Prospectus Supplement Dated August 13, 2004 Filed Pursuant to Rule 424 (b)(3)
to Prospectus Dated January 13, 2004 of
Pioneer Financial Services, Inc. Registration Number 333-103293
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended: June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 333-103293
Pioneer Financial Services, Inc.
(Exact name of Registrant as specified in its charter)
Missouri 44-0607504
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
4700 Belleview Avenue, Suite 300, Kansas City, Missouri 64112
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (816)756-2020
- ----------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant has (1) filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X ] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of June 30, 2004
----- -------------------------------
Common Stock, $100 par value 17,136 shares
PIONEER FINANCIAL SERVICES, INC.
FORM 10-Q
June 30, 2004
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item No. Page
1. Consolidated Financial Statements..........................................3
Consolidated Balance Sheets at June 30, 2004 and September 30, 2003........3
Consolidated Statements of Income for the three months ended and nine
months ended June 30, 2004 and 2003........................................4
Consolidated Statements of Retained Earnings for the nine months
ended June 30, 2004 and year ended September 30, 2003......................5
Consolidated Statements of Cash Flows for the nine months ended
June 30, 2004 and 2003.....................................................6
Condensed Notes to Consolidated Financial Statements.......................7
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................8
3. Quantitative and Qualitative Disclosures About Market Risk................17
4. Controls and Procedures...................................................18
PART II
OTHER INFORMATION
1. Legal Proceedings......................................................18
2. Changes in Securities and Use of Proceeds..............................18
3. Defaults upon Senior Securities........................................18
4. Submission of Matters to a Vote of Security Holders....................18
5. Other Information......................................................18
6. Exhibits and Reports on Form 8-K.......................................19
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
PIONEER FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, September 30,
2004 2003
----------------- -----------------
(unaudited)
Cash $ 2,188,252 $ 2,039,109
Other investments 1,954,088 1,962,614
Finance receivables:
Direct receivables 167,394,174 147,095,062
Retail installment 20,751,127 18,799,693
contracts
----------------- -----------------
Finance receivables before
allowance
for credit losses 188,145,301 165,894,755
Allowance for credit losses (10,650,868) (9,220,868)
----------------- -----------------
Net finance receivables 177,494,433 156,673,887
Furniture and equipment, net 1,849,495 1,467,077
Deferred income taxes 3,859,500 3,364,700
Prepaid and other assets 433,745 334,859
----------------- -----------------
Total assets $ 187,779,513 $ 165,842,246
================= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
June 30, September 30,
2004 2003
----------------- -----------------
(unaudited)
Revolving credit line - $ 11,975,000 $ 10,580,000
banks
Revolving credit line - 2,799,926 1,712,841
affiliate
Accounts payable 922,293 945,038
Accrued expenses and other 11,200,256 10,940,246
liabilities
Amortizing and single pay 113,875,514 99,471,296
term notes
Junior subordinated notes 22,931,331 21,436,745
----------------- -----------------
Total liabilities $ 163,704,320 $ 145,086,166
----------------- -----------------
Stockholder's equity:
Common stock, $100 par
value; authorized
20,000 shares; issued
and outstanding
17,136 shares 1,713,600 1,713,600
Retained earnings 22,361,593 19,042,480
----------------- -----------------
Total stockholder's equity 24,075,193 20,756,080
----------------- -----------------
Total liabilities and
stockholder's equity $ 187,779,513 $ 165,842,246
================= =================
See notes to consolidated financial statements.
PIONEER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ -------------------------
2004 2003 2004 2003
---------- ----------- ----------- -----------
Revenue
Finance income $14,047,746 $12,194,349 $40,286,529 $37,377,783
Insurance premiums
and commissions 1,252,583 1,321,872 3,837,116 4,017,528
Other income, fees
and commissions 489,851 312,441 1,299,819 1,247,008
----------- ----------- ----------- -----------
Total revenue 15,790,180 13,828,662 45,423,464 42,642,319
Provision for 2,972,637 3,007,663 7,796,129 9,430,573
credit losses
Interest expense 2,250,280 2,296,585 6,685,031 7,129,507
----------- ----------- ----------- -----------
Net revenue 10,567,263 8,524,414 30,942,304 26,082,239
Operating expenses
Employee costs 5,603,150 4,577,550 16,761,621 13,991,480
Facilities 1,148,685 1,173,569 3,601,830 3,700,598
Marketing 591,706 510,041 1,886,026 1,331,576
Professional fees 564,034 343,571 1,526,138 1,575,142
Other 336,077 240,922 1,035,510 906,266
----------- ----------- ----------- -----------
Total operating 8,243,652 6,845,653 24,811,125 21,505,062
expenses
Income before income 2,323,611 1,678,761 6,131,179 4,577,177
taxes
Provision for 870,853 574,696 2,262,000 1,657,708
income taxes
----------- ----------- ----------- -----------
Net income $ 1,452,758 $ 1,104,065 $ 3,869,179 $ 2,919,469
=========== =========== =========== ===========
Net income per share,
basic and diluted $ 84.78 $ 64.43 $ 225.79 $ 170.37
=========== =========== =========== ===========
See notes to consolidated financial statements.
PIONEER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Nine Months Ended Year Ended
June 30, September 30,
2004 2003
---------------- ----------------
(unaudited)
Retained earnings, beginning of $ 19,042,480 $ 15,606,679
period
Net income 3,869,179 3,979,869
Dividends paid ($32.10 and $31.75 (550,066) (544,068)
per share)
---------------- ----------------
Retained earnings, end of period $ 22,361,593 $ 19,042,480
================ ================
See notes to consolidated financial statements.
