3 million (54%) and $15.9 million (63%) compared to the same periods of 2002. Legacy Marketing's sales increase was driven by sales of declared rate and equity index annuities, reflecting a shift in the marketplace toward more traditional fixed income-based annuities. The overall increase in commissions and marketing allowances during 2003 was offset in part by the effect of discontinuing several annuity products issued by Transamerica Life Insurance and Annuity Company ("Transamerica"). Legacy Marketing will continue to administer these annuity products and to accept additional premium payments, subject to applicable additional deposit rules for these products. The 11 discontinued products accounted for a nominal amount of our total consolidated revenue for the quarter ended September 30, 2003 and approximately 33% of our total consolidated revenue for the quarter ended September 30, 2002. For the nine months ended September 30, 2003 and 2002, the discontinued products accounted for approximately 4% and 35% of our total consolidated revenue. Sales of recently introduced Transamerica products have partially offset the effect of the discontinued Transamerica products. During the second quarter of 2003, American National Life Insurance Company ("American National") reduced the crediting rates of several annuity products marketed by Legacy Marketing. As a result, sales of annuity products on behalf of American National began to decrease during the second quarter of 2003 and throughout the third quarter of 2003. We believe this trend may continue for the remainder of 2003. It is possible that overall consolidated revenues may also decline due to this event. Legacy Marketing is developing new annuity products with American National that may result in increased sales for Legacy Marketing in the long term. During the third quarter of 2003, Legacy Marketing began discontinuing the marketing of the AssureMark (SM) fixed annuity product issued by John Hancock Variable Life Insurance Company ("John Hancock"). As a result, sales of annuity products on behalf of John Hancock decreased during the third quarter and will continue to decrease for the remainder of 2003. Legacy Marketing is developing new annuity products with John Hancock that may result in increased sales in the long term. Administrative fees increased $638,000 (22%) and $2 million (23%) during the three months and nine months ended September 30, 2003 compared to the same periods in 2002 primarily due to increased issuing and maintenance fees. Other income increased $25,000 (16%) and $2.1 million (472%) during the three months and nine months ended September 30, 2003 compared to the three months and nine months ended September 30, 2002. This increase was primarily due to a performance bonus earned on sales of fixed annuity and life products under the terms of one of the Company's insurance carrier partner contracts. During the third quarter of 2003, the Company and the insurance carrier agreed to terminate the bonus program effective July 1, 2003. As of September 30, 2003, Legacy Marketing sold and administered products on behalf of four unaffiliated insurance carriers: American National, Transamerica, Investors Insurance Corporation, and John Hancock. Legacy Marketing also performs administrative services for products of IL Annuity and Insurance Company ("IL Annuity"). As indicated below, the agreements with these carriers generated a significant portion of our total consolidated revenue (sales on behalf of Investors Insurance Corporation began in the second quarter of 2002): Three months ended Nine months ended September 30, September 30, ------------- ------------- 2003 2002 2003 2002 ---- ---- ---- ---- (Restated) (Restated) American National 30% 20% 40% 15% Transamerica 30% 47% 24% 57% Investors Insurance Corporation 24% 4% 20% 1% IL Annuity 6% 13% 6% 13% John Hancock 2% 12% 3% 8% Our consolidated revenues are derived primarily from sales and administration of the following annuity products:
Three months ended Nine months ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- (Restated) (Restated) BenchMark(SM) series (sold on behalf of American National) 30% 19% 39% 14% SelectMark(R) series (sold on behalf of Transamerica) 30% 43% 24% 55% MarkOne(SM) series (sold on behalf of Investors Insurance Corporation) 24% 4% 20% 1% VisionMark(R) series (sold on behalf of IL Annuity) 3% 12% 4% 12% AssureMark(SM) series (sold on behalf of John Hancock) 2% 12% 3% 8%
12 As mentioned above, we believe that sales of the BenchMark(SM) series sold on behalf of American National and sales of the AssureMark(SM) series sold on behalf of John Hancock may decrease during the remainder of 2003. Legacy Marketing expenses increased $2.9 million (26%) and $8.3 million (24%) during the three months and nine months ended September 30, 2003 compared to the same periods in 2002 primarily due to increases in selling, general and administrative expenses. Selling, general and administrative expenses increased $2.9 million (30%) and $8.3 million (28%) primarily due to increases in compensation, sales promotion and support expenses, insurance, occupancy, and courier expenses. Compensation increased primarily due to salary increases, incentive based compensation based on our consolidated year-to-date results, temporary help due to increased business volume, and benefits. Sales promotion and support expenses increased primarily due to bonuses for our top independent insurance producers based on their achievement, for the year 2003, of predetermined