UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1994
Commission file numbers 33-21775, 33-25070 and 33-33261
PREMIER ACCEPTANCE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 41-1615279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Piper Jaffray Tower, 222 South 9th Street, Minneapolis, MN 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-342-6673
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
1,000 Common shares were outstanding as of December 31, 1994, and were wholly
owned by Piper Jaffray Companies Inc.
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.
PREMIER ACCEPTANCE CORPORATION
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Statements of Financial Condition 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-8
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF FINANCIAL CONDITION
December 31, September 30,
1994 1994
ASSETS (Unaudited)
Cash $ 15,922 $ 16,762
Interest receivable 214,720 13,400
Investments pursuant to
mortgage-backed bonds 40,785,610 1,575,444
Receivable from Parent - 3,328,341
Unamortized bond issuance costs 1,562,915 168,803
Deferred income tax asset 50,591 50,591
Other assets 9,527 -
------------- ------------
$ 42,639,285 $ 5,153,341
============= ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $ 41,897,595 $ 1,600,916
Interest payable on bonds 24,850 26,513
Bond redemptions payable 1,215 1,244
Notes payable to Parent 481,130 -
Other liabilities 37,975 119
------------- ------------
42,442,765 1,628,792
------------- ------------
Stockholder's equity:
Common stock, $1 par value,
1,000 shares authorized, issued
and outstanding 1,000 1,000
Additional paid-in capital 35,000 35,000
Retained earnings 160,520 3,488,549
------------- ------------
196,520 3,524,549
------------- ------------
$ 42,639,285 $ 5,153,341
============= ============
See accompanying notes to financial statements.
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
1994 1993
REVENUES:
Interest income $ 40,398 $ 77,910
Interest expense 38,216 68,946
--------- ---------
Net interest income 2,182 8,964
Gain on accretion of
discount on investments 3,108 12,183
--------- ---------
Total revenue 5,290 21,147
--------- ---------
EXPENSES:
Amortization of bond issuance
costs on redemptions 2,854 10,519
General and administrative 10,599 15,897
--------- ---------
Total expense 13,453 26,416
--------- ---------
LOSS BEFORE INCOME TAXES (8,163) (5,269)
INCOME TAX BENEFIT (3,184) (2,108)
--------- ---------
NET LOSS $ (4,979) $ (3,161)
========= =========
See accompanying notes to financial statements.
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
1994 1993
OPERATING ACTIVITIES:
Net loss $ (4,979) $ (3,161)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Amortization of bond
issuance costs 2,854 10,519
Recognition of discount
on investments (2,103) (7,751)
Change in:
Interest receivable (201,320) 3,143
Receivable from Parent 3,328,341 323,555
Interest payable on bonds (1,663) (6,174)
Bond redemptions payable (29) 15,502
Other 28,329 (319,594)
------------- -----------
Net cash provided by operating activities 3,149,430 16,039
FINANCING ACTIVITIES:
Issuance of mortgage-backed bonds 40,400,000 -
Redemption of mortgage-backed bonds (103,321) (380,857)
Purchase of investments pursuant to
mortgage-backed bonds (39,310,380) -
Principal redemption on investments
pursuant to mortgage-backed bonds 102,317 377,154
Bond issuance costs incurred (1,396,966) -
Net issuance of notes payable to Parent 481,130 -
Dividends paid to Parent (3,323,050) -
------------- -----------
Net cash used in financing activities (3,150,270) (3,703)
------------- -----------
(DECREASE) INCREASE IN CASH (840) 12,336
CASH AT BEGINNING OF PERIOD 16,762 109,824
------------- -----------
CASH AT END OF PERIOD $ 15,922 $ 122,160
============= ===========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three months for:
Interest $ 39,879 $ 75,120
Income taxes (received from)
paid to Parent $ (3,184) $ 118,491
See accompanying notes to financial statements.
