-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CqCgjn8fW/cMdeNxjW7qOhGJwWQcusidlByBvK8Jd+FDhw9mUh8Uw7viUKv598ZC qbWyRV5Fb8XkFCYtXL7vUA== 0001047469-99-011887.txt : 19990330 0001047469-99-011887.hdr.sgml : 19990330 ACCESSION NUMBER: 0001047469-99-011887 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIER ACCEPTANCE CORP /MN/ CENTRAL INDEX KEY: 0000833374 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 411615279 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-21775 FILM NUMBER: 99575613 BUSINESS ADDRESS: STREET 1: PIPER JAFFRAY TOWER STREET 2: 222 S NINTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123426673 FORMER COMPANY: FORMER CONFORMED NAME: PREMIER MORTGAGE CORP /MN/ DATE OF NAME CHANGE: 19880609 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 --------------------------------- Commission file numbers 33-21775, 33-25070 and 33-33261 --------------------------------- PREMIER ACCEPTANCE CORPORATION ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 41-1615279 - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Piper Jaffray Tower, 222 South 9th Street, Minneapolis, Minnesota 55402 - ------------------------------------------- ---------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 612-342-6000 ------------ Securities registered pursuant to Section 12(b) of the Act: NONE ------ Securities registered pursuant to Section 12(g) of the Act: NONE ------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 1,000 shares of common stock were outstanding as of December 31, 1998, and were wholly owned by U.S. Bancorp Piper Jaffray Companies Inc., a wholly owned subsidiary of U.S. Bancorp. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) TABLE OF CONTENTS
Page Number ------ PART I. Item 1. Business 3 Item 2. Properties 3 Item 3. Legal Proceedings 3 Item 4. Submission of Matters to a Vote of Security Holders 3 PART II. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 4 Item 6. Selected Financial Data 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 4 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 5 Item 8. Financial Statements and Supplementary Data 6 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 16 PART III. Item 10. Directors and Executive Officers of the Registrant 16 Item 11. Executive Compensation 16 Item 12. Security Ownership of Certain Beneficial Owners and Management 16 Item 13. Certain Relationships and Related Transactions 16 PART IV. Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K 17 SIGNATURES 20 INDEX TO EXHIBITS 21
2 PART I. ITEM 1. BUSINESS Premier Acceptance Corporation (the "Company"), is a wholly-owned subsidiary of U.S. Bancorp Piper Jaffray Companies Inc. (the "Parent"), which is a wholly-owned subsidiary of U.S. Bancorp. Effective May 1, 1998, U.S. Bancorp acquired the stock of the Parent in a merger accounted for as a purchase. On July 31, 1998, the Company's Board of Directors approved a change in the Company's fiscal year end from September 30 to December 31. The Company's Certificate of Incorporation limits the business activities in which it may engage to activities in connection with or related to the issuance of mortgage-backed bonds. The Company's activities include the issuance and sale of bonds collateralized by certain mortgage related investments (certificates), directly or through trusts formed by the Company, and the investment of the proceeds in such certificates. The Company or such trusts purchase the certificates prior to or simultaneously with the issuance of the mortgage-backed bonds. The Company has filed shelf Registration Statements under the Securities Act of 1933 (the "Act") with the Securities and Exchange Commission, pursuant to which $900,000,000 in aggregate principal amount of the Company's mortgage-backed bonds were registered under the Act. At December 31, 1998, the Company has issued 34 series of bonds with an aggregate original principal amount of $529,950,000. ITEM 2. PROPERTIES The Company has no physical properties. ITEM 3. LEGAL PROCEEDINGS The Company is not party to any pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted pursuant to General Instruction J of Form 10-K. 3 PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of December 31, 1998, all outstanding shares of the Company's common stock are owned directly by the Parent and are not traded on any stock exchange or in any over-the-counter