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, 1998
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, 1998, and were wholly owned
by U.S. Bancorp Piper Jaffray Companies Inc., a wholly owned subsidiary of U.S.
Bancorp.
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 U.S. Bancorp)
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Statements of Financial Condition 3
Statements of Operations 4-5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION:
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
PART I FINANCIAL INFORMATION
Item I. Financial Statements
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<S> <C> <C>
June 30, September 30,
ASSETS 1998 1997
---------------- -----------------
(unaudited)
Cash $ 1,051,556 $ 771,448
Interest receivable 202,471 271,887
Investments available for sale, carried at
market value 34,500,297 42,100,057
Receivable from Parent 3,645 3,004
Unamortized bond issuance costs 1,200,028 1,547,387
---------------- -----------------
$ 36,957,997 $ 44,693,783
================ =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $ 30,285,000 $ 40,240,000
Interest payable on bonds 422,969 550,313
Bond redemption payable 794,000 469,000
Deferred tax liabilities 2,086,987 1,268,162
Other liabilities 1,026 1,357
---------------- -----------------
33,589,982 42,528,832
Stockholder's equity:
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding 1,000 1,000
Additional paid-in capital 195,652 35,000
Net unrealized holding gains on investment
securities available for sale 3,166,883 1,962,793
Retained earnings 4,480 166,158
---------------- -----------------
3,368,015 2,164,951
---------------- -----------------
$ 36,957,997 $ 44,693,783
================ =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Pre-Acquisition Post-Acquisition
Seven Months Two Months
Ended Ended Nine Months Ended
April 30, June 30, June 30,
----------------------------------- -----------------------------------
1998 1998 1998 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income $ 1,743,549 $ 429,006 $ 2,172,555 $ 2,658,670
Interest expense 1,827,302 447,838 2,275,140 2,684,937
----------------- ----------------- ----------------- -----------------
Net interest expense 83,753 18,832 102,585 26,267
Net gain on accretion of discount
on investments 373,355 111,944 485,299 179,718
----------------- ----------------- ----------------- -----------------
Total revenue 289,602 93,112 382,714 153,451
EXPENSES:
Amortization of bond issuance
costs on redemptions 267,379 79,980 347,359 126,858
General and administrative costs 31,249 5,788 37,037 52,231
----------------- ----------------- ----------------- -----------------
Total expenses 298,628 85,768 384,396 179,089
----------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) BEFORE INCOME TAXES (9,026) 7,344 (1,682) (25,638)
INCOME TAXES (BENEFIT) (3,520) 2,864 (656) (9,486)
----------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) $ (5,506) $ 4,480 $ (1,026) $ (16,152)
================= ================= ================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Pre-Acquisition Post-Acquisition
One Months Two Months
Ended Ended Three Months Ended
April 30, June 30, June 30,
----------------------------------- -----------------------------------
1998 1998 1998 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income $ 222,744 $ 429,006 $ 651,750 $ 859,020
Interest expense 241,036 447,838 688,874 869,941
----------------- ----------------- ----------------- -----------------
Net interest expense 18,292 18,832 37,124 10,921
Net gain on accretion of discount
on investments 79,339 111,944 191,283 66,229
----------------- ----------------- ----------------- -----------------
Total revenue 61,047 93,112 154,159 55,308
EXPENSES:
Amortization of bond issuance
costs on redemptions 58,059 79,980 138,039 43,366
General and administrative costs 1,391 5,788 7,179 9,717
----------------- ----------------- ----------------- -----------------
Total expenses 59,450 85,768 145,218 56,083
----------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) BEFORE INCOME TAXES 1,597 7,344 8,941 (775)
INCOME TAXES (BENEFIT) 623 2,864 3,487 (287)
----------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) $ 974 $ 4,480 $ 5,454 $ (488)
================= ================= ================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Pre-Acquisition Post-Acquisition
Seven Months Two Months
Ended Ended Nine Months Ended
April 30, June 30, June 30,
----------------------------------- -----------------------------------
1998 1998 1998 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (5,506) $ 4,480 $ (1,026) $ (16,152)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Amortization of bond issuance costs 267,379 79,980 347,359 126,858
Deferred income taxes (59,677) 7,636 (52,041) (2,029)
Recognition of discount on investments 373,355 111,944 485,299 179,718
Change in:
Interest receivable 51,775 17,641 69,416 24,590
Interest payable on bonds (79,603) (47,741) (127,344) (43,004)
Bond redemptions payable 1,196,000 (871,000) 325,000 35,000
Receivable from parent 3,004 (3,645) (641) 21,384
Other (214) (117) (331) 1,399
----------------- ----------------- ----------------- -----------------
Net cash provided by (used in)
operating activities 1,746,513 (700,822) 1,045,691 327,764
FINANCING ACTIVITIES:
Redemption of mortgage-backed bonds (7,662,000) (2,293,000) (9,955,000) (3,635,000)
Principal redemption on investments
pursuant to mortgage-backed bonds 7,087,667 2,101,750 9,189,417 3,329,037
Net issuance of notes payable
to Parent 348 (348) - -
----------------- ----------------- ----------------- -----------------
Net cash used in
financing activities (573,985) (191,598) (765,583) (305,963)
----------------- ----------------- ----------------- -----------------
INCREASE IN CASH 1,172,528 (892,420) 280,108 21,801
CASH AT BEGINNING OF PERIOD 771,448 1,943,976 771,448 591,051
----------------- ----------------- ----------------- -----------------
CASH AT END OF PERIOD $ 1,943,976 $ 1,051,556 $ 1,051,556 $ 612,852
================= ================= ================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (refunded) during the period ended for:
Interest $ 1,906,905 $ 495,579 $ 2,402,484 $ 2,727,941
Income taxes paid to
(refunded from)Parent $ 11,982 $ 4,772 $ 16,754 $ (9,998)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended June 30, 1998 and 1997
1. ORGANIZATION AND BUSINESS ACTIVITY
The Company is a wholly owned subsidiary of U.S. Bancorp Piper Jaffray Companies
Inc., formerly known as Piper Jaffray Companies Inc. (the "Parent"), which is a
wholly owned subsidiary of U.S. Bancorp. On April 30, 1998, the shareholders of
Piper Jaffray Companies Inc. approved the acquisition of the Parent by U.S.
