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 June 30, 1996
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, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-342-6000
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 June 30, 1996, 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.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
TABLE OF CONTENTS
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
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF FINANCIAL CONDITION
June 30, September 30,
1996 1995
ASSETS (Unaudited)
Cash $ 11,475 $1,047,239
Interest receivable 313,221 360,943
Investments, classified as available
for sale carried at market value 47,203,375 55,364,807
Receivable from Parent 32,409 62,487
Unamortized bond issuance costs 1,760,586 2,024,297
Other assets 100 -
---------- -----------
$49,321,166 $58,859,773
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $46,352,000 $53,908,000
Interest payable on bonds 311,119 729,610
Bond redemptions payable - 169,000
Deferred tax liability 956,428 1,523,110
Other liabilities - 1,803
---------- ----------
47,619,547 56,331,523
---------- ----------
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
Unrealized holding gain on investment
securities available for sale 1,484,970 2,293,501
Retained earnings 180,649 198,749
------- -------
1,701,619 2,528,250
--------- ---------
$49,321,166 $58,859,773
=========== ===========
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
REVENUE:
Interest income $ 961,796 $1,110,121 $3,056,764 $2,313,606
Interest expense 1,038,290 1,108,205 3,124,959 2,380,328
--------- --------- --------- ---------
Net interest income (expense) (76,494) 1,916 (68,195) (66,722)
Gain on accretion of discount
on investments 122,012 15,818 344,410 27,418
Gain on sale of residual interest - - - 205,632
Net gain related to bond call - - - 51,014
------ ------ -------- -------
Total revenue 45,518 17,734 276,215 217,342
EXPENSES:
Amortization of bond issuance
costs on redemptions 87,987 2,313 263,711 5,223
General and administrative 20,180 8,580 42,175 140,863
-------- ------ ------- -------
Total expenses 108,167 10,893 305,886 146,086
------- ------ ------- -------
INCOME (LOSS) BEFORE
INCOME TAXES (62,649) 6,841 (29,671) 71,256
INCOME TAXES (BENEFIT) (23,773) 2,668 (11,571) 27,790
------- ----- ------- ------
NET INCOME (LOSS) $(38,876) $ 4,173 $(18,100) $ 43,466
======== ======= ======== ========
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
Net income (loss) $(18,100) $ 43,466
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Amortization of bond issuance costs 263,711 5,223
Recognition of discount on investments 344,410 (26,394)
Change in:
Interest receivable 47,722 (353,211)
Deferred taxes (27,658) (5,897)
Interest payable on bonds (418,491) 622,156
Bond redemptions payable (169,000) 63,756
Receivable from Parent 30,078 3,328,341
Other liabilities (1,903) 1,694
------ -----
Net cash provided by operating activities 50,769 3,679,134
FINANCING ACTIVITIES:
Issuance of mortgage-backed bonds - 54,400,000
Mortgage-backed bonds called - (1,481,022)
Redemption of mortgage-backed bonds (7,556,000) (185,894)
Purchase of investments pursuant to
mortgage-backed bonds - (52,827,183)
Principal redemption on investments
pursuant to mortgage-backed bonds 6,469,467 604,056
Sale of investments pursuant to
mortgage-backed bonds - 1,473,266
Bond issuance costs incurred - (1,875,654)
Net issuance of notes payable to Parent - 82,088
Dividends paid to Parent - (3,323,050)
---------- ----------
Net cash used in financing activities (1,086,533) (3,133,393)
---------- ----------
INCREASE (DECREASE) IN CASH (1,035,764) 545,741
CASH AT BEGINNING OF PERIOD 1,047,239 16,762
--------- ------
CASH AT END OF PERIOD $ 11,475 $562,503
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the nine months ended for:
Interest $3,543,450 $1,680,920
Income taxes paid to Parent $(11,572) $ 39,905
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended June 30, 1996 and 1995
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-four series
of bonds with an aggregate original principal amount of $529,950,000.
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, 1995.