PIONEER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30,
2004 2003
------------ ----------------
Cash Flows from Operating
Activities:
Net income $ 3,869,179 $ 2,919,469
Items not requiring(providing
cash:
Provision for credit losses
on finance receivables 7,796,129 9,430,573
Depreciation and 502,152 555,449
amortization
Compounded interest added to
junior subordinated debt 924,839 945,952
Deferred income taxes (494,800) (921,876)
Loss on disposal/donation 1,020 25,062
of equipment
Changes in:
Accounts payable and 219,692 (147,413)
accrued expenses
Other (98,886) (99,639)
------------- ----------------
Net cash provided by
operating activities 12,719,325 12,707,577
------------- ----------------
Cash Flows from Investing
Activities:
Loans originated (110,161,234) (87,847,338)
Loans purchased (14,536,503) (11,807,793)
Loans repaid 96,081,062 89,378,621
Capital expenditures (877,064) (270,902)
Securities purchased -- (317,827)
Securities matured -- 212,884
------------- ----------------
Net cash used in (29,493,739) (10,652,355)
investing activities
------------- ----------------
Cash Flows from Financing
Activities:
Net borrowing under 2,499,658 433,654
lines of credit
Proceeds from borrowings 50,110,421 32,367,594
Repayment of borrowings (35,136,456) (33,860,797)
Dividends paid (550,066) (419,147)
------------- ----------------
Net cash provided/(used)
by financing activities 16,923,557 (1,478,696)
------------- ----------------
Net Increase/(Decrease) in Cash 149,143 576,526
Cash, Beginning of Period 2,039,109 1,150,863
------------- ----------------
Cash, End of Period $ 2,188,252 $ 1,727,389
============= ================
Additional Cash Flow Information:
Interest paid $ 6,652,781 $ 7,230,547
Income taxes paid $ 3,332,667 $ 2,718,506
See notes to consolidated financial statements.
PIONEER FINANCIAL SERVICES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and September 30, 2003
(Unaudited)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Concentration
Pioneer Financial Services, Inc., a Missouri corporation (the "Company"),
is a specialized financial services company which originates and services
consumer loans and provides other products and financial services exclusively to
U.S. active duty or retired career military personnel or U.S. Department of
Defense employees. The Company's revenues are primarily earned from the making
of direct loans and the purchase of retail installment contracts. The Company
also earns revenues from commissions from the sale of credit-related insurance
placed with non-related insurance companies and from reinsurance premiums on
credit accident and health insurance. Additionally, the Company sells non-loan
related products and services, including roadside assistance programs and
discount healthcare cards.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Pioneer Financial Services, Inc. (a wholly-owned subsidiary of Pioneer Financial
Industries, Inc.) and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated from the
accompanying consolidated financial statements. Certain information and note
disclosures normally included in the Company's annual financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These condensed consolidated financial statements should
be read in conjunction with the Company's annual consolidated financial
statements filed with the Securities and Exchange Commission.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Information with respect to June 30, 2004 and 2003, and the periods then
ended, have not been audited by the Company's independent auditors, but in the
opinion of management reflect all adjustments (which include only normal
recurring adjustments) necessary for the fair presentation of the financial
condition and operations of the Company. The results of operations for the three
months and nine months ended June 30, 2004 and 2003 are not necessarily
indicative of results to be expected for the entire fiscal year. The condensed
consolidated balance sheet and retained earnings statement as of September 30,
2003 has been derived from the Company's audited consolidated balance sheet and
retained earnings statement.
NOTE 2: NET INCOME PER SHARE
Net income per share is computed based upon the weighted-average common
shares outstanding of 17,136 during each period. There are no potentially
dilutive securities issued and outstanding.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
The discussion set forth below, as well as other portions of this
quarterly report, contains forward-looking statements within the meaning of
federal securities law. Words such as "may," "will," "expect," "anticipate,"
"believe," "estimate," "continue," "predict," or other similar words, identify
forward-looking statements. Forward-looking statements include statements
regarding our management's intent, belief or current expectation about, among
other things, trends affecting the markets in which we operate, our business,
financial condition and growth strategies. Although we believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those predicted in the forward-looking statements as a result of
various factors, including, but not limited to, those risk factors set forth in
our registration statement on Form S-1, as amended (No. 333-103293). Other
factors not identified herein could also have such an effect. If any of these
risk factors occur, they could have an adverse effect on our business, financial
condition and results of operation. When considering forward-looking statements
keep these risk factors in mind. These forward-looking statements are made as of
the date of this filing. You should not place undue reliance on any
forward-looking statement. We are not obligated to update forward-looking
statements and will not update any forward-looking statements in this Quarterly
Report to reflect future events or developments.
Overview
We originate and service consumer loans and provide other financial
products and services on a worldwide basis, exclusively to active duty or
retired career U.S. military personnel or U.S. Department of Defense employees.
We make direct loans to our customers through our network of retail sales
offices and over the Internet. We also purchase retail installment sales
contracts from retail merchants who sell consumer goods to active duty or
retired career U.S. military personnel or U.S. Department of Defense employees.
We refer to these consumer loans and retail installment contracts as finance
receivables.
Our finance receivables are effectively unsecured with fixed interest
rates and typically have a maturity of less than 48 months. During the first
nine months of fiscal 2004, the size of our average finance receivable at
origination was approximately $3,290. A large portion of our customers are
unable to obtain traditional financing from banks, credit unions or savings and
loan associations due to factors such as their age, likelihood of relocation and
lack of credit history.
