EX-99.1 2 d445127dex991.htm REGISTRANT'S MONTHLY OPERATING REPORT Registrant's Monthly Operating Report

Exhibit 99.1

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

 

In re The PMI Group, Inc.   

Case No. 11-13730 (BLS)

Reporting Period: 10/1/12-10/31/12

MONTHLY OPERATING REPORT

File with Court and submit copy to United States Trustee within 20 days after end of month

Submit copy of report to any official committee appointed in the case

 

REQUIRED DOCUMENTS

  

Form No.

  

Document

Attached

  

Explanation

Attached

  

Debtor’s
Statement

Schedule of Cash Receipts and Disbursements    MOR-1    X      
Bank Account Reconciliations, Bank Statements and Cash Disbursements Journal    MOR-1(a)          X
Schedule of Professional Fees Paid    MOR-1(b)    X      
Statement of Operations    MOR-2    X      
Balance Sheet    MOR-3    X      
Status of Postpetition Taxes    MOR-4          X
Summary of Unpaid Postpetition Accounts Payable    MOR-4(a)    X      
Debtor Questionnaire    MOR-5    X      

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

 

 

   

 

Signature of Debtor     Date

 

   

 

Signature of Joint Debtor     Date

/s/ L. Stephen Smith

   

11/27/12

Signature of Authorized Individual*     Date

L. Stephen Smith

   

Chief Executive Officer

and Chairman of the Board

Printed Name of Authorized Individual     Title of Authorized Individual

 

* Authorized individual must be an officer, director or shareholder if debtor is a corporation; a partner if debtor is a partnership; a manager or member if debtor is a limited liability company.


NOTES TO MONTHLY OPERATING REPORT

The PMI Group, Inc., a debtor and debtor in possession (the “Company” or “Debtor”), hereby submits its Monthly Operating Report (the “MOR”).

1. Description of the Cases. On November 23, 2011 (the “Petition Date”), the Debtor filed a voluntary petition with the Bankruptcy Court for reorganization under Chapter 11 of the Bankruptcy Code. The Debtor is operating its business as a debtor-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

2. Basis of Presentation. The MOR is limited in scope, covers a limited time period and has been prepared solely for the purpose of complying with the monthly reporting requirements to the United States Bankruptcy Court. The financial information in the MOR is preliminary and unaudited and does not purport to show the financial statements of the Debtor in accordance with Generally Accepted Accounting Principles (“GAAP”) and, therefore, may exclude items required by GAAP, such as certain reclassifications, eliminations, accruals, valuations and disclosure items. We caution readers not to place undue reliance upon the MOR. There can be no assurance that such information is complete and the MOR may be subject to revision.

The information contained in the MOR has been derived from the Debtor’s books and records in conjunction with information available from non-debtor affiliates. This information, however, has not been subject to procedures that would typically be applied to financial information presented in accordance with GAAP, and upon the application of such procedures, we believe that the financial information could be subject to changes and these changes could be material. The information furnished in this MOR includes primarily normal recurring adjustments but does not include all of the adjustments that would typically be made for financial statements prepared in accordance with GAAP. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

3. Recoveries and Causes of Action. The MOR, the Debtor’s Schedules of Assets and Liabilities and Statements of Financial Affairs may not include a complete list of causes of action it possesses as of the Petition Date or at any point thereafter. Regardless of the recoveries and causes of action listed, the Debtor reserves all of its rights with respect to any and all causes of action it may possess, including, but not limited to, avoidance actions or to assert any defenses, and nothing in this MOR shall be deemed a waiver or limitation of any of the Debtor’s rights to pursue any such causes of action or recovery or assert any defenses.

4. Reorganization Items. American Institute of Certified Public Accountant Statement of Position 90-7, “Financial Reporting by Entities in reorganization under the Bankruptcy Code” (“SOP 90-7”) requires separate disclosure of reorganization items such as realized gains and losses from the settlement of pre-petition liabilities, provisions for losses resulting from the reorganization and restructuring of the business as well as professional fees directly related to the process of reorganizing the Debtor under Chapter 11. Such items are reflected in the MOR as Bankruptcy Related Expenses.


5. Liabilities Subject to Compromise. As a result of the Chapter 11 filing, most pre-petition indebtedness is subject to compromise or other treatment under a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. The Debtor has been paying and intends to continue to pay undisputed post-petition claims in the ordinary course of business. In addition, the Debtor may reject pre-petition executory contracts with respect to the Debtor’s operations with the approval of the Bankruptcy Court. Damages resulting from rejection of executory contracts are generally treated as general unsecured claims and will be classified as liabilities subject to compromise. The pre-petition liabilities that are subject to compromise are reported herein at the amounts expected to be allowed, although they may be settled for lesser amounts. The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims or other events. While GAAP requires fair market adjustments to certain obligations, including funded debt, this MOR states such obligations at notional value, including pre-petition accrued interest.

On February 21, 2012, the Bankruptcy Court signed an order to approve an amended cost allocation agreement between the Debtor and an operating subsidiary. Under the amended agreement, the operating subsidiary agreed to continue providing certain services. As part of the consideration for the provision of services, the Debtor has made a “cure payment” of $849,488 for services rendered prior to the Petition Date.