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
NOTES TO FINANCIAL STATEMENTS
Three Months Ended December 31, 1994 and 1993
1. ORGANIZATION AND BUSINESS ACTIVITY
The Company is a wholly owned subsidiary of Piper Jaffray Companies Inc. The
Company's Certificate of Incorporation limits the business activities in which
it may engage to activities in connection with or related to the issuance of
mortgage-backed bonds, as described in Note 3.
The Company's activities include the issuance and sale of securities
collateralized by certain mortgage related investments (certificates),
directly or through trusts formed by the Company, and the investment of the
proceeds in such certificates. The Company or such trusts purchase the
certificates prior to or simultaneously with the issuance of the mortgage-
backed bonds.
The Company has filed Registration Statements under the Securities Act of 1933
(the Act) with the Securities and Exchange Commission, pursuant to which
$900,000,000 in aggregate principal amount of the Company's mortgage-backed
bonds were registered under the Act. The Company has issued thirty-three
series of mortgage-backed bonds with an aggregate original principal amount of
$515,950,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and should be read in conjunction
with the Company's annual report on Form 10-K for the year ended September 30,
1994. The results of operations for the three months ended December 31, 1994,
are not necessarily indicative of the results to be expected for the year
ending September 30, 1995.
The statement of financial condition as of December 31, 1994 and the
information for the periods ended December 31, 1994 and 1993, is unaudited.
Management of the Company believes that all adjustments (consisting only of
normal recurring accruals) necessary for a fair statement of the results of
operations for the periods have been included.
3. MORTGAGE-BACKED BONDS
The Company periodically issues mortgage-backed bonds (the bonds) which are
collateralized by GNMA or FNMA certificates and guaranteed as to payment of
principal and interest by the Government National Mortgage Association or the
Federal National Mortgage Association. The bonds are obligations solely of
the Company and bondholders' only recourse is to the underlying series'
collateral. The collateral, which has been purchased with the issuance
proceeds, is held by a trustee and is carried at par value less unaccreted
discount. Principal and interest payments on the collateral are used to meet
the debt service of the respective bonds.
Bonds outstanding at December 31, 1994, have stated maturities ranging from
2019 through 2024 and stated interest rates ranging from 8.0% to 10%. The
collateral has contractual maturities ranging from 2019 through 2025 and
stated interest rates ranging from 8.0% to 10%.
At December 31, 1994 the market value of the underlying collateral for the
outstanding bonds was approximately $41,600,000.
The issuance of six series of bonds with an aggregate original principal
amount of $176,145,000 and the related purchase of collateral certificates has
been accounted for financial reporting purposes as a sale. Accordingly, the
assets, liabilities, interest income, and interest expense relating to these
series do not appear on the financial statements of the Company. At December
31, 1994, and September 30, 1994, the aggregate amount outstanding was
approximately $32,966,000 and $34,380,000 respectively.
4. RELATED PARTY TRANSACTIONS
The Company is charged for certain expenses by the Parent based on
specifically identified cost allocations. Such cost allocations are
determined through negotiations between the Company and the Parent.
Management believes that the method of allocation, as so determined, is
reasonable. In addition, the Company's affiliate, Piper Jaffray Inc. (PJI),
provides the Company with accounting and administrative services, including
services of officers. For the three months ended December 31, 1994 and 1993,
the Company was charged $10,000 and $15,000, respectively, for such services.
The Company's costs are not necessarily indicative of the costs that would
have been incurred had the Company operated independently.
The Company has notes payable to the parent which bear interest at a rate of
one-half of one percent over the broker call rate and mature over the life of
the bonds.
In connection with the issuance of the mortgage-backed bonds recorded on the
financial statements, PJI acting as underwriter received underwriting
discounts of $351,050 for the quarter ended December 31, 1994. These costs
are capitalized on the Company's Statement of Financial Condition as
unamortized bond issuance costs.
On December 12, 1994, the Board of Directors declared and paid a dividend to
the Parent of $3,323,050, eliminating the balance of the receivable from the
Parent.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
During the first quarter of fiscal year 1995, the Company issued 2 series of
mortgage-backed bonds with an aggregate principal amount of approximately
$40,400,000.