annual sales targets which will be paid in the first quarter of 2004. Increased insurance expenses reflected rising prices for errors and omissions and workers' compensation insurance coverage. The increase in courier expenses was related to increased business volume. During 2002, we began an evaluation of an internal use software project that we initially licensed in 1998 with the intent to modify and customize the licensed software prior to deployment. We began this project intending to replace our administration system after the vendor of our existing administration system required us to migrate from the existing system to an alternative platform. In late 2002, we learned from our vendor that we might be able to retain our existing system. Modification and customization of the licensed software was suspended in December of 2002. To date, we have $4.4 million capitalized relating to this licensed software. A financial analysis completed in the first quarter of 2003 indicated that remaining on the existing system may provide greater benefit than converting to a new system. In the third quarter of 2003, our vendor concluded that we could continue to use our existing system for an extended period. We are currently performing a rigorous evaluation of our Company-wide technological needs, which includes an assessment of the viability of the existing system. One possibility under consideration is to use our existing administrative system for some products and to use the new system for other products. We expect to complete this assessment before year-end. We previously estimated that if our final decision was to fully abandon the software project, approximately $1.2 million of this software would have continuing value and be used to upgrade our existing system and the remaining $3.2 million would be written off. As we proceed with our assessment, we expect to further refine these estimates. In the event we decide to use both systems, a smaller write off or no write off may occur. Legacy Financial During the third quarter of 2003, Legacy Financial's net loss of $118,000 was relatively unchanged compared to the third quarter of 2002. For the nine months ended September 30, 2003, Legacy Financial had net losses of $605,000 compared to net losses of $485,000 during the same period in 2002, primarily due to increased expenses partially offset by increased revenue. Legacy Financial revenue increased $170,000 (26%) and $180,000 (10%) during the three months and nine months ended September 30, 2003 compared to the same periods in 2002, primarily due to increased reimburseable insurance premiums and increased sponsorship revenues, partially offset by decreased marketing allowances and commissions related to lower overall sales volume and changes in product mix. Legacy Financial expenses increased $176,000 (21%) and $394,000 (15%) during the three months and nine months ended September 30, 2003 compared to the same periods in 2002. The increase in the second quarter of 2003 expenses is primarily due to an increase in selling, general and administrative expenses and other expenses. Selling, general and administrative expenses increased $128,000 (16%) primarily attributable to increased sales promotion expenses, increased errors and omissions insurance premiums, and increased incentive compensation. Other expenses increased $48,000 (77%) primarily due to increased equipment maintenance expenses and increased insurance costs. On a year-to-date basis, selling, general and administrative expenses increased $259,000 (11%) primarily due to increased errors and omissions insurance premiums, increased incentive compensation, and increased sales promotion expenses, partially offset by lower occupancy costs resulting from Legacy Financial's move to the Company's headquarters during 2002. Other expenses increased $135,000 (59%) primarily due to increased equipment maintenance expenses and increased insurance costs. 13 Imagent Online, LLC Imagent Online, LLC ("Imagent") had net losses of $137,000 during the third quarter of 2003 compared to net losses of $160,000 during the third quarter of 2002. During the nine months ended September 30, 2003, Imagent had net losses of $437,000 compared to net losses of $491,000 during the same period in 2002. The reduced losses are primarily due to increased revenues partially offset by increased expenses. Revenues increased $78,000 (390%) and $125,000 (205%) during the three months and nine months ended September 30, 2003 compared to the comparable prior year periods primarily due to increased subscription and licensing revenues. Expenses increased $45,000 (16%) and $60,000 (7%) during the third quarter and year-to-date periods primarily due to increased salaries and benefits associated with increased headcount, partially offset by decreased postage expenses related to direct marketing campaigns. Values Financial Network, Inc. Values Financial Network, Inc. ("VFN") had net losses of $656,000 during the third quarter of 2003 compared to net losses of $133,000 during the third quarter of 2002. During the nine months ended September 30, 2003, VFN had net losses of $941,000 compared to net losses of $421,000 during the same period in 2002. The increased losses are due to goodwill, intangibles, and long-lived asset impairment losses during the third quarter of 2003. Revenues increased $7,000 (350%) and $15,000 (300%) during the quarterly and year-to-date periods primarily due to rental income from a tenant who began subleasing office space from VFN in the second