The “Liabilities Subject to Compromise” includes a pre-petition intercompany claim in the amount of $18,237,156. The Debtor’s Schedule of Assets and Liabilities, filed on December 23, 2011, classified this claim as “contingent” and “disputed”. The Debtor filed an objection to this intercompany claim (Proof of Claim #894) on March 19, 2012 and subsequently filed a supplemental objection to this claim on September 28, 2012. While this claim continues to be included in the MOR as a liability subject to compromise, the Debtor believes that Claim 894 should be disallowed. Moreover, the Debtor expects that, as a component of the settlement announced on October 31, 2012, and subject to final documentation and court approval, this claim will be released.

6. Post-petition Accounts Payable. The Debtor has paid and continues to pay post-petition, undisputed invoices in the ordinary course and on generally agreed-upon terms.

7. Investments in Subsidiaries. Financial information related to any of the Debtor’s investments in its subsidiaries has been derived from the Debtor’s books and records in conjunction with the information available from non-debtor affiliates. Any information contained in this report pertaining to the Debtor’s investments in its subsidiaries should be viewed as preliminary and subject to revision. Given the timing of this filing, final loss provision and other expenses and revisions may not be reflected in the period in which they occur.

In August 2012, the Debtor recorded a full valuation allowance against its equity investment in PMI Capital I, an affiliate formed to facilitate the issuance of certain junior debentures, due to the Debtor’s subordinated position in the PMI Capital I capital structure. The fair market value of this investment and the amount that may be ultimately received in satisfaction thereof cannot be determined at this time.


8. Non-Cash Compensation Expense. Prior to the Petition Date, certain employees of the Debtor and its subsidiaries were granted stock-based compensation (including options). The Debtor has not expensed or accrued post-petition expense for outstanding stock-based grants and other stock-based compensation.

9. Pre-Paid Assets. Pre-Paid Assets primarily consist of insurance policies being amortized on a straight-line basis over the life of each policy.

10. Notes Receivable. The Other Assets balance reported on the balance sheet of this report includes notes receivable that relate to investments made prior to 2002 to fund programs instituted, or to be instituted, by the Company or its subsidiaries. These programs are no longer in place and the Debtor is currently attempting to monetize these assets. The value assigned to these notes has been derived from the Debtor’s books and records in conjunction with the information available from non-debtor affiliates. The Debtor has not independently confirmed the outstanding balance on these notes receivable. These amounts may not represent fair market value and may be subject to significant revision.

The Debtor holds a Note Receivable of approximately $285 million plus accrued interest from an operating subsidiary. That subsidiary has been placed into receivership by its regulator due to a deficiency in regulatory capital; accordingly, the Debtor has provided a full valuation allowance against this note. The fair market value of this note and the amount that may ultimately be received in satisfaction thereof cannot be determined at this time.

11. Deferred Assets and Liabilities and Other Accruals. The Debtor has reversed certain accruals for pre-petition non-cash assets and liabilities, such as unamortized debt issuance expenses. There is significant uncertainty respecting the Debtor’s ability to utilize its deferred tax attributes; accordingly, a full valuation allowance has been applied to the deferred tax asset and no tax benefit or provision has been recognized.

12. Intercompany Balances. The “Accounts Receivable – Affiliates” and Post-petition “Accounts Payable – Intercompany” should be viewed as preliminary and subject to further revision. Given the timing of this filing, the Debtor and its affiliates may be required to make adjustments that may not be reflected in the period in which they occur.


The PMI Group, Inc.

Cash Receipts and Disbursements

October 1, 2012 to October 31, 2012

MOR - 1

 

Cash Receipts

   $ 24   

Operating Disbursements

  

Employee Compensation

     91,210   

Payroll Taxes

     1,698   

Employee Benefit Costs

     399   

Consultants and Temporary Staff

     2,151   

Ordinary Course Professional Fees

     —     

Intercompany Payments (non-employee)

     61,959   

Travel

     —     

Tax Payments

     —     

Board Compensation and Travel

     227,250   

Other (misc. G&A and contingencies)

     25,927   
  

 

 

 

Total Operating Disbursements

     410,593   

Bankruptcy Related Expenses

  

Debtor Professionals

     128,959   

UCC Professionals

     109,116   

Claims Administrators

     —     

US Trustee

     12,350   
  

 

 

 

Total Bankruptcy Disbursements

     250,425   

Total Disbursements

     661,018   

Net Cash Flow

   $ (660,994

Beginning Cash Balance as of 10-1-2012

   $ 159,004,544   

Change in Cash

     (660,994
  

 

 

 

Ending Cash Balance as of 10-31-2012

   $ 158,343,550   
  

 

 

 


The PMI Group, Inc.

Schedule of Bank Accounts and Balances

As of October 31, 2012

MOR - 1a

Note: All bank accounts have been reconciled for the period presented.