Further improvement of our profitability is dependent in large part upon
the growth in our outstanding finance receivables, the maintenance of loan
quality, acceptable levels of borrowing costs and operating expenses and the
ongoing introduction of innovative new products and services to our customer
base. Since September 30, 1998, finance receivables have increased at a 12.9%
annual compounded rate from $90.3 million to $165.9 million at September 30,
2003. We anticipate this trend will continue as our originations grow through
existing and planned new retail offices and through the Internet. Use of the
Internet to extend loans is a lower cost method of origination. We plan to
continue to look for opportunities to expand the Internet portion of our
business and add new retail offices as we evaluate new military markets and
possible products.
Sources of Income
We earn revenues and resulting income from finance income derived from
direct consumer lending and retail installment contracts, commissions earned on
the sale of credit insurance products, credit reinsurance premiums, and
commissions earned on the sale of ancillary products and services. For purposes
of the following discussion, "revenues" means the sum of our finance income,
insurance premiums and commissions and other income.
Finance Receivables
Our finance receivables are comprised of direct loans and retail
installment contracts. The following table sets forth certain information about
the components of our finance receivables:
As of, and For the Nine As of, and For the
Months Ended Year Ended
June 30, September 30,
----------------------------------------------------
2004 2003 2003
----------------------------------------------------
(dollars in thousands, except for average note balance)
Finance Receivables:
Finance receivable balance $ 188,145 $ 162,504 $ 165,895
Average note balance $ 2,344 $ 2,067 $ 2,117
Total finance income $ 40,287 $ 37,378 $ 50,003
Total number of notes 80,260 78,624 78,364
Direct Loans:
Notes receivable balance $ 167,394 $ 143,537 $ 147,095
Percent of finance receivables 88.97% 88.33% 88.67%
Average note balance $ 2,380 $ 2,071 $ 2,123
Number of notes 70,347 69,292 69,291
Retail Installment Contracts:
Notes receivable balance $ 20,751 $ 18,967 $ 18,800
Percent of finance receivables 11.03% 11.67% 11.33%
Average note balance $ 2,093 $ 2,032 $ 2,072
Number of notes 9,913 9,332 9,073
Net Interest Margin
The principal component of our profitability is our net interest margin,
which is the difference between the interest we earn on finance receivables and
the interest we pay on borrowed funds. In some states, statutes regulate the
interest rates that we may charge our customers while in other states
competitive market conditions establish the interest rates we may charge.
Differences also exist in the interest rates we earn on the various components
of our finance receivable portfolio.
Unlike our interest income, our interest expense is sensitive to general
market interest rate fluctuations. These general market fluctuations directly
impact our cost of funds. Our general inability to increase the interest rates
earned on new and existing finance receivables restricts our ability to react to
increases in our cost of funds. Accordingly, increases in market interest rates
generally will narrow our interest rate spread and lower our profitability,
while decreases in market interest rates generally will widen our interest rate
spread and increase our profitability. An increase in market interest rates may
result in a reduction in our profitability and impair our ability to pay
interest and principal on the debentures.
The following table presents important data relating to our net interest
margin:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
---------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------
(dollars in thousands)
Finance receivables balance $188,145 $162,504 $188,145 $162,504
Average finance receivables (1) $183,662 $162,222 $176,239 $164,518
Average interest bearing
liabilities (1) $146,337 $132,042 $140,434 $131,700
Total finance income $ 14,048 $ 12,194 $ 40,287 $ 37,378
Total interest expense $ 2,250 $ 2,297 $ 6,685 $ 7,130
Provision for credit losses $ 2,973 $ 3,008 $ 7,796 $ 9,431
Net charge-offs $ 2,233 $ 2,208 $ 6,366 $ 6,631
- ----------------------------
(1) Averages are computed using month-end balances.
Results of Operations
Three Months Ended June 30, 2004 Compared to Three Months Ended
June 30, 2003
Finance Receivables. Our aggregate finance receivables increased 6.7%
during the third quarter of fiscal 2004 to $188.1 million on June 30, 2004 from
$176.2 million on March 31, 2004 as compared to a decrease of 0.8% during the
third quarter of fiscal 2003 to $162.5 million on June 30, 2003 from $163.9
million on March 31, 2003. Increased loan originations in the third quarter of
fiscal 2004 generated the highest quarterly gain in finance receivables in our
company history. This increase was due primarily to increases in finance
receivables from the Internet, which grew by approximately $8.0 million or 12.0%
during this period. The Internet is a lower-cost method of loan origination and
proceed distribution. We plan to continue to increase this distribution platform
in the future through our existing channels and additional third party websites.
Total Revenues. Total revenues in the third quarter of fiscal 2004
increased to $15.8 million from $13.8 million in the third quarter of fiscal
2003, an increase of $2.0 million or 14.2%. This increase was primarily due to
an increase in average finance receivables to $183.7 million in the third
quarter of fiscal 2004 from $162.2 million in the third quarter fiscal 2003, an
increase of 13.2%.
Provision for Credit Losses. The provision for credit losses in the third
quarter of fiscal 2004 remained consistent with the third quarter of fiscal 2003
at $3.0 million. Net charge-offs of finance receivables in the third quarter of
fiscal 2004 also remained consistent with fiscal 2003 at $2.2 million, while the
net charge-offs as a percentage of average finance receivables for the third
quarter of fiscal 2004 declined to 4.9% compared to 5.4% in fiscal 2003. The
decrease in net charge-offs as a percentage of average finance receivables
reflects enhanced collection efforts. The 60-day or more past due accounts as a
percent of finance receivables decreased to 2.9% in the third quarter of fiscal
2004 as compared to 3.3% in the third quarter of fiscal 2003. Our allowance for
credit losses at June 30, 2004 increased to $10.7 million from $9.9 million at
March 31, 2004, an increase of $0.8 million, or 7.4%. The increase reflects the
increase in our average finance receivables portfolio for the three months ended
June 30, 2004. See also "--Credit Loss Experience and Provision for Credit
Losses."