market. ITEM 6. SELECTED FINANCIAL DATA Omitted pursuant to General Instruction J of Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Omitted pursuant to General Instruction J of Form 10-K. MANAGEMENT'S ANALYSIS (pursuant to General Instruction J of Form 10-K) RESOURCES AND LIQUIDITY The Company's source of funds with respect to the mortgage-backed bonds is the receipt of payments of principal and interest, including prepayments, on the mortgage-backed collateral certificates securing the bonds, together with the reinvestment income thereon. The Company expects that, at all times, the aggregate future receipts of principal and interest on the certificates, together with reinvestment income thereon, will exceed the aggregate of future amounts due as payments of principal and interest on the mortgage-backed bonds, as well as payments of other liabilities. The deferred bond issuance costs and original issue discounts or premiums on the collateral are amortized as bonds are redeemed. RESULTS OF OPERATIONS The Company's interest income and interest expense are directly related to the issuance and sale of mortgage-backed bonds. The bonds have stated maturities through 2025 and stated interest rates between 8% and 8.15%. The actual maturities may be shortened by prepayments on the collateral. The Company recorded net interest expense of $149,994, $25,949, $38,581 and $68,021 for the year ended December 31, 1998, the three-month transition period ended December 31, 1997 and the years ended September 30, 1997 and 1996, respectively. The net interest expense recorded in such periods resulted from additional expense related to the fiscal 1995 sale of residual interests in one series of mortgage-backed bonds. The Company anticipates that it will incur additional interest expense in future years relating to the sale of such residual interests. The Company's purchase accounting treatment of the unrealized gains in investment securities has caused the Company to record losses related to the amortization of premiums over par. Until the merger, the Company's investments available for sale were carried on the books at a discount to par, subject to a mark to market adjustment for unrealized gains or losses. The Company amortized such discount proportionate with the receipt of principal paydowns and recognized income as net gain on accretion of discount in investments. On the effective date of the merger, the Company capitalized all unrealized gains over original cost in its investments accounts by recording a premium over par value in its investments accounts. Subsequent to this adjustment, the Company has amortized such premium proportionate with the receipt of principal paydowns and recognized a net loss on amortization of premium on investments. The Company expects that the statement of operations will continue to show net losses as a result of this accounting treatment. 4 General and administrative expenses were approximately $49,000, $10,000, $62,000 and $52,000 for the year ended December 31, 1998, the three-month period ended December 31, 1997 and the years ended September 30, 1997 and 1996, respectively. YEAR 2000 Management of Premier Acceptance Corporation believes that Year 2000 issues will not have a material adverse impact on the Company's financial statements. The Company has no employees and limited operations and systems. The Company is currently in the process of verifying the Year 2000 readiness of the national bank which serves as trustee for the collateral and the bonds issued against such collateral. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary source of market risk for the Company is prepayments on its investments collateralizing mortgage-backed bonds. The Company has mitigated its exposure to market risks due to the matching of its investments to its bond obligations. The bonds have call provisions which permit the Company to redeem bonds concurrently with investment prepayments. 5 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS
Page Reports of Independent Auditors 7 Statements of Financial Condition 9 Statements of Operations and Comprehensive Income 10 Statements of Stockholder's Equity 11 Statements of Cash Flows 12 Notes to Financial Statements 13 Schedules, which are omitted, are omitted because they are not required, are inapplicable, or the information is included in the financial statements or notes thereto.