 

Name of Bank

   Account Name    Bank Account Number    Balance  

Bank of America

   Main Account    xxxxxx0476    $ 157,926,610   

Bank of America

   Payroll Account    xxxxxx0423      124,988   

Bank of America

   Investment Account    xxxx0C80      —     

Bank of New York

   Cash Securities    xxx430      276,905   

Commonwealth National Bank

   Gateway    xxx3169      15,046   
        

 

 

 

Total

         $ 158,343,550   
        

 

 

 


The PMI Group, Inc.

Schedule of Professional Fees Paid

October 1, 2012 to October 31, 2012

MOR - 1b

 

Payee

   Period Covered    Amount  

Morrison & Foerster, LLP

   June 2012    $ 61,051   

Peter J. Solomon Company, L.P.

   June 2012      48,066   

Goldin Associates, LLC

   September 2012      128,959   

U.S. Trustee

   July 2012 - September 2012      12,350   
     

 

 

 

Total Professional Fees

      $ 250,425   
     

 

 

 


STATEMENT OF OPERATIONS

THE PMI GROUP, INC.

For the Month Ended October 31, 2012

MOR-2

 

Total Revenues

   $ —     
  

 

 

 

Payroll Expense

     103,312   

Other Recurring Expenses

     682,809   
  

 

 

 

Total Recurring Expenses

     786,121   

Non-Recurring Expenses - Bankruptcy Related

     1,588,860   
  

 

 

 

Total Expenses

     2,374,981   

Interest and Dividends

     24   

Equity Earnings

     179,148   

Gain (Loss) on Investments

     —     
  

 

 

 

Net Investment Income

     179,172   
  

 

 

 

Non-Cash Interest Expense

     —     
  

 

 

 

Income (Loss) before Tax

     (2,195,809
  

 

 

 

Tax Provision (Benefit)

     39,658   
  

 

 

 

Net Income (Loss)

   $ (2,235,467
  

 

 

 


BALANCE SHEET

THE PMI GROUP, INC.

As of October 31, 2012

MOR-3

 

Assets

  

Fixed Income Securities

   $ —     

Cash

     158,343,550   

Investments in Subsidiaries

     57,323,673   

Accounts Receivable - Affiliates

     1,655,001   

Pre-Paid Assets

     9,633,542   

Other Assets

     264,429   
  

 

 

 

Total Assets

   $ 227,220,194   
  

 

 

 

Liabilities Not Subject to Compromise

  

Accrued Expenses

   $ 8,711,409   

Accounts Payable

     127,072   

Accounts Payable - Intercompany

     37,977   

Other Liabilities

     45,334   
  

 

 

 

Liabilities Not Subject to Compromise

   $ 8,921,792   
  

 

 

 

Liabilities Subject to Compromise

  

Pre-Petition Bond Debt

   $ 742,553,677   

Gateway Liability

     262,000   

Accounts Payable

     49,197   

Accounts Payable - Intercompany

     19,594,296   
  

 

 

 

Liabilities Subject to Compromise

   $ 762,459,170   
  

 

 

 
  
  

 

 

 

Total Liabilities

   $ 771,380,962   
  

 

 

 

Common Stock

   $ 1,970,788   

Additional Paid in Capital and Accumulated Deficit

     727,273,352   

Treasury Shares

     (1,273,404,907
  

 

 

 

Total Equity

   $ (544,160,768 ) 
  

 

 

 
  
  

 

 

 

Total Liabilities and Equity

   $ 227,220,194   
  

 

 

 


The PMI Group, Inc.

Summary of Post-Petition Taxes

For the Month Ended October 31, 2012

MOR - 4

Representation: The PMI Group, Inc.’s 2011 federal income tax return, filed on September 12, 2012, indicates taxes owing of $4,862,835. The Debtor and/or its affiliates intend to pay this amount.


The PMI Group, Inc.

Summary of Post-Petition Debts

For the Month Ended October 31, 2012

MOR - 4a

 

Unpaid Post-Petition Debts

                
     Current     0-31 Days      31-60 Days      61-90 Days      Over 90 Days      Total  

Total Operating Activity Payables

   $ —        $ —         $ —         $ —         $ —         $ —     

Total Bankruptcy Activity Payables

     (127,072     —           —           —           —           (127,072
  

 

 

 

Total Post-Petition Payables

   $ (127,072   $ —         $ —         $ —         $ —         $ (127,072
  

 

 

 


The PMI Group, Inc.

Debtor Questionnaire

For the Month Ended October 31, 2012

MOR - 5

DEBTOR QUESTIONNAIRE

 

Must be completed each month

  

Yes

   No  
1.   Have any assets been sold or transferred outside the normal course of business this reporting period? If yes, provide an explanation below.         x   
2.   Have any funds been disbursed from any account other than a debtor in possession account this reporting period? If yes, provide an explanation below.         x   
3.   Have all postpetition tax returns been timely filed? If no, provide an explanation below.    x   
4.   Are workers compensation, general liability and other necessary insurance coverages in effect? If no, provide an explanation below.    x   
5.   Has any bank account been opened during the reporting period? If yes, provide documentation identifying the opened account(s). If an investment account has been opened provide the required documentation pursuant to the Delaware Local Rule 4001-3.         x