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, 1997
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, 1997, 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
March 31, September 30,
ASSETS 1997 1996
--------------- ---------------
(unaudited)
Cash $ 771,832 $ 591,051
Interest receivable 290,754 306,333
Investments available-for-sale, carried 43,706,480 46,287,924
at market value
Receivable from Parent 298 21,693
Unamortized bond issuance costs 1,644,543 1,725,034
=============== ===============
$ 46,413,907 $ 48,932,035
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $ 43,029,000 $ 45,333,000
Interest payable on bonds 588,579 610,378
Bond redemption payable 453,000 271,000
Deferred tax liabilities 827,348 972,611
Other liabilities 1,449 -
--------------- ---------------
44,899,376 47,186,989
--------------- ---------------
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
Net unrealized holding gains on
investment securities available for sale 1,311,065 1,525,917
Retained earnings 167,466 183,129
--------------- ---------------
1,514,531 1,745,046
=============== ===============
$ 46,413,907 $ 48,932,035
=============== ===============
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,
----------------------- ---------------------
1997 1996 1997 1996
----------------------- ---------------------
REVENUES:
Interest income $ 886,546 $ 1,023,325 $ 1,799,650 $ 2,094,968
Interest expense 898,264 1,010,938 1,814,996 2,086,669
--------------------- ---------------------
Net interest income (expense) (11,718) 12,387 (15,346) 8,299
Net gain on accretion of
discount on investments 69,492 143,897 113,489 222,398
----------------------- ---------------------
Total revenue 57,774 156,284 98,143 230,697
EXPENSES:
Amortization of bond issuance
costs on redemptions 49,282 125,327 80,492 175,724
General and administrative costs 31,594 10,555 42,514 21,995
----------------------- ----------------------
Total expenses 80,876 135,882 123,006 197,719
----------------------- ----------------------
INCOME (LOSS) BEFORE INCOME
TAXES (23,102) 20,402 (24,863) 32,978
INCOME TAXES (BENEFIT) (8,512) 7,297 (9,199) 12,202
======================= ======================
NET INCOME (LOSS) $ (14,590) $ 13,105 (15,664) 20,776
======================= ======================
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,
----------------------------
1997 1996
------------ -------------
OPERATING ACTIVITIES:
Net income (loss) $ (15,664) $ 20,776
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating activities:
Amortization of bond issuance costs 80,492 175,724
Deferred income taxes (2,029) 38,482
Recognition of discount on investments 113,489 222,398
Change in:
Interest receivable 15,579 30,476
Interest payable on bonds (21,799) (401,583)
Bond redemptions payable 182,000 (169,000)
Receivable from parent 21,395 (20,971)
Other 1,449 (1,803)
------------ -------------
Net cash provided by (used in) 374,912 (105,501)
operating activities
FINANCING ACTIVITIES:
Redemption of mortgage-backed bonds (2,304,000) (5,034,000)
Principal redemption on investments pursuant
to mortgage-backed bonds 2,109,869 4,126,617
------------ ------------
Net cash used in financing activities (194,131) (907,383)
------------ ------------
INCREASE (DECREASE) IN CASH 180,781 (1,012,884)
CASH AT BEGINNING OF PERIOD 591,051 1,047,239
============ =============
CASH AT END OF PERIOD $ 771,832 $ 34,355
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (refunded) during the six months
ended for:
Interest $ 1,836,795 $ 2,488,252
Income taxes paid to Parent $ (9,697) $ 26,280
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, 1997 and 1996
1. ORGANIZATION AND BUSINESS ACTIVITY
The Company is a wholly owned subsidiary of Piper Jaffray Companies Inc.
(the "Parent"). 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments pursuant to mortgage-backed securities are classified as
available for sale, and are carried at market value based upon quoted market
prices with a cost of $41,521,373 and $43,744,731 at March 31, 1997 and
September 30, 1996, respectively. The effect on the Company's financial
statements was an unrealized holding gain of $214,852, net of related taxes, for
the six months ended March 31, 1997.
The Company's collateral for outstanding mortgage-backed bonds is
classified as available for sale; however, such securities are not salable
before the bonds are callable, at some future date. The market value of GNMA and
FNMA securities fluctuate significantly as interest rates change; therefore, the
market value of such securities as of the future redemption dates may vary
significantly from the current date, and the realization of any unrealized gain
is not assured. When the market is such that the value of the securities is less
than the amortized cost, the Company has the expectation that such securities
would be held to maturity as collateral for the related mortgage-backed bonds,
and the Company would not realize any unrealized losses. Thus, no tax benefit
would be recognized for unrealized losses for the Company's investment in
available for sale securities. The Company does recognize deferred tax
liabilities resulting from unrealized gains on available for sale securities.
Unamortized bond issuance costs consist of underwriting and other expenses
of issuance and distribution. Such costs are amortized as bonds are redeemed.
Cash includes monthly principal and interest payments from investments
pursuant to mortgage-backed bonds, plus any reinvestment income thereon, which
are used to pay interest and redeem mortgage-backed bonds during the month
following receipt.
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, 1996.
The results of operations for the six months ended March 31, 1997, are not
necessarily indicative of the results to be expected for the year ending
September 30, 1997.
The statement of financial condition as of March 31, 1997 and the
information for the periods ended March 31, 1997 and 1996, 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, 1997, 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,
1997, and September 30, 1996, the aggregate amount outstanding was approximately
$19,232,000 and $22,293,000, respectively.
4. RELATED PARTY TRANSACTIONS
The Company maintains 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, 1997
and 1996 the Company received $290 and $2,881, respectively, in interest income
from the Parent. At March 31, 1997 and September 30, 1996, $298 and $21,693,
respectively, was receivable from the Parent.
The Company is charged for certain expenses by the Parent based on
specifically identified cost allocations. In addition, the Company's Parent
provides the Company with accounting and administrative services, including
services of officers. For the six months ended March 31, 1997 and 1996, the
Company was charged $10,500 and $9,500, respectively, for such accounting
services. These charges are subject to periodic reevaluation based upon the
number of mortgage-backed bond series outstanding and the nature of services
provided. 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.
Results of Operations
The Company's interest income and interest expense are directly related to
the issuance and sale of mortgage-backed bonds. The Company recorded net
interest expense of $15,346 for the six months ended March 31, 1997 versus net
interest income of $8,299 for the same six months of the prior year. Net
interest expense for the six months through March 31, 1997 related to the fiscal
1995 sale of residual interests in one series of mortgage-backed bonds. The
Company anticipates that it will incur additional interest expense in future
years relating to the sale of such residual interests.
<PAGE>
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
None applicable
(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, 1997.
<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, 1997 /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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 771,832
<SECURITIES> 43,706,480
<RECEIVABLES> 290,754
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,413,907
<CURRENT-LIABILITIES> 1,043,028
<BONDS> 43,029,000
0
0
<COMMON> 1,000
<OTHER-SE> 1,513,531
<TOTAL-LIABILITY-AND-EQUITY> 46,413,907
<SALES> 0 <F2>
<TOTAL-REVENUES> 1,913,139
<CGS> 0 <F3>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 123,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,814,996
<INCOME-PRETAX> (24,863)
<INCOME-TAX> (9,199)
<INCOME-CONTINUING> (15,664)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,664)
<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>