6 REPORT OF INDEPENDENT AUDITORS Board of Directors Premier Acceptance Corporation Minneapolis, Minnesota We have audited the accompanying statement of financial condition of Premier Acceptance Corporation (a wholly-owned subsidiary of U.S. Bancorp) as of December 31, 1998, and the related statements of operations and comprehensive income, stockholder's equity and cash flows for the year ended December 31, 1998 and the three-month period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Premier Acceptance Corporation as of December 31, 1998 and the results of its operations and cash flows for the year ended December 31, 1998 and the three-month period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota March 23, 1999 7 REPORT OF INDEPENDENT AUDITORS Board of Directors Premier Acceptance Corporation Minneapolis, Minnesota We have audited the accompanying statement of financial condition of Premier Acceptance Corporation (a wholly-owned subsidiary of Piper Jaffray Companies Inc.) as of September 30, 1997, and the related statements of operations and comprehensive income, stockholder's equity and cash flows for each of the two years in the period ended September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Premier Acceptance Corporation as of September 30, 1997 and the results of its operations and cash flows for each of the two years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Minneapolis, Minnesota November 5, 1997 (December 15, 1997 as to the transaction described in the first paragraph of Note 1) 8 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) STATEMENTS OF FINANCIAL CONDITION
December 31 September 30 1998 1997 --------------- ---------------- ASSETS Cash $ 1,578,248 $ 771,448 Interest receivable on investments 159,073 271,887 Investments available for sale, net of premium or discount, at market 26,240,897 42,100,057 Receivable from Parent - 3,004 Other assets 964,532 1,547,387 ------------ ------------ Total Assets $ 28,942,750 $ 44,693,783 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY Mortgage-backed bonds payable $ 23,544,000 $ 40,240,000 Interest payable on bonds 343,305 550,313 Bond redemption payable 1,353,000 469,000 Payable to Parent 5,416 - Deferred tax liabilities 1,397,958 1,268,162 Other liabilities 848 1,357 ------------ ------------ 26,644,527 42,528,832 Stockholder's equity: Common stock, $1 par value; 1,000 shares authorized, issued and outstanding 1,000 1,000 Additional paid-in capital 3,062,760 35,000 Accumulated other comprehensive income - net unrealized holding gains on investments available for sale 41,373 1,962,793 Retained earnings (806,910) 166,158 ------------ ------------ Total Stockholder's equity 2,298,223 2,164,951 ------------ ------------ Total Liabilities and Stockholder's equity $ 28,942,750 $ 44,693,783 ------------ ------------ ------------ ------------
See accompanying notes to financial statements. 9 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three-month Year ended period ended Year ended September 30 December 31 December 31 ---------------------------------- 1998 1997 1997 1996 ---------------- ---------------- ---------------- --------------- REVENUES: Interest income $ 2,477,239 $ 788,707 $3,489,513 $3,993,663 Interest expense 2,627,233 814,656 3,528,094 4,061,684 ----------- --------- ---------- ---------- Net interest expense (149,994) (25,949) (38,581) (68,021) Net gain on accretion of discount on investments 254,874 118,482 250,896 393,950 Net loss on amortization of premium on investments (886,619) ----------- --------- ---------- ---------- Net revenue (781,739) 92,533 212,315 325,929 EXPENSES: Amortization expense 498,632 84,223 177,648 299,262 General and administrative costs 49,478 10,290 61,605 52,273 ----------- --------- ---------- ---------- Total expense 548,110 94,513 239,253 351,535 ----------- --------- ---------- ---------- LOSS BEFORE INCOME TAXES (1,329,849) (1,980) (26,938) (25,606) INCOME TAXES (BENEFIT) (518,641) (772) (9,967) (9,986) ----------- --------- ---------- ---------- NET LOSS $ (811,208) $ (1,208) $ (16,971) $ (15,620) ----------- --------- ---------- ---------- OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized gains/(losses) on securities: Unrealized holding gains/(losses) arising during the period $ 1,012,540 $ 50,343 $ 979,023 $ (885,357) Add: Tax benefit/(expense) (405,016) (20,137) (391,609) 354,143 ----------- --------- ---------- ---------- Net of tax amount 607,524 30,206 587,414 (531,214) (Less)/Add: reclassification adjustment for (gains)/losses included in net income 631,745 (118,482) (250,896) (393,950) Add: Tax expense/(benefit) (252,698) 47,393 100,358 157,580 ----------- --------- ---------- ---------- Net of tax amount 379,047 (71,089) (150,538) (236,370) ----------- --------- ---------- ---------- Other comprehensive income (loss) 986,571 (40,883) 436,876 (767,584) ----------- --------- ---------- ---------- ----------- --------- ---------- ---------- COMPREHENSIVE INCOME $ 175,363 $ (42,091) $ 419,905 $ (783,204) ----------- --------- ---------- ---------- ----------- --------- ---------- ----------