Interest Expense. Interest expense in the third quarter of fiscal 2004
remained consistent with the third quarter of fiscal 2003 at $2.3 million. Our
average interest bearing liabilities for the three months ended June 30, 2004
increased by $14.3 million or 10.8% compared to the three months ended June 30,
2003. The weighted average interest rate declined to 6.4% in the third quarter
of fiscal 2004 from 7.3% in the third quarter of fiscal 2003.
Operating Expense. Operating expenses in the third quarter of fiscal
2004 increased to $8.2 million from $6.8 million in the third quarter of fiscal
2003, an increase of $1.4 million or 20.4%. This increase was primarily due to
higher employment costs. Employment costs have increased as a result of
continued infrastructure improvements in the Internet distribution channel of
our business. In addition, our commission expenses have increased due to
agreements that we entered into in the first quarter of 2004 with third parties
who sell products via the Internet, to provide financing solutions for their
military customer base.
Net Income. Income before taxes in the third quarter of fiscal 2004 was
$2.3 million and net income was $1.5 million compared to income before taxes of
$1.7 million and net income of $1.1 million during the third quarter of fiscal
2003.
Nine Months Ended June 30, 2004 Compared to Nine Months Ended
June 30, 2003
Finance Receivables. Our aggregate finance receivables increased 13.4%
during the first nine months of fiscal 2004 to $188.1 million from $165.9
million on September 30, 2003, compared to a 2.2% increase during the first nine
months of fiscal 2003 to $162.5 million from $159.0 million on September 30,
2002. This increase was due primarily to increases in finance receivables from
the Internet, which grew by more than $16.8 million or 28.5% during this period.
The Internet is a lower-cost method of loan origination and proceed
distribution, and we plan to continue to increase this distribution channel in
the future.
Total Revenues. Total revenues for the first nine months of fiscal 2004
increased to $45.4 million from $42.6 million for the first nine months of
fiscal 2003, an increase of $2.8 million or 6.52%. This increase was primarily
due to the increase in average finance receivables to $176.2 million in fiscal
2004 from $164.5 million in fiscal 2003, an increase of 7.1%.
Provision for Credit Losses. The provision for credit losses in the first
nine months of fiscal 2004 decreased to $7.8 million from $9.4 million in the
first nine months of fiscal 2003, a decrease of $1.6 million or 17.3%. Net
charge-offs of finance receivables in the first nine months of fiscal 2004
decreased to $6.4 million from $6.7 million in the first nine months of fiscal
2003, a decrease of $.3 million or 4.5%. Net charge-offs were 4.8% of the
average finance receivable balance for the nine months ended June 30, 2004
compared to 5.4% for the nine months ended June 30, 2003. This decline reflects
the decrease in 60-day or more delinquent accounts as a percentage of finance
receivables to 2.9% on June 30, 2004 from 3.3% on June 30, 2003. In addition,
our allowance for credit losses at June 30, 2004 increased to $10.7 million from
$9.2 million at September 30, 2003, an increase of $1.5 million or 15.5%. The
increase in the allowance for credit losses reflects the increase in our average
finance receivables portfolio for the nine months ended June 30, 2004. See also
"--Credit Loss Experience and Provision for Credit Losses."
Interest Expense. The interest expense for the first nine months of fiscal
2004 decreased to $6.7 million from $7.1 million in the first nine months of
fiscal 2003, a decrease of $.4 million or 6.2%. This decrease is the result of
lower interest rates charged on our borrowings, even though our average interest
bearing liabilities for the nine months ended June 30, 2004 increased by $8.7
million or 6.6% compared to the nine months ended June 30, 2003. The weighted
average interest rate declined to 6.3% in the first nine months of fiscal 2004
from 7.2% in the first nine months of fiscal 2003.
Operating Expense. Operating expenses for the first nine months of fiscal
2004 increased to $24.8 million from $21.5 million in the first nine months of
fiscal 2003, an increase of $3.3 million or 15.4%. This increase is the result
of rising employment costs and advertising expenses. A continued effort to build
an infrastructure in the Internet distribution channel of our business has
increased employment expenses. Competitive compensation and rising benefit costs
is another factor that has compounded this employment cost variance. In
addition, in the first quarter of 2004, we entered into an agreement with third
parties, who sell products via the Internet, to provide financing solutions for
their military customer base, which has increased our commission expenses.
Advertising costs have also continued to rise due to additional marketing
efforts to build brand awareness.
Net Income. Income before taxes of $6.1 million and net income of $3.9
million for the first nine months of fiscal 2004 compared to $4.6 million and
net income of $2.9 million for the first nine months of fiscal 2003.
Delinquency Experience
Our customers are required to make monthly payments of interest and
principal. We analyze our delinquencies on a recency delinquency basis. A loan
is delinquent under the recency method when a full payment (95% or more of the
contracted payment amount) has not been received for 60 days after the last full
payment. We rarely grant extensions or deferments, or allow account revision,
rewriting, renewal or rescheduling in order to bring otherwise delinquent
accounts current.
