EX-99.1 2 d472645dex991.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: 12/1/12-12/31/12

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

   

1/23/13

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.

The “Liabilities Subject to Compromise” previously included a pre-petition intercompany claim in the amount of $18,237,156. This claim was released pursuant to the terms of a settlement among the Debtor, PMI Mortgage Insurance Co. (“MIC”) and certain other parties, which settlement became effective on December 18, 2012 (the “Settlement”). The effects of the Settlement are reflected in the financial information reported in the forms contained in the MOR.

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.

Following effectiveness of the Settlement (i) certain reinsurance affiliates of the Debtor that remain under the Debtor’s control distributed an aggregate of approximately $27 million in cash to the Debtor; (ii) MIC paid $20 million in cash that MIC was required to pay to the Debtor pursuant to the terms of the Settlement in connection with the exclusive use by MIC of $1 billion of net operating loss carryforwards; and (iii) one of the Debtor’s wholly-owned non-debtor affiliates (A) entered into a mutual release of claims with MIC and certain other parties and (B) paid a cash dividend to the Debtor. The effects of the Settlement are reflected in the financial information reported in the forms contained in the MOR. All income effects of the Settlement are classified as “Gain on Settlement” in the accompanying Statement of Operations contained in the MOR.

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. Cash and Fixed Income Securities. Cash balances include investment holdings consisting of U.S. Treasury Bills, primarily with maturity of three months or less. These investments are listed at their initial purchase price and interest will be recognized at maturity.

As part of the Settlement, the Company’s title to a note receivable from Impact Community Capital LLC (“Impact Tranche E Note”) was clarified and the Company entered into an agreement for MIC to purchase the Impact Tranche E Note, subject to Bankruptcy Court approval. The Impact Tranche E Note is classified as a Fixed Income Security in the accompanying Balance Sheet and carried at the agreed upon sale price.

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

11. Other Assets. The Other Assets balance reported on the balance sheet of this report previously included notes receivable that related 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 has not been able to independently confirm the outstanding balances on these notes. As a result, the Debtor has determined that the monetization of these assets is highly unlikely and assigned no value to these notes in the MOR.

As part of the Settlement, claims held by the Debtor in respect of a Note Receivable of approximately $285 million (plus accrued interest) (the “Note”) from an operating subsidiary were released. Prior to the Settlement, the Debtor provided a full valuation allowance against the Note as that subsidiary had been placed into receivership by its regulator due to a deficiency in regulatory capital. The effects of the Settlement are reflected in the financial information reported in the forms contained in the MOR.

12. 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.

13. 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

December 1, 2012 to December 31, 2012

MOR - 1

 

Cash Receipts

  

Dividends from Reinsurance Subsidiaries

   $ 26,971,959   

Affiliate Payments for Tax Attributes

     20,283,915   

Dividends from PMI Capital Corp.

     144,527   

Interest

     20   
  

 

 

 

Total Cash Receipts

     47,400,421   

Operating Disbursements

  

Employee Compensation

     102,000   

Payroll Taxes

     1,827   

Employee Benefit Costs

     2,047   

Consultants and Temporary Staff

     —     

Ordinary Course Professional Fees

     131,007   

Intercompany Payments (non-employee)

     37,563   

Travel

     2,630   

Tax Payments

     —     

Board Compensation and Travel

     37,592   

Other (misc. G&A and contingencies)

     12,913   
  

 

 

 

Total Operating Disbursements

     327,578   

Bankruptcy Related Expenses

  

Debtor Professionals

     601,775   

UCC Professionals

     476,759   

Claims Administrators

     —     

US Trustee

     —     
  

 

 

 

Total Bankruptcy Disbursements

     1,078,535   

Total Disbursements

     1,406,112   

Net Cash Flow

   $ 45,994,309   

Beginning Cash Balance as of 12-1-2012

   $ 156,327,656   

Change in Cash

     45,994,309   
  

 

 

 

Ending Cash Balance as of 12-31-2012

   $ 202,321,964   
  

 

 

 


The PMI Group, Inc.

Schedule of Bank Accounts and Balances

As of December 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      81,908,790.43   

Bank of America

   Payroll Account    xxxxxx0423      146,971.63   

Bank of America 1

   Investment Account    xxxx0C80      119,974,216.68   

Bank of New York

   Cash Securities    xxx430      276,949   

Commonwealth National Bank

   Gateway    xxx3169      15,036   
        

 

 

 

Total

         $ 202,321,964   
        

 

 

 

 

1

Investment account holdings consist of three month U.S. Treasury Bills and are listed at initial purchase price.

 


The PMI Group, Inc.