See accompanying notes to financial statements. 10 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) STATEMENTS OF STOCKHOLDER'S EQUITY
Accumulated Additional Other Common Paid-in Retained Comprehensive Stock Capital Earnings Income Total ----------- -------------- -------------- -------------- -------------- Balances at September 30, 1995 $ 1,000 $ 35,000 $ 198,749 $2,293,501 $2,528,250 Net loss (15,620) (15,620) Other comprehensive income - change in net unrealized holding gains on investment securities available for sale (767,584) (767,584) ----------- -------------- -------------- -------------- -------------- Balances at September 30, 1996 1,000 35,000 183,129 1,525,917 1,745,046 Net loss (16,971) (16,971) Other comprehensive income - change in net unrealized holding gains on investment securities available for sale 436,876 436,876 ----------- -------------- -------------- -------------- -------------- Balances at September 30, 1997 1,000 35,000 166,158 1,962,793 2,164,951 Net loss (1,208) (1,208) Other comprehensive income - change in net unrealized holding gains on investment securities available for sale (40,883) (40,883) ----------- -------------- -------------- -------------- -------------- Balances at December 31, 1997 1,000 35,000 164,950 1,921,910 2,122,860 Net loss January 1, 1998 through April 30, 1998 (4,298) (4,298) Other comprehensive income - change in net unrealized holding gains on investment securities available for sale 945,198 945,198 ----------- -------------- -------------- -------------- -------------- Balances at April 30, 1998 1,000 35,000 160,652 2,867,108 3,063,760 Merger-related recapitalization 3,027,760 (160,652) (2,867,108) - Net loss for the period May 1, 1998 through December 31, 1998 (806,910) (806,910) Other comprehensive income - change in net unrealized holding gains on investment securities available for sale 41,373 41,373 ----------- -------------- -------------- -------------- -------------- Balances at December 31, 1998 $ 1,000 $3,062,760 $ (806,910) $ 41,373 $2,298,223 ----------- -------------- -------------- -------------- -------------- ----------- -------------- -------------- -------------- --------------
See accompanying notes to financial statements. 11 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) STATEMENTS OF CASH FLOWS
Three-month Year ended period ended Year ended September 30 December 31 December 31 ------------------------------- 1998 1997 1997 1996 --------------- --------------- --------------- --------------- OPERATING ACTIVITIES: Net Income (loss) $ (811,208) $ (1,208) $ (16,971) $ (15,620) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Amortization expense 498,632 84,223 177,648 299,262 Accretion of discount on investments (254,874) (118,482) (250,896) (393,950) Amortization expense 886,619 - - - Deferred income taxes (500,735) 73 4,300 (38,774) Change in: Interest receivable on investments 96,502 16,312 34,446 54,610 Interest payable on bonds (179,459) (27,549) (60,065) (119,232) Bond redemptions payable 636,000 248,000 198,000 102,000 Net intercompany balance 5,065 3,355 18,689 40,794 Other (437) (72) 1,356 (1,802) --------------- --------------- --------------- --------------- Net cash provided by (used in) operating activities 376,105 204,652 106,507 (72,712) INVESTING ACTIVITIES: Principal redemption on investments 14,475,182 2,446,861 5,166,890 8,191,524 --------------- --------------- --------------- --------------- Net cash provided by investing activities 14,475,182 2,446,861 5,166,890 8,191,524 FINANCING ACTIVITIES: Redemption of mortgage-backed bonds (14,283,000) (2,413,000) (5,093,000) (8,575,000) --------------- --------------- --------------- --------------- Net cash used in financing activities (14,283,000) (2,413,000) (5,093,000) (8,575,000) --------------- --------------- --------------- --------------- INCREASE (DECREASE) IN CASH 568,287 238,513 180,397 (456,188) CASH AT BEGINNING OF PERIOD 1,009,961 771,448 591,051 1,047,239 --------------- --------------- --------------- --------------- CASH AT END OF PERIOD $ 1,578,248 $ 1,009,961 $ 771,448 $ 591,051 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid (received) for: Interest paid $ 2,806,692 $ 842,205 $ 3,588,159 $ 4,180,916 Income taxes - from Parent $ (17,905) $ (846) $ 14,267 $ (29,344)
See accompanying notes to financial statements. 12 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) NOTES TO FINANCIAL STATEMENTS Year ended December 31, 1998, three months ended December 31, 1997 and the years ended September 30, 1997 and 1996 1. ORGANIZATION AND BUSINESS ACTIVITY The Company is a wholly-owned subsidiary of U.S. Bancorp Piper Jaffray Companies Inc. (the "Parent"), which in turn is a wholly-owned subsidiary of U.S. Bancorp. Effective May 1, 1998, U.S. Bancorp acquired 100% of the stock of the Parent for cash in a merger accounted for as a purchase. The purchase effectively resulted in the recording of the May 1, 1998 market value of investments available for sale, including the related unrealized gains, as the Company's new cost of such investments. At the same time, the Company's equity accounts were recapitalized and unrealized gains were recorded as additional paid-in capital. On July 31, 1998, the Company's Board of Directors approved a change in the Company's fiscal year end from September 30 to December 31. Accordingly, these financial statements reflect the results of operations and comprehensive income, changes in stockholder's equity and cash flows for the year ended December 31, 1998, the transition period of three months ended December 31, 1997 and the years ended September 30, 1997 and 1996. The following information reflects the results of operations of the Company for 1998 for the period preceding the merger and the period following the merger:
Four-month Eight-month period ended period ended April 30, 1998 December 31, 1998 -------------- ----------------- Net revenue $ 197,070 ($ 978,809) Total expense 204,116 343,994 ------------ -------------- Income (loss) before taxes ( 7,046) ( 1,322,803) Income tax (benefit) ( 2,748) ( 515,893) ------------ -------------- Net loss ($ 4,298) ($ 806,910) ------------ -------------- ------------ --------------
The Company's Certificate of Incorporation limits the business activities in which it may engage to activities in connection with or related to the issuance of mortgage-backed bonds, as described in Note 3. The Company's activities include the issuance and sale of bonds collateralized by certain mortgage related investments (certificates), directly or through trusts formed by the Company, and the investment of the proceeds in such certificates. The Company or such trusts purchase the certificates prior to or simultaneously with the issuance of the mortgage-backed bonds. The Company has filed Registration Statements under the Securities Act of 1933 (the Act) with the Securities and Exchange Commission, pursuant to which $900,000,000 in aggregate principal amount of the Company's mortgage-backed bonds were registered under the Act. At December 31, 1998, the Company has issued thirty-four series of bonds with an aggregate original principal amount of $529,950,000. Certain amounts in the 1997 and 1996 financial statements have been reclassified to conform to the 1998 presentation. These reclassifications had no effect on net income or stockholders' equity as previously reported. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME during 1998. The Statement establishes standards for the reporting and display of comprehensive income 13 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) and its components in a full set of general purpose financial statements. The Statement applies to all enterprises that provide a full set of general-purpose financial statements. For the Company, other comprehensive income consists of unrealized gains and losses on investments available for sale. The Company adopted SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES during fiscal 1995. Investments pursuant to mortgage-backed securities are classified as available for sale, and are carried at market value based upon quoted market prices with a cost of $22,718,454 and $38,828,738 at December 31, 1998 and September 30, 1997, respectively. The Company's collateral for outstanding mortgage-backed bonds is classified as investments available for sale. Such securities are not salable before the bonds are callable, at some future date. In addition, the market value of GNMA and FNMA securities fluctuates significantly as interest rates change; therefore, the market value of such securities as of the future redemption dates may vary significantly from the current date, and the realization of any unrealized gain is not assured. When the market is such that the value of the securities is less than the amortized cost, the Company has the expectation that such securities would be held to maturity, although not specifically categorized as such, as collateral for the related mortgage-backed bonds, and the Company would not realize any unrealized losses. Thus, no tax benefit would be recognized for unrealized losses for the Company's investment in available for sale securities. The Company does recognize deferred tax liabilities resulting from unrealized gains on available for sale securities. Until the merger, the Company's investments available for sale were carried on the books at a discount to par, subject to a mark to market adjustment to record unrealized gains or losses. The Company amortized such discount proportionate with the receipt of principal paydowns and recognized income as net gain on accretion of discount on investments. On the effective date of the merger, the Company capitalized all unrealized gains over original cost by recording a premium over par value in its investments accounts. Subsequent to this adjustment, the Company has amortized such premium proportionate with the receipt of principal paydowns and recognized a net loss on amortization of premium on investments. The Company expects that the statement of operations will continue to show net losses as a result of this accounting treatment. Other assets consist of excess cost over net assets acquired. Such assets are amortized as bonds are redeemed. Cash includes monthly principal and interest payments from investments pursuant to mortgage-backed bonds, plus any reinvestment income thereon, both of which are used to pay interest and redeem mortgage-backed bonds during the month following receipt. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. MORTGAGE-BACKED BONDS The Company periodically issues mortgage-backed bonds (the "bonds") which are collateralized by GNMA or FNMA certificates and guaranteed as to payment of principal and interest by the Government National Mortgage Association or the Federal National Mortgage Association. The bonds are obligations solely of the Company and bondholders' only recourse is to the underlying series' collateral. The collateral, which has been purchased with the issuance proceeds, is held by a trustee and is carried at market value under SFAS No. 115, as discussed in Note 2. Principal and interest payments on the collateral are used to meet the debt service of the respective bonds. 14 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) 4. INCOME TAXES The Company files a consolidated federal income tax return and unitary state tax returns with its Parent and affiliates. Payments are made to the Parent each month for federal and state income taxes computed on pre-tax book income using the consolidated effective tax rate. Deferred income taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities. Adjustments to deferred tax assets and liabilities are periodically settled with the Parent. At December 31, 1998 and September 30, 1997, the Company's deferred tax liability included $1,422,226 and $1,308,527, respectively in deferred tax liabilities related to the unrealized holding gains on investment securities available for sale. The liabilities offset deferred tax assets of $24,268 and $40,365 at December 31, 1998 and September 30, 1997, respectively, resulting from income recognition differences for residual interests. 5. RELATED PARTY TRANSACTIONS The Company maintains an agreement with the Parent, stating that the Company may advance excess cash to the Parent for a specified period of time and the Parent shall pay interest to the Company at the stated rate of one-half of one percent over the broker call rate. At December 31, 1998 and September 30, 1997, $0 and $3,004 was receivable from the Parent, respectively. The Company is charged for certain expenses by the Parent based on specifically identified cost allocations. In addition, the Company's Parent provides the Company with accounting and administrative services, including services of officers. For the year ended December 31, 1998, the three month period ended December 31, 1997 and the years ended September 30, 1997 and 1996, the Company was charged $21,000, $5,250, $21,000, and $20,000, respectively for such services. These charges are subject to periodic reevaluation based upon the number of mortgage-backed bond series' outstanding and the nature of services provided. The Company's costs are not necessarily indicative of the costs that would have been incurred had the Company operated independently. 15 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Concurrent with the purchase of the Company's Parent by U.S. Bancorp, the Company changed its auditors to U.S. Bancorp's auditors, Ernst & Young LLP, from Deloitte & Touche LLP. There were no disagreements with the current or the predecessor accountants on any matter of accounting principle or practice or financial disclosure. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Omitted pursuant to General Instruction J of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Omitted pursuant to General Instruction J of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Omitted pursuant to General Instruction J of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Omitted pursuant to General Instruction J of Form 10-K. 16 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements. The following financial statements are included in Part II, Item 8: Report of Independent Auditors Statements of Financial Condition Statements of Operations and Comprehensive Income Statements of Stockholder's Equity Statements of Cash Flows Notes to Financial Statements (a)(2) Financial Statement Schedules. All schedules have been omitted because they are either inapplicable or the required information is included in the financial statements or notes thereto. (a)(3) Exhibits. 3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3(a) to Form S-11 filed May 11, 1988). 3.2 By-laws of the Company (incorporated by reference to Exhibit 3(b) to Form S-11 filed May 11, 1988). 3.3 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3(c) to Amendment No. 1 to Form S-11 filed June 6, 1988). 4.1 Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated November 23, 1988). 4.2 Series Supplement dated as of June 29, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-B Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated June 27, 1989). 