The following sets forth our delinquency experience for accounts for which
payments are 60 days or more past due and allowance for credit losses for our
finance receivables:
As of the Nine Months Ended As of
June 30, September 30,
2004 2003 2003
----------------------------------------------
(dollars in thousands)
Finance receivables balances $188,145 $162,504 $165,895
Finance receivables balances
60 days or more past due $ 5,506 $ 5,291 $ 4,836
Finance receivables balances
60 days or more past due as a
percent of finance receivables 2.93% 3.26% 2.92%
Credit Loss Experience and Provision for Credit Losses
General
Our provisions for credit losses are charged to income in amounts
sufficient to maintain our allowance for credit losses at a level considered
adequate to cover the probable losses inherent in our existing finance
receivable portfolio. Historical credit loss experience, delinquency of finance
receivables, the value of underlying collateral, current economic conditions,
current military activities and management's judgment are factors used in
assessing the overall adequacy of the allowance and corresponding provision for
credit losses. Our allowance for credit losses is developed primarily for our
direct finance receivable portfolio as our retail installment contracts are
generally covered by dealer reserves.
Direct Loans
Our charge-off policy is based on an account-by-account review of
delinquent receivables on a recency basis. Finance receivables are charged-off
when management deems them to be uncollectible through our normal collection
procedures or they become 270 days past due. The 270-day limit is required by
our senior lending agreement. Approximately 40% of our charge-offs occur before
an account is 180 days delinquent. Our primary source of charge-offs is when a
customer leaves the military prior to repaying the finance receivable. We
generally structure our loans so that the entire amount is repaid prior to a
customer's estimated separation from the military, and the number of our
customers who depart the military early has remained relatively constant over
time. We, however, cannot predict when or whether a customer may depart from the
military early. Accordingly, we cannot implement any policy or procedure to
ensure that we are repaid in full prior to our customer leaving the military.
Our second greatest source of loss is when a customer declares bankruptcy.
The following table presents net charge-offs on direct loans and net
charge-offs as a percentage of direct loans. The decrease shown on this table in
the percentage of net charge-offs to average monthly balance outstanding
resulted primarily from more effective collection efforts:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
---------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------
(dollars in thousands)
Direct Loans:
Loans charged-off $ 2,600 $ 2,471 $ 7,307 $ 7,462
Less recoveries 350 256 909 760
---------------------------------------------------
Net charge-offs $ 2,250 $ 2,215 $ 6,398 $ 6,702
===================================================
Average monthly balance of
outstanding (1) $162,906 $143,135 $156,670 $145,392
Percentage of net
charge-offs to average
monthly balance 5.52% 6.19% 5.44% 6.15%
outstanding (2)
- -----------------------------
(1) Averages are computed using month-end balances.
(2) June 30, 2004 and 2003 are annualized for comparison purpose.
Retail Installment Contracts
Under our retail merchant reserve arrangements, we withhold a percentage
(usually between five and ten percent) of the principal amount of the retail
installment contract purchased. The amounts withheld from a particular retail
merchant are recorded in a specific reserve account. Any losses incurred on the
retail installment contracts purchased from that retail merchant are charged
against its specific reserve account. Upon the retail merchant's request, and no
more often than annually, we pay the retail merchant the amount by which its
specific reserve account exceeds 15% of the aggregate outstanding balance on all
retail installment contracts purchased from them, less losses we have sustained,
or reasonably could sustain, due to debtor defaults, collection expenses,
delinquencies and breaches of our agreement with the retail merchant. Our
allowance for credit losses is charged only to the extent that the loss on a
retail installment contract exceeds the originating retail merchant's specific
reserve account at the time of the loss.
The following table presents net charge-offs on retail installment
contracts and net charge-offs as a percentage of retail installment contracts:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
---------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------
(dollars in thousands)
Retail Installment Contracts:
Contracts charged-off $ 2 $ 14 $ 26 $ 71
Less recoveries 19 21 58 142
---------------------------------------------------
Net charge-offs $ (17) $ (7) $ (32) $ (71)
===================================================
Average monthly balance of
outstanding (1) $ 20,755 $ 19,088 $ 19,568 $ 19,126
Percentage of net
charge-offs to average
monthly balance -0.33% -0.15% -0.22% -0.49%
outstanding (2)
- ----------------------------
(1) Averages are computed using month-end balances.
(2) June 30, 2004 and 2003 are annualized for comparison purpose.
The following table presents our allowance for credit losses on direct
loans and retail installment contracts:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
------------------------- -----------------------
2004 2003 2004 2003
------------------------- -----------------------
(dollars in thousands)
Average finance $ 183,662 $ 162,222 $ 176,239 $164,518
receivables (1)
Provision for credit losses $ 2,973 $ 3,008 $ 7,796 $ 9,431
Net charge-offs $ 2,233 $ 2,208 $ 6,366 $ 6,631
Net charge-offs as a
percentage of average
finance receivables (2) 4.86% 5.44% 4.82% 5.37%
Allowance for credit losses $ 10,651 $ 9,021 $ 10,651 $ 9,021
Allowance as a percentage
of average finance
receivables 5.80% 5.56% 6.04% 5.48%
- -----------------------------
(1) Averages are computed using month-end balances.
(2) June 30, 2004 and 2003 are annualized for comparison purpose.
Allowance for Credit Losses
The allowance for credit losses is maintained at an amount which
management considers sufficient to cover estimated future losses. The Company
has developed policies and procedures for assessing the adequacy of the
allowance for credit losses which take into consideration the historical credit
loss experience of the Company, delinquency trends, current economic conditions,
current or future military deployments, and the composition of the finance
receivable portfolio. The Company uses various ratio analyses in evaluating
prior finance receivable losses and delinquency experience. These and other
analyses are used to measure historical movement of finance receivables through
various levels of repayment, delinquency, and loss. These results and
management's judgment are used to estimate future losses and in establishing the
current provision and allowance for credit losses. These estimates are
influenced by factors outside the Company's control, such as economic conditions
and current or future military deployments. There is uncertainty inherent in
these estimates, making it reasonably possible that they could
change in the near term. See our registration statement on Form S-1, as
amended (No. 333-103293), "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Critical Accounting Policies."