Schedule of Professional Fees Paid

December 1, 2012 to December 31, 2012

MOR - 1b

 

Payee

  

Period Covered

   Amount  

Sullivan & Cromwell, LLP

   June 2012 - August 2012    $ 193,857   

Young Conaway Stargatt & Taylor, LLP

   June 2012 - September 2012      247,767   

Goldin Associates, LLC

   November 2012      143,525   

Osborn Maledon

   June 2012 - August 2012      6,118   

Snell & Wilmer, LLC

   July 2012 - November 2012      10,508   

Morrison & Foerster, LLP

   June 2012 - September 2012      365,751   

Peter J. Solomon Company, L.P.

   June 2012 - September 2012      102,000   

Womble Carlyle Sandridge & Rice, LLP

   June 2012 - August 2012      6,411   

Roshka DeWulf

   June 2012 - August 2012      693   

UCC Member Reimbursement

   September 2012      1,905   
     

 

 

 

Total Professional Fees

      $ 1,078,535   
     

 

 

 


STATEMENT OF OPERATIONS

THE PMI GROUP, INC.

For the Month Ended December 31, 2012

MOR - 2

 

Total Revenues

   $ —     
  

 

 

 

Payroll Expense

     114,102   

Other Recurring Expenses

     358,109   
  

 

 

 

Total Recurring Expenses

     472,211   

Non-Recurring Expenses - Bankruptcy Related

     827,081   
  

 

 

 

Total Expenses

     1,299,292   

Interest and Dividends

     26,969,594   

Equity Earnings

     (20,845,450

Gain (Loss) on Investments

     —     
  

 

 

 

Net Investment Income

     6,124,144   
  

 

 

 

Non-Cash Interest Expense

     —     
  

 

 

 

Income (Loss) before Tax

     4,824,852   
  

 

 

 

Tax Provision (Benefit)

     2,035,125   
  

 

 

 

Gain on Settlement

     38,649,885   
  

 

 

 

Net Income (Loss)

   $ 41,439,611   
  

 

 

 


BALANCE SHEET

THE PMI GROUP, INC.

As of December 31, 2012

MOR - 3

 

Assets

  

Fixed Income Securities

   $ 412,729   

Cash

     202,321,964   

Investments in Subsidiaries

     5,322,322   

Accounts Receivable - Affiliates

     109,908   

Pre-Paid Assets

     9,163,944   

Other Assets

     20   
  

 

 

 

Total Assets

   $ 217,330,886   
  

 

 

 

Liabilities Not Subject to Compromise

  

Accrued Expenses

   $ 2,742,257   

Accounts Payable

     5,613,970   

Accounts Payable - Intercompany

     73,388   

Other Liabilities

     38,498   
  

 

 

 

Liabilities Not Subject to Compromise

   $ 8,468,113   
  

 

 

 

Liabilities Subject to Compromise

  

Pre-Petition Bond Debt

   $ 742,553,677   

Gateway Liability

     —     

Accounts Payable

     49,197   

Accounts Payable - Intercompany

     1,357,140   
  

 

 

 

Liabilities Subject to Compromise

   $ 743,960,014   
  

 

 

 
  
  

 

 

 

Total Liabilities

   $ 752,428,128   
  

 

 

 

Common Stock

   $ 1,970,788   

Additional Paid in Capital and Accumulated Deficit

     736,336,878   

Treasury Shares

     (1,273,404,907
  

 

 

 

Total Equity

   $ (535,097,241
  

 

 

 
  
  

 

 

 

Total Liabilities and Equity

   $ 217,330,886   
  

 

 

 


The PMI Group, Inc.

Summary of Post-Petition Taxes

For the Month Ended December 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 and any penalties and interest.


The PMI Group, Inc.

Summary of Post-Petition Debts

For the Month Ended December 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

   $ 384,609       $  —         $ —         $ —         $ 5,116,243       $ 5,500,852   

Total Bankruptcy Activity Payables

     113,118         —           —           —           —           113,118   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Post-Petition Payables

   $ 497,726       $  —         $ —         $ —        $ 5,116,243       $ 5,613,970   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note: Operating Activity Payables include a gross taxes payable amount of $ 5,116,243 related to The PMI Group, Inc.’s 2011 federal income tax return, filed on September 12, 2012. The Debtor and/or its affiliates intend to pay this amount, which includes penalties and interest through September 12, 2012, along with any additional penalties and interest. As of December 31, 2012, the Debtor also had a net tax liability of $384,609 related to a 2008 tax year audit. To the Debtor’s knowledge, this liability was satisfied on January 10, 2013.


The PMI Group, Inc.

Debtor Questionnaire

For the Month Ended December 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