The results of operations for the nine months ended June 30, 1996, are not
necessarily indicative of the results to be expected for the year ending
September 30, 1996.
The statement of financial condition as of June 30, 1996 and the information for
the periods ended June 30, 1996 and 1995, is unaudited, but 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 market value. Principal and interest payments on the
collateral are used to meet the debt service of the respective bonds.
Bonds outstanding at June 30, 1996, have stated maturities through 2025 and
interest rates ranging from 8% to 8.15%. The actual maturities may be shortened
by prepayments on related collateral.
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 June 30, 1996, and
September 30, 1995, the aggregate amount outstanding was approximately
$23,958,000 and $29,574,000, respectively.
4. RELATED PARTY TRANSACTIONS
The Company has entered into an agreement with the Parent, stating that Premier
may advance excess cash to the Parent for a specified period of time and the
Parent shall pay interest to Premier at the stated rate of one-half of one
percent over the broker call rate. During the nine months ended June 30, 1996
the Company received $3,983 in interest income from the Parent. At June 30, 1996
and September 30, 1995, $32,409 and $62,487, respectively, was receivable from
the Parent.
General and administrative expenses for the nine months ended June 30, 1995
includes a management fee of $101,463 paid to Piper Jaffray Inc. (PJI) for
services provided by officers of the Company, and a brokerage commission of
$6,000 paid to PJI, both relating to the sale of Series 27 residual interests.
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 Parent
provides the Company with accounting and administrative services, including
services of officers. For the nine months ended June 30, 1996 and 1995, the
Company was charged $14,250 and $16,000, 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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
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
The Company's interest income and interest expense are directly related to the
issuance and sale of mortgage-backed bonds. Interest income and expense for the
nine months ended June 30, 1996 increased over the same period of the prior
fiscal year due to the issuance of $54,400,000 in bonds during fiscal 1995.
The Company recorded net interest expense of $68,195 for the nine months ended
June 30, 1996 versus net interest expense of $66,722 for the nine months ended
June 30, 1995. Excluding a $101,463 management fee and a $6,000 commission paid
to PJI during fiscal 1995 relating to the sale of Series 27 residual interests,
general and administrative expenses increased approximately $9,000 during
the nine months ended June 30, 1996 over the same period of the prior year.
The increase was due to higher audit and professional fees .
The Company recorded net interest expense of $76,494 for the quarter ended June
30, 1996 versus net interest income of $1,916 for the same period of the prior
year. Interest income decreased due to lower average balances of funds held in
trust resulting from faster pass-through of principal and interest. Interest
expense also decreased related to the faster pass-through however, the decrease
was partially offset by additional expense recorded in the third quarter as a
result of the recalculation of year-to-date interest. In future periods the
Company anticipates interest income to approximately offset interest expense.
Gains on accretion of discounts and the amortization of bond issuance costs have
both increased over the third quarter of the prior year due to larger principal
redemptions.
<PAGE>
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
27 - Financial Data Schedule (filed electronically).
(b). Reports on Form 8-K
The Company was not required to file any reports on Form 8-K to
the Securities and Exchange Commission during the quarter ended
June 30, 1996.
<PAGE>
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 August 14, 1996 /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 PERIODS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,475
<SECURITIES> 47,203,375
<RECEIVABLES> 345,630
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,321,166
<CURRENT-LIABILITIES> 311,119
<BONDS> 46,352,000
0
0
<COMMON> 1,000
<OTHER-SE> 1,700,619
<TOTAL-LIABILITY-AND-EQUITY> 49,321,166
<SALES> 0<F2>
<TOTAL-REVENUES> 3,401,174
<CGS> 0<F3>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 305,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,124,959
<INCOME-PRETAX> (29,671)
<INCOME-TAX> (11,571)
<INCOME-CONTINUING> (18,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,100)
<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 - THE COMPANY HAS NO SALES, ONLY INTEREST INCOME AS REVENUE
<F4> NOT APPLICABLE - THE COMPANY DOES NOT COMPUTE EARNINGS PER SHARE
</FN>
</TABLE>