The following table sets forth changes in the components of our allowance
for credit losses on direct loans and retail installment contracts:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
-----------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------
(dollars in thousands)
Balance beginning of period $ 9,911 $ 8,221 $ 9,221 $ 6,221
-----------------------------------------------------
Charge-offs:
Loans charged-off (2,602) (2,485) (7,333) (7,533)
Recoveries 369 277 967 902
-----------------------------------------------------
Net charge-offs (2,233) (2,208) (6,366) (6,631)
Provision for credit losses 2,973 3,008 7,796 9,431
-----------------------------------------------------
Balance end of period $10,651 $ 9,021 $ 10,651 $ 9,021
=====================================================
Loan Origination
Our loan origination is an important factor in determining our future
revenues. Loan origination for the first nine months of fiscal 2004 increased to
$173.9 million from $138.9 million for the first nine months of fiscal year
2003, an increase of $35.0 million or 25.2%. The demand for our loan origination
in the third quarter of 2004 generated $66.8 million in volume, which is a
company record. The record volume was achieved in the first nine months of
fiscal 2004 through the expansion of our Internet distribution channel. This
resulted in a $25.5 million or 53.9% increase from the first nine months of
fiscal 2003. See our registration statement on Form S-1, as amended
(No. 333-103293), "Business--Direct Lending Activities."
The following table sets forth our overall loan originations and lending
activities by direct loans and retail installment contracts:
As of, and For the Three As of, and For the Nine
Months Ended Months Ended
June 30, June 30,
---------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------
(dollars in thousands, except for average note amounts)
Total Loan Origination:
Gross balance $ 66,761 $ 42,932 $ 173,948 $ 138,944
Number of notes 19,723 12,855 52,867 44,408
Average note amount $ 3,385 $ 3,340 $ 3,290 $ 3,129
Direct Loans:
Gross balance $ 61,775 $ 39,103 $ 159,411 $ 127,136
Number of notes 18,095 11,758 47,935 40,923
Average note amount $ 3,414 $ 3,326 $ 3,326 $ 3,107
Retail Installment Contracts:
Gross balance $ 4,986 $ 3,829 $ 14,537 $ 11,808
Number of notes 1,628 1,097 4,932 3,485
Average note amount $ 3,063 $ 3,490 $ 2,947 $ 3,388
In June 2004, we began an initiative to replace our legacy loan processing
system with a purchased software solution, which will provide the organization
with continued improvements in its loan origination, servicing and collection
processes. This new system is scheduled for launch in fiscal 2005.
Liquidity and Capital Resources
A relatively high ratio of borrowings to invested capital is customary in
consumer finance activities due to the quality and term of the assets employed.
Investing activities are our principal use of cash, which is to make new loans
and purchase retail installment contracts. We use our borrowings to fund the
difference, if any, between the cash used to make new loans and purchase retail
installment contracts, and the cash generated from loan repayments. Cash used in
investing activities in the first nine months of fiscal 2004 was approximately
$29.5 million, which was funded from $12.7 million of cash from operating
activities and $16.9 million from financing activities. Cash used in investing
and financing activities in the first nine months of fiscal 2003 was
approximately $10.7 million and $1.5 million respectively, which were funded
from $12.7 million from operating activities.
Financing activities primarily consist of borrowings and repayments
relating to our bank debt, an unsecured revolving credit line from our parent
and our junior subordinated debentures. We anticipate that our cash inflow from
operations, borrowings under our senior lending agreement, and the proceeds from
the sale of subordinated debentures will be adequate to meet our cash out flows
to fund anticipated growth in our finance receivables, operating expenses,
repayment of indebtedness, and planned capital expenditures.
On or before March 31st of each year, each bank that is a party to the
senior lending agreement is to deliver to us a written indication of whether or
not it wishes to participate in future fundings and the amounts that it expects
to be willing to fund during the next 12 months. As of June 30, 2004, all banks
that are a party to our senior lending agreement have indicated in writing their
willingness to participate in the fundings up to an aggregate of $200 million,
up from $185.5 million in fiscal year 2003.
Senior Indebtedness-Bank Debt
Our senior lending agreement is an uncommitted facility, which provides
common terms and conditions pursuant to which individual banks that are a party
to this agreement may choose to make loans to us in the future. Any bank may
elect not to participate in any future fundings at any time without penalty. As
of June 30, 2004, we could request up to $21.9 million in additional funds and
remain in compliance with the terms of our senior lending agreement. No bank,
however, has any contractual obligation to lend us these additional funds. As of
June 30, 2004, we were in material compliance with all loan covenants.
Senior Indebtedness-Parent Debt
We also have a revolving line of credit, payable on demand, from our
parent, Pioneer Financial Industries, Inc. Interest on this facility accrues at
the prime rate plus 2%. At June 30, 2004, there was $2.8 million outstanding
under this credit facility with an interest rate of 6.0%.
Senior Indebtedness Table
As of June 30, 2004 and 2003 and September 30, 2003, the total borrowings
and availability under our senior lending agreement and our revolving line of
credit from our parent company consisted of:
As of June 30, As of September 30,
---------------------------------------------
2004 2003 2003
--------- -------- --------
(dollars in thousands)
Revolving Credit Line (1):
Total facility $ 36,146 $ 31,000 $ 31,000
Balance at end of period $ 14,775 $ 13,151 $ 12,293
Maximum available credit $ 21,371 $ 17,849 $ 18,707
Term Notes (2):
Total facility $167,443 $141,269 $140,036
Balance at end of period $113,876 $ 97,041 $ 99,471
Maximum available credit $ 53,567 $ 44,228 $ 40,565
Total Revolving and Term
Notes (1) (2):
Total facility $203,589 $172,269 $171,036
Balance at end of period $128,651 $110,192 $111,764
Maximum available credit (3) $ 74,938 $ 62,077 $ 59,273
Credit Facility Available (4) $ 21,865 $ 12,594 $ 13,575
Percent utilization of the
total facility 63.19% 63.97% 65.34%
- --------------------------
(1) Includes revolving credit line from our parent.
