UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from October 1, 1997 to December 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 December 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 U.S. Bancorp)
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. As such, a
Transition Report on Form 10-Q is being filed for the transition period from
October 1, 1997 to December 31, 1997. This report contains the same information
as was previously filed on Form 10-Q for the period ending December 31, 1997.
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>
PART I FINANCIAL INFORMATION
Item I. Financial Statements
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF FINANCIAL CONDITION
December 31, September 30,
1997 1997
---------------- ----------------
(unaudited)
ASSETS
Cash $ 1,009,961 $ 771,448
Interest receivable 255,575 271,887
Investments available for sale,
carried at market value 39,703,540 42,100,057
Receivable from Parent - 3,004
Unamortized bond issuance costs 1,463,164 1,547,387
---------------- ----------------
$ 42,432,240 $ 44,693,783
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgage-backed bonds payable $ 37,827,000 $ 40,240,000
Interest payable on bonds 522,764 550,313
Bond redemption payable 717,000 469,000
Note payable to Parent 351 -
Deferred tax liabilities 1,240,980 1,268,162
Other liabilities 1,285 1,357
---------------- ----------------
40,309,380 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 35,000 35,000
Net unrealized holding gains on investment
securities available for sale 1,921,910 1,962,793
Retained earnings 164,950 166,158
---------------- ----------------
2,122,860 2,164,951
---------------- ----------------
$ 42,432,240 $ 44,693,783
================ ================
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
December 31,
------------- -------------
1997 1996
------------- -------------
REVENUE:
Interest income $ 788,707 $ 913,104
Interest expense 814,656 916,732
------------- -------------
Net interest expense 25,949 3,628
Net gain on accretion of discount on investments 118,482 43,997
------------- -------------
Total revenue 92,533 40,369
EXPENSE:
Amortization of bond issuance costs on redemptions 84,223 31,210
General and administrative costs 10,290 10,920
------------- -------------
Total expense 94,513 42,130
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT (1,980) (1,761)
INCOME TAX BENEFIT (772) (687)
------------- -------------
NET LOSS $ (1,208) $ (1,074)
============= =============
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
------------------------------
1997 1996
-------------- --------------
OPERATING ACTIVITIES:
Net loss $ (1,208) $ (1,074)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of bond issuance costs 84,223 31,210
Deferred income taxes 73 (2,042)
Recognition of discount on investments 118,482 43,997
Change in:
Interest receivable 16,312 6,042
Interest payable on bonds (27,549) (4,103)
Bond redemptions payable 248,000 145,000
Receivable from parent 3,004 5,774
Other (72) 1,494
-------------- --------------
Net cash provided by operating activities 441,265 226,298
FINANCING ACTIVITIES:
Redemption of mortgage-backed bonds (2,413,000) (894,000)
Principal redemption on investments pursuant
to mortgage-backed bond 2,209,897 818,333
Net issuance of notes payable to Parent 351 -
-------------- --------------
Net cash used in financing activities (202,752) (75,667)
-------------- --------------
INCREASE IN CASH 238,513 150,631
CASH AT BEGINNING OF PERIOD 771,448 591,051
-------------- --------------
CASH AT END OF PERIOD $ 1,009,961 $ 741,682
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (refunded) during the three months ended for:
Interest $ 842,205 $ 920,835
Income taxes paid to (refunded from) Parent $ 846 $ (686)
See accompanying notes to financial statements.
<PAGE>
PREMIER ACCEPTANCE CORPORATION
(a wholly owned subsidiary of U.S. Bancorp)
NOTES TO FINANCIAL STATEMENTS
Three Months Ended December 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.
On December 15, 1997, the Company's Parent announced an agreement of merger with
U.S. Bancorp. The merger, which is subject to shareholder and regulatory
approval, is expected to close in the second calendar quarter of 1998.
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 December 31, 1997, 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 $36,500,359 and $38,828,738 at December 31, 1997 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 three months ended December 31, 1997, are not
necessarily indicative of the results to be expected for the year ending
September 30, 1998.
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 December 31, 1997 and the information
for the periods ended December 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 December 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 December 31, 1997, and
September 30, 1997, the aggregate amount outstanding was approximately
$11,610,000 and $17,486,000, respectively.
On December 29, 1997 the Company redeemed the outstanding bonds for the Series
1990-II, 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 three months ended December 31, 1997 and 1996
the Company received $83 and $270 interest, respectively. At December 31, 1997,
$351 was payable to the Parent and at September 30, 1997, $3,004 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 three months ended December 31, 1997 and 1996, the Company was
charged $5,250 and $5,250, 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
On December 15, 1997, the Company's Parent announced an agreement of merger with
U.S. Bancorp. The merger, which is subject to shareholder and regulatory
approval, is expected to close in the second calendar quarter of 1998.
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 $25,949 for the three months ended December 31, 1997 and net interest
expense of $3,628 for the same three 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.
<PAGE>
PART II. OTHER INFORMATION:
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
December 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 September 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 TRANSITION PERIOD FROM OCTOBER 1, 1997 TO DECEMBER 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,009,961
<SECURITIES> 39,703,540
<RECEIVABLES> 255,575
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,432,240
<CURRENT-LIABILITIES> 1,240,115
<BONDS> 37,827,000
0
0
<COMMON> 1,000
<OTHER-SE> 2,121,860
<TOTAL-LIABILITY-AND-EQUITY> 42,432,240
<SALES> 0 <F2>
<TOTAL-REVENUES> 907,189
<CGS> 0 <F3>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 94,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 814,656
<INCOME-PRETAX> (1,980)
<INCOME-TAX> (772)
<INCOME-CONTINUING> (1,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,208)
<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>