Bancorp. The acquisition closed on May 1, 1998 and was accounted for as a
purchase transaction. At the time of the acquisition, the Parent changed its
name to U.S. Bancorp 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. At June 30, 1998, 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
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 $29,222,159 and $38,828,738 at June 30, 1998 and September 30, 1997,
respectively.
The Company's collateral for outstanding mortgage-backed bonds is classified as
available for sale and such securities are not salable before the bonds are
callable, at some future date. In addition, 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 recognize any unrealized losses or related tax
benefits. 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, 1997.
The results of operations for the period ended June 30, 1998, are not
necessarily indicative of the results to be expected for the year. As a result
of the May 1, 1998 acquisition, the statements of operations and cash flows for
the three and nine months ended June 30, 1998 have been presented pre and post
acquisition. This presentation provides the post acquisition periods as
consolidated in the U.S. Bancorp consolidated financial statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The statement of financial condition as of June 30, 1998 and the information for
the periods ended April 30, 1998 and June 30, 1998 and 1997, 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, 1998, 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, 1998, and
September 30, 1997, the aggregate amount outstanding was approximately
$5,113,000 and $17,486,000, respectively.
On April 27, 1998 the Company redeemed the outstanding bonds for the Series
1989-E, original principal of $50,000,000, which had been originally accounted
for as a sale. The redemption had no affect on the financial statements of the
Company.
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 nine months ended June 30, 1998 and 1997 the
Company received $96 and $248 in interest, respectively.
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 nine months ended June 30, 1998 and 1997, the Company was
charged $15,750 and $15,750, 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. At
June 30, 1998 and September 30, 1997, $3,645 and $3,004, respectively, was
receivable from the Parent. The Company's costs are not necessarily indicative
of the costs that would have been incurred had the Company operated
independently.
5. SUBSEQUENT EVENT
On July 31, 1998, the Company's Board of Directors approved a resolution to
change the Company's year end from September 30 to December 31.
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 $102,585 for the nine months ended June 30, 1998 and $26,267 for the
same nine months of the prior year, which 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.
PART II. OTHER INFORMATION:
Item 5. Other Information
Change in Parent Company
The Registrant is a wholly owned subsidiary of U.S. Bancorp Piper Jaffray
Companies Inc., formerly known as Piper Jaffray Companies Inc. On May 1, 1998
U.S. Bancorp acquired Piper Jaffray Companies Inc. pursuant to an Agreement and
Plan of Merger dated as of December 14, 1997 by and among Piper Jaffray
Companies Inc., U.S. Bancorp and Cub Acquisition Corporation (the "Merger").
Also on May 1, 1998, the name of Piper Jaffray Companies Inc. was changed to
U.S. Bancorp Piper Jaffray Companies Inc. As a result of the Merger, the
Registrant became a wholly owned subsidiary of U.S. Bancorp held through U.S.
Bancorp Piper Jaffray Companies Inc.
Change in Fiscal Year
On July 31, 1998, the Company's Board of Directors approved a resolution to
change the Company's year end from September 30 to December 31.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
27 - Financial Data Schedule - EDGAR version only (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, 1998.
<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, 1998 /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, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,051,556
<SECURITIES> 34,500,297
<RECEIVABLES> 202,471
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,957,997
<CURRENT-LIABILITIES> 2,086,987
<BONDS> 30,285,000
0
0
<COMMON> 1,000
<OTHER-SE> 3,367,015
<TOTAL-LIABILITY-AND-EQUITY> 36,957,997
<SALES> 0 <F2>
<TOTAL-REVENUES> 2,657,854
<CGS> 0 <F3>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 384,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,275,140
<INCOME-PRETAX> (1,682)
<INCOME-TAX> (656)
<INCOME-CONTINUING> (1,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,026)
<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>