(2) Includes amortizing notes.
(3) Maximum available credit assuming proceeds in excess of the amounts shown
below under "Credit Facility Available" are used to increase qualifying
finance receivables and all terms of the senior lending agreement are
met, including maintaining a Senior Indebtedness to Net Receivable Ratio
of not more than 80%.
(4) Credit facility available based on the existing asset borrowing base and
maintaining a Senior Indebtedness to Net Receivable Ratio of not more than
80%.
Outstanding Subordinated Debt
We also fund our liquidity needs through the sale of unsecured junior
subordinated debentures. These debentures have varying fixed interest rates and
are subordinate to all senior indebtedness. We can redeem these debentures at
any time upon 30 days written notice. As of June 30, 2004, we had issued
approximately $22.9 million of these junior subordinated debentures at a
weighted average interest rate of 9.4%.
The sale of these debentures provides us with additional liquidity and
capital resources. Issuing these debentures increases our tangible net worth
which allows us to borrow larger amounts under our senior lending agreement. To
finance growth in our finance receivables portfolio, we intend to borrow
additional funds under our senior lending agreement from time to time as we sell
additional debentures.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our profitability and financial performance are sensitive to changes in
the U.S. Treasury yields and the spread between the effective rate of interest
we receive on customer loans and the interest rates we pay on our borrowings.
Our finance income is generally not sensitive to fluctuations in market interest
rates. The primary exposure that we face is changes in interest rates on our
borrowings. A substantial and sustained increase in market interest rates could
adversely affect our growth and profitability. The overall objective of our
interest rate risk management strategy is to mitigate the effects of changing
interest rates on our interest expense through the utilization of short-term
variable rate debt and medium and long term fixed rate debt. We have not entered
into any derivative instruments to manage our interest rate risk.
ITEM 4. Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to
ensure that information required to be disclosed in the Company's reports under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosures. Any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives. Our management, under the supervision and with the participation of
our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures within 90 days of the filing date of this quarterly report on Form
10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that the design and operation of our disclosure controls
and procedures are effective. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date the evaluation was completed.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
We are subject to claims and lawsuits that primarily involve routine
matters in the ordinary course of business. We believe that the disposition or
ultimate resolution of such claims and lawsuits will not have a material adverse
effect on our financial position or results of operations.
ITEM 2. Changes in Securities and Use of Proceeds
On May 13, 2003, the Securities and Exchange Commission declared our
registration statement on Form S-1, as amended (File No. 333-103293), effective.
On January 13, 2004 the Securities and Exchange Commission declared our post
effective amendment as filed on Form S-1 (File No. 333-103293), effective.
Pursuant to the registration statement, and the accompanying prospectus, we
registered and are offering up to $25,000,000 in aggregate principal amount of
our junior subordinated debentures, with a maximum aggregate offering price of
$25,000,000 on a continuous basis with an expected termination in May 2005. We
commenced the offering of these junior subordinated debentures on May 20, 2003.
We are currently offering the debentures through our officers and employees
directly without an underwriter or agent. From May 20, 2003 to June 30, 2004, we
sold 210 debentures in an approximate aggregate principal amount of $4,055,000.
For the quarter ended June 30, 2004 we sold 69 debentures in the approximate
aggregate principal amount of $1,113,000. Costs incurred in connection with the
preparation of the initial registration statement on Form S-1 were approximately
$315,000. Our expenses incurred in connection with the issuance and distribution
of the junior subordinated debentures from the date our registration statement
became effective, May 13, 2003, through June 30, 2004 were approximately
$336,000. Expenses incurred in the third quarter of fiscal 2004 were
approximately $40,000. Net proceeds from the offering through June 30, 2004,
were approximately $3,453,000.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1, as amended, filed with the Securities and Exchange
Commission on February 8, 2003 (Commission No. 333-103293) (the
"Initial Registration Statement")).
3.2 Certificate of Amendment to Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3.2 of the Initial Registration
Statement).
3.3 Amended and Restated By-Laws of the Company (Incorporated
by reference to Exhibit 3.3 of the Initial Registration
Statement).
4.1 Form of indenture (Incorporated by reference to Exhibit
4.1 of the Initial Registration Statement).
4.2 Form of debenture (Incorporated by reference to Exhibit
4.2 of the Initial Registration Statement).
4.3 Form of debenture prior to November 1, 2002 (Incorporated by
reference to Exhibit 4.3 of the Initial Registration Statement).
4.7 Form of Agreement between the Company and various banks named in
Amended and Restated Senior Lending Agreement (Incorporated by
reference to Exhibit 4.7 of the Initial Registration Statement).
4.8 Promissory Note dated August 1, 2000, between the Company and Pioneer
Financial Industries, Inc. (Incorporated by reference to Exhibit 4.8
of the Initial Registration Statement).
4.9 Amended and Restated Senior Lending Agreement dated October 1, 2003
among the Company and various banks named therein.
10.1 Form of Readi-Loan Licensing Agreement (Incorporated by reference to
Exhibit 10 of the Initial Registration Statement).
10.2 Office Building Lease dated January 31, 2001, between the Company and
Belletower Partners, L.L.C. (Incorporated by reference to Exhibit
10.2 of the Initial Registration Statement).
