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 March 31, 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 March 31, 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 7
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
March 31, September 30,
1996 1995
ASSETS (Unaudited)
Cash $ 34,355 $ 1,047,239
Interest receivable 330,467 360,943
Investments, classified as available for sale
carried at market value 50,321,600 55,364,807
Receivable from Parent 83,458 62,487
Unamortized bond issuance costs 1,848,573 2,024,297
--------- ---------
$52,618,453 $ 58,859,773
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $48,874,000 $ 53,908,000
Interest payable on bonds 328,027 729,610
Bond redemptions payable - 169,000
Deferred tax liability 1,283,914 1,523,110
Other liabilities - 1,803
--------- ---------
50,485,941 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 1,876,987 2,293,501
Retained earnings 219,525 198,749
2,132,512 2,528,250
--------- ---------
$52,618,453 $ 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 Six Months Ended
March 31, March 31,
1996 1995 1996 1995
REVENUE:
Interest income $1,023,325 $1,163,087 $2,094,968 $1,203,485
Interest expense 1,010,938 1,233,908 2,086,669 1,272,124
--------- --------- --------- ---------
Net interest income (expense) 12,387 (70,821) 8,299 (68,639)
Gain on accretion of discount
on investments 143,897 8,492 222,398 11,600
Gain on sale of residual
interest - 205,632 - 205,632
Net gain related to bond call - 51,014 - 51,014
------- ------ ------- ------
Total revenue 156,284 194,317 230,697 199,607
------- ------- ------- -------
EXPENSES:
Amortization of bond issuance
costs on redemptions 125,327 56 175,724 2,910
General and administrative 10,555 121,683 21,995 132,282
------ ------- ------ -------
Total expenses 135,882 121,739 197,719 35,192
------- ------- ------- ------
INCOME BEFORE
INCOME TAXES 20,402 72,578 32,978 64,415
INCOME TAXES 7,297 28,306 12,202 25,122
----- ------ ------ ------
NET INCOME $ 13,105 $ 44,272 $ 20,776 $ 39,293
========= ========= ======== ========
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
1996 1995
OPERATING ACTIVITIES:
Net income $ 20,776 $ 39,293
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Amortization of bond issuance costs 175,724 2,910
Recognition of discount on investments 222,398 (11,600)
Change in:
Interest receivable 30,476 (424,506)
Deferred taxes 38,482 (12,116)
Interest payable on bonds (401,583) 637,453
Bond redemptions payable (169,000) (1,244)
Receivable from Parent (20,971) 3,328,341
Other liabilities (1,803) 13,452
------ ------
Net cash provided by (used in)
operating activities (105,501) 3,571,983
-------- ---------
FINANCING ACTIVITIES:
Issuance of mortgage-backed bonds -- 54,400,000
Redemption of mortgage-backed bonds (5,034,000) (1,481,022)
Purchase of investments pursuant to mortgage-backed bonds --
(52,835,068)
Principal redemption on investments
pursuant to mortgage-backed bonds 4,126,617 285,288
Bond issuance costs incurred -- (1,875,390)
Net issuance of notes payable to Parent -- 249,903
Dividends paid to Parent -- (3,323,050)
-------- ----------
Net cash used in financing activities (907,383) (3,225,967)
-------- ----------
INCREASE (DECREASE) IN CASH (1,012,884) 346,116
CASH AT BEGINNING OF PERIOD 1,047,239 16,762
--------- ------
CASH AT END OF PERIOD $ 34,355 $ 362,878
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the six months ended for:
Interest $2,488,252 $ 557,419
Income taxes paid to Parent $ 26,280 $ 37,238
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of Piper Jaffray Companies Inc.)
NOTES TO FINANCIAL STATEMENTS
Six Months Ended March 31, 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 six months ended March 31, 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 March 31, 1996 and the information
for the periods ended March 31, 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 March 31, 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 March 31, 1996, and
September 30, 1995, the aggregate amount outstanding was approximately
$26,531,000 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 six months ended March 31, 1996
the Company received $2,881 in interest income from the Parent. At March 31,
1996 and September 30, 1995, $83,458 and $62,487, respectively, was receivable
from the Parent.
General and administrative expenses for the six months ended March 31, 1995
includes a management fee of $101,463 paid to 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 six months ended March 31, 1996 and 1995, the
Company was charged $9,500 and $13,000, respectively, for such accounting
services. The Company's costs are not necessarily indicative of the costs that
would have been incurred had the Company operated independently.
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.
<PAGE>
Results of Operations
The Company's interest income and interest expense are directly related to the
issuance and sale of mortgage-backed bonds and have increased over the prior
fiscal year due to the issuance of $54,400,000 in bonds during the six months
ended March 31, 1995. The Company recorded net interest income of $8,299 for the
six months ended March 31, 1996 versus net interest expense of $68,639 for the
prior year. The Company incurred net interest expense for the six months ended
March 31, 1995 because the liquidation of collateral for called bonds occurred
prior to the date the bonds were actually called.
During the six months ended March 31, 1996 general and administrative expenses
decreased 11% over the same period of the prior year, excluding the $101,463
management fee and the $6,000 commission paid to PJI during fiscal 1995.
<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 March 31,
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 May 13, 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 MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 34355
<SECURITIES> 50321600
<RECEIVABLES> 413925
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52618453
<CURRENT-LIABILITIES> 328027
<BONDS> 48874000
0
0
<COMMON> 1000
<OTHER-SE> 2131512
<TOTAL-LIABILITY-AND-EQUITY> 52618453
<SALES> 0<F2>
<TOTAL-REVENUES> 2317366
<CGS> 0<F3>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 197719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2086669
<INCOME-PRETAX> 32978
<INCOME-TAX> 12202
<INCOME-CONTINUING> 20776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20776
<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>