quarter of 2003. Expenses were relatively unchanged during the quarterly and year-to-date periods. When the Company purchased Values Financial Network, Inc. ("VFN") in 2000, part of the purchase price was for goodwill. Before January 1, 2002, the Company amortized the goodwill on a straight-line basis over 10 years, which was its estimated useful life. Pursuant to Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," the Company ceased amortizing goodwill on January 1, 2002. As required by SFAS 142, the Company performed a transitional and annual goodwill impairment test during 2002. The impairment test of SFAS 142 required the Company to measure fair value of the reporting unit. The Company established fair value by preparing a forecast of the discounted value of future cash flows expected to be derived from VFN. During 2002, the Company revised the business model for VFN to focus on corporate and individual producer sales and its projections supported the balance of goodwill. During 2003 the Company further refined its business model for VFN, including identifying a new market and committing additional resources to develop the business. During the third quarter of 2003 the Company updated its annual measurement of fair value of VFN due to the failure of VFN to produce revenues as projected. The fair value measurement based on a revised cash flow forecast was predicated on VFN realizing a lower level of sales. This forecast of cash flows did not support the balance of goodwill, and the Company recorded a preliminary goodwill impairment loss of $491,000 during the third quarter of 2003. Additionally, when the Company purchased VFN in 2000, among the assets acquired were long-lived assets comprised of a website, which incorporates sales lead management, investment screening and asset allocation functionalities, and copyrights related to two books. These assets were recorded at fair value, as determined by an independent appraisal. In connection with the updated measurement of the fair value of the VFN asset group as discussed above, the Company recorded a long-lived asset impairment loss of $394,000 during the third quarter of 2003, included in Other expenses. Other Segment During the third quarter of 2003, combined net income from our Other segment of $22,000 was relatively unchanged compared to the third quarter of 2002. For the nine months ended September 30, 2003, combined net income from our Other segment was $85,000, compared to combined net income of $45,000 during the same period in 2002. This favorable change is primarily due to increased advisory fee revenues. 14 Liquidity and Capital Resources Net cash provided by operating activities was $10.7 million for the nine months ended September 30, 2003 compared to net cash used in operating activities of $4.2 million for the same period in 2002, primarily due to increased operating results, lower net purchases of trading securities, and the application of a prepaid deposit toward a producer incentive trip, offset in part by payment for the annual option to purchase Investors Insurance Corporation, included in Other assets. Net cash used in investing activities was $4.6 million for the nine months ended September 30, 2003 compared to net cash provided by investing activities of $2.3 million for the nine months ended September 30, 2002, primarily due to increased purchases and lower sales of available-for-sale securities, partially offset by lower cash outlays for the development of internal use software. Net cash used in financing activities was $1.5 million for the nine months ended September 30, 2003 compared to net cash provided by financing activities of $2.3 million for the nine months ended September 30, 2002, primarily due to net proceeds from loans during the first nine months of 2002, and higher repurchases of our common stock. Recent Accounting Pronouncements In May 2003, the Financial Accounting Standards Board issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. Many of these instruments were previously classified as equity. The provisions of SFAS 150 will require that some of these instruments now be classified as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for existing financial instruments beginning on July 1, 2003. The implementation of SFAS 150 had no material effect on the Company's consolidated results of operations or financial position. In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21 ("EITF 00-21"), "Accounting for Revenue Arrangements with Multiple Deliverables". EITF 00-21 provides guidance on when and how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The Company adopted EITF 00-21 on July 1, 2003. The adoption of EITF 00-21 did not have a material effect on the Company's consolidated financial position and results of operations. 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Company's market risk, interest rate risk, credit risk, or equity price risk since December 31, 2002. Please see the Company's Annual Report on Form 10-K for the year ended December 31, 2002 for more information concerning Quantitative and Qualitative Disclosures About Market Risk. Item 4. Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and executed, can provide only a reasonable assurance of achieving the desired control objectives. The Company's Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Company's management, the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Company determined that it should have recorded additional revenue during the third quarter of 2003 that it earned as marketing allowances and commission overrides for sales of fixed annuity products under the terms of one if its insurance carrier partner contracts. As a result, the Company is restating its consolidated financial statements for the three months and nine months ended September 30, 2003. The Company, in consultation with its independent auditors, PricewaterhouseCoopers LLP ("PWC"), has identified deficiencies in the Company's internal control over financial reporting which resulted in two restatements of its financial statements. One of these deficiencies resulted in the amendment of the Company's Form 10-Q for the quarter ended March 31, 2003 in order to restate the Company's consolidated financial statements. Another deficiency resulted in the amendment of the Company's Form 10-Q for the period ended September 30, 2003 in order to restate the Company's consolidated financial statements. Members of the Company's management and PWC have discussed these deficiencies with the Audit Committee of the Company's Board of Directors. PWC has stated that these deficiencies result in a "material weakness" under standards established by the American Institute of Certified Public Accountants. The material weakness was identified as a breakdown in communication between the financial and operational management of the Company and a breakdown in the processes by which transactions are reviewed. To remedy this weakness, the Board of Directors of the Company approved the formation of a disclosure committee (the "Disclosure Committee") and is appointing executives of the Company to serve on the Disclosure Committee. The Disclosure Committee will, among other things, meet quarterly as part of the closing process and review each financial statement line item and footnote disclosure to ensure the impacts of all business activity and transactions have been appropriately accounted for and disclosed in the consolidated financial statements of the Company. The Disclosure Committee will also review detailed analytics of the Company's performance and assess the need for any additional disclosures based on the relevant reporting period's activity. The Disclosure Committee will begin reviewing the disclosures made by the Company in its filings with the U.S. Securities and Exchange Commission starting with the Company's Form 10-K for the year ended December 31, 2003. Except as described above, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the date hereof. The Company's management, including the Chief Executive Officer and the Chief Financial Officer, also evaluated the Company's internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there have been no such changes during the period covered by this report, except as described above. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not involved in any material pending legal proceedings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 31.1 Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 31.2 Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K No reports on Form 8-K were filed during the third quarter of 2003. 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. REGAN HOLDING CORP. Date: March 23, 2004 Signature: /s/ R. Preston Pitts ------------------------------------ R. Preston Pitts President and Chief Operating Officer Date: March 23, 2004 Signature: /s/ G. Steven Taylor ------------------------------------ G. Steven Taylor Chief Financial Officer 17 INDEX TO EXHIBITS Number Description - ------ ----------- Exhibit 31.1 Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 31.2 Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 18 EX-31.1 3 p18303_ex31-1.txt CERTIFICATION UNDER SECTION 302 Exhibit 31.1 CERTIFICATION I, Lynda L. Regan, certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Regan Holding Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 23, 2004 /s/ Lynda L. Regan ------------------------------------- Name: Lynda L. Regan Title: Chief Executive Officer EX-31.2 4 p18303_ex31-2.txt CERTFICATION UNDER SECTION 302 Exhibit 31.2 CERTIFICATION I, G. Steven Taylor, certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Regan Holding Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 23, 2004 /s/ G. Steven Taylor ----------------------------------- Name: G. Steven Taylor Title: Chief Financial Officer EX-32.1 5 p18303_ex32-1.txt CERTIFICATION UNDER SECTION 906 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Lynda L. Regan, Chief Executive Officer of Regan Holding Corp. (the "Company"), hereby certify, to the best of my knowledge, that the Company's quarterly report on Form 10-Q/A for the period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 23, 2004 /s/ Lynda L. Regan ----------------------------------- Name: Lynda L. Regan Title: Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Regan Holding Corp. and will be retained by Regan Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 6 p18303_ex32-2.txt CERTIFICATION UNDER SECTION 906 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, G. Steven Taylor, Chief Financial Officer of Regan Holding Corp.(the "Company"), hereby certify, to the best of my knowledge, that the Company's quarterly report on Form 10-Q/A for the period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 23, 2004 /s/ G. Steven Taylor ----------------------------------- Name: G. Steven Taylor Title: Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Regan Holding Corp. and will be retained by Regan Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----