10.3 Addendum to Office Building Lease between the Company and Belletower
Partners, L.L.C. (Incorporated by reference to Exhibit 10.3 of the
Initial Registration Statement).
10.4 First Amendment to Office Building Lease dated July 19, 2001, between
the Company and Belletower Partners, L.L.C. (Incorporated by
reference to Exhibit 10.4 of the Initial Registration Statement).
10.5 Employment Contract between the Company and Randall J. Opliger
(Incorporated by reference to Exhibit 10.5 of the Initial
Registration Statement).
10.6 Trademark Licensing Agreement dated October 10, 2000 between the
Company and Pioneer Licensing Services, Inc. (Incorporated by
reference to Exhibit 10.6 of the Initial Registration Statement).
10.7 Transfer of Shares dated as of September 30, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.7 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
10.8 Capital Contribution Agreement dated as of September 30, 2003 between
the Company and Pioneer Financial Industries, Inc. (Incorporated by
reference to Exhibit 10.8 of the Annual Report on Form 10-K for the
fiscal year ended September 30, 2003).
10.9 Stock Purchase Agreement dated October 29, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.9 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
10.10 Stock Purchase Agreement dated October 29, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
12 Statement regarding computation of ratios (Incorporated by reference
to Exhibit 12 of the Initial Registration Statement).
21 Subsidiaries of the Company.
25 Statement of eligibility of trustee (Incorporated by
reference to Exhibit 25 of the Amendment No. 1).
31.1 Certification of Chief Executive Officer pursuant to Rule 15d-15e.
31.2 Certification of Chief Financial Officer pursuant to Rule 15d-15e.
32.1 18 U.S.C. Section 1350 Certification of Chief Executive Officer.
32.2 18 U.S.C. Section 1350 Certification of Chief Financial Officer.
(b) Reports on Form 8-K
None.
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.
PIONEER FINANCIAL SERVICES, INC.
Name Title Date
Chief Executive Officer August 13, 2004
- ---------------------- and Sole Director
William D. Sullivan (Principal Executive Officer)
Chief Financial Officer, August 13, 2004
- ---------------------- Treasurer and Secretary
Randall J. Opliger (Principal Financial Officer
and Principal Accounting Officer)
3.1 Restated Articles of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1, as amended, filed with the Securities and Exchange
Commission on February 8, 2003 (Commission No. 333-103293) (the
"Initial Registration Statement")).
3.2 Certificate of Amendment to Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3.2 of the Initial Registration
Statement).
3.3 Amended and Restated By-Laws of the Company (Incorporated
by reference to Exhibit 3.3 of the Initial Registration
Statement).
4.1 Form of indenture (Incorporated by reference to Exhibit
4.1 of the Initial Registration Statement).
4.2 Form of debenture (Incorporated by reference to Exhibit
4.2 of the Initial Registration Statement).
4.3 Form of debenture prior to November 1, 2002 (Incorporated by
reference to Exhibit 4.3 of the Initial Registration Statement).
4.7 Form of Agreement between the Company and various banks named in
Amended and Restated Senior Lending Agreement (Incorporated by
reference to Exhibit 4.7 of the Initial Registration Statement).
4.10 Promissory Note dated August 1, 2000, between the Company and Pioneer
Financial Industries, Inc. (Incorporated by reference to Exhibit 4.8
of the Initial Registration Statement).
4.11 Amended and Restated Senior Lending Agreement dated October 1, 2003
among the Company and various banks named therein.
10.1 Form of Readi-Loan Licensing Agreement (Incorporated by reference to
Exhibit 10 of the Initial Registration Statement).
10.2 Office Building Lease dated January 31, 2001, between the Company and
Belletower Partners, L.L.C. (Incorporated by reference to Exhibit
10.2 of the Initial Registration Statement).
10.3 Addendum to Office Building Lease between the Company and Belletower
Partners, L.L.C. (Incorporated by reference to Exhibit 10.3 of the
Initial Registration Statement).
10.4 First Amendment to Office Building Lease dated July 19, 2001, between
the Company and Belletower Partners, L.L.C. (Incorporated by
reference to Exhibit 10.4 of the Initial Registration Statement).
10.5 Employment Contract between the Company and Randall J. Opliger
(Incorporated by reference to Exhibit 10.5 of the Initial
Registration Statement).
10.6 Trademark Licensing Agreement dated October 10, 2000 between the
Company and Pioneer Licensing Services, Inc. (Incorporated by
reference to Exhibit 10.6 of the Initial Registration Statement).
10.7 Transfer of Shares dated as of September 30, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.7 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
10.8 Capital Contribution Agreement dated as of September 30, 2003 between
the Company and Pioneer Financial Industries, Inc. (Incorporated by
reference to Exhibit 10.8 of the Annual Report on Form 10-K for the
fiscal year ended September 30, 2003).
10.9 Stock Purchase Agreement dated October 29, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.9 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
10.10 Stock Purchase Agreement dated October 29, 2003 between the Company
and Pioneer Financial Industries, Inc. (Incorporated by reference to
Exhibit 10.10 of the Annual Report on Form 10-K for the fiscal year
ended September 30, 2003).
12 Statement regarding computation of ratios (Incorporated by reference
to Exhibit 12 of the Initial Registration Statement).
21 Subsidiaries of the Company.
25 Statement of eligibility of trustee (Incorporated by
reference to Exhibit 25 of the Amendment No. 1).
31.1 Certification of Chief Executive Officer pursuant to Rule 15d-15e.
31.2 Certification of Chief Financial Officer pursuant to Rule 15d-15e.
32.1 18 U.S.C. Section 1350 Certification of Chief Executive Officer.
32.2 18 U.S.C. Section 1350 Certification of Chief Financial Officer.