In addition, the Company has one other issue pending and may issue additional
series during fiscal year 1995.
Resources and Liquidity
The Company's source of funds with respect to the mortgage-backed bonds is the
receipt of payments of principal and interest, including prepayments, on the
mortgage-backed collateral certificates securing the bonds, together with the
reinvestment income thereon. The Company expects that, at all times, the
aggregate future receipts of principal and interest on the certificates,
together with reinvestment income thereon, will exceed the aggregate of future
amounts due as payments of principal and interest on the mortgage-backed
bonds, as well as payments of other liabilities.
The deferred bond issuance costs and original issue discounts on the
collateral are amortized as bonds are redeemed.
Results of Operations
For the three months ended December 31, 1994, net interest income of $2,182
compared to $8,964 of net interest income for the three months ended December
31, 1993. The Company's interest income and interest expense are directly
related to the issuance and sale of mortgage-backed bonds and have decreased
from the first quarter of fiscal 1994 to the first quarter of fiscal 1995 as
the average amount of outstanding bonds decreased during this same period. As
a result, gain on accretion of discount on investments decreased from $12,183
for the three months ended December 31, 1993 to $3,108 for the three months
ended December 31, 1994.
General and administrative expenses decreased during the first quarter of
fiscal 1995 to $10,599 compared to $15,897 from the first quarter of fiscal
1994. This decrease was primarily due to a reassessment of the charges for
accounting and administrative services provided to the Company, including
services of officers of the Company's affiliate PJI.
These charges are subject to reevaluation based on the number of outstanding
series of bonds.
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 27 - Financial Data Schedule (filed electronically)
(b). Reports on Form 8-K
November 23, 1994, reporting:
i) Issuance and sale of Mortgage-Backed Bonds, Series 26.
ii) Underwriting agreement dated October 24, 1994 between Premier
Acceptance Corporation, as issuer, and Piper Jaffray Inc., as
representative for the various underwriters, relating to the
sale of mortgage-backed bonds.
iii) Series Supplement dated November 23, 1994 to Indenture dated
June 28, 1991 between Premier Acceptance Corporation, as issuer,
and Norwest Bank Minnesota, National Association, as trustee,
relating to Series 26.
December 23, 1994, reporting:
i) Issuance and sale of Mortgage-Backed Bonds, Series 27.
ii) Series Supplement dated December 23, 1994 to Indenture dated
June 28, 1991 between Premier Acceptance Corporation, as issuer,
and Norwest Bank Minnesota, National Association, as trustee,
relating to Series 27.
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.
PREMIER ACCEPTANCE CORPORATION
(Registrant)
Dated February 13, 1995 /s/ DEBORAH K. ROESLER
DEBORAH K. ROESLER
Treasurer (Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF PREMIER ACCEPTANCE CORPORATION AS OF AND FOR
THE QUARTER ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 15,922
<SECURITIES> 40,785,610
<RECEIVABLES> 214,720
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,639,285
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 41,897,595
<COMMON> 1000
0
0
<OTHER-SE> 195,520
<TOTAL-LIABILITY-AND-EQUITY> 42,639,285
<SALES> 0<F2>
<TOTAL-REVENUES> 43,506
<CGS> 0<F3>
<TOTAL-COSTS> 0<F3>
<OTHER-EXPENSES> 13,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,216
<INCOME-PRETAX> (8,163)
<INCOME-TAX> (3,184)
<INCOME-CONTINUING> (4,979)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,979)
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<FN>
<F1>NOT APPLICABLE - COMPANY DOES NOT HAVE A CLASSIFIED BALANCE SHEET
<F2>REVENUES CONSIST OF INTEREST INCOME ONLY
<F3>NOT APPLICABLE - COMPANY HAS NO SALES, ONLY INTEREST INCOME AS REVENUE
<F4>NOT APPLICABLE - COMPANY DOES NOT COMPUTE EARNINGS PER SHARE
</FN>
</TABLE>