4.3 Series Supplement dated as of August 30, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-C Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated August 30, 1989). 4.4 Series Supplement dated as of November 29, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-D Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated November 29, 1989). 17 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) PART IV ITEM 14. (CONTINUED) (a)(3) Exhibits. 4.5 Series Supplement dated as of December 19, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated December 19, 1989). 4.6 Supplemental Indenture dated as of December 21, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated December 19, 1989). 4.7 Supplemental Indenture dated as of December 28, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.3 to Form 8-K dated December 19, 1989). 4.8 Series Supplement dated as of March 27, 1990 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1990-I Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated March 27, 1990). 4.9 Series Supplement dated as of September 27, 1990 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1990-II Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated September 26, 1990). 4.10 The resignation of First Trust National Association as trustee for the Company's Mortgage-Backed Bonds, Series 1 through 5 and the resignation of First Bank National Association as trustee for the Company's Mortgage-Backed Bonds, Series 6 through 25, Series 1989-A through 1989-E and Series 1990-I and Series 1990-II. Norwest Bank Minnesota, National Association was appointed successor trustee to both First Trust National Association and First Bank National Association under the indentures pursuant to which such bonds have been issued (incorporated by reference to Item 5 in Form 8-K dated June 28, 1991). 4.11 Amendment and Series Supplement dated as of October 31, 1991 to Indenture as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and Norwest Bank Minnesota, National Association, as Trustee, relating to Series 1989-E Bonds (incorporated by reference to Exhibit 4.65 in Form 10-K dated September 27, 1991). 4.12 Amendment and Series Supplement dated as of October 31, 1991 to Indenture as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and Norwest Bank Minnesota, National Association, as Trustee, relating to Series 1990-II Bonds (incorporated by reference to Exhibit 4.66 in Form 10-K dated September 27, 1991). 18 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) PART IV ITEM 14. (CONTINUED) (a)(3) Exhibits. 4.13 Series Supplement dated November 23, 1994 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 26 (incorporated by reference to Exhibit 4.2 to Form 8-K dated November 23, 1994). 4.14 Series Supplement dated December 23, 1994 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 27 (incorporated by reference to Exhibit 4.1 to Form 8-K dated December 23, 1994). 4.15 Series Supplement dated February 23, 1995 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 28 (incorporated by reference to Exhibit 4.1 to Form 8-K dated February 23, 1995). 4.16 Revolving Credit Agreement between Piper Jaffray Companies Inc., as borrower, and Premier Acceptance Corporation, as lender, dated September 1, 1995. 23a Consent of Ernst & Young LLP, Independent Auditors. 23b Consent of Deloitte & Touche LLP, Independent Auditors. 27 Financial Data Schedule. (b) Reports on Form 8-K - None. (c) Exhibits filed as part of this report are included in Item 14 (a)(3) above. (d) Financial Statement Schedules required by Regulation S-X are included in Part II, Item 8 above. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PREMIER ACCEPTANCE CORPORATION (Registrant) By: /s/ BRIAN J. RANALLO - ------------------------------------- BRIAN J. RANALLO President and Director /s/ DEBORAH K. ROESLER - ------------------------------------- DEBORAH K. ROESLER Treasurer (Principal Financial and Accounting Officer) and Director Dated: March 25, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated: /S/ FRANCIS E. FAIRMAN, IV /S/ DAVID B. HOLDEN - --------------------------- Director --------------------------- Director FRANCIS E. FAIRMAN, IV DAVID B. HOLDEN /s/ MARK A. LINDGREN /s/ THOMAS E. STANBERRY - --------------------------- Director --------------------------- Director MARK A. LINDGREN THOMAS E. STANBERRY /s/ CHARLES NEERLAND /s/ BRADLEY F. ZILKA - --------------------------- Director --------------------------- Director CHARLES NEERLAND BRADLEY F. ZILKA
Dated: March 25, 1999 PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) INDEX TO EXHIBITS
Exhibit Description of Exhibit Form of Filing - ------- ----------------------------------------------------------------------------- -------------- 3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3(a) to Form S-11 filed May 11, 1988). 3.2 By-laws of the Company (incorporated by reference to Exhibit 3(b) to Form S-11 filed May 11, 1988). 3.3 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3(c) to Amendment to Form S-11 filed June 6, 1988). 4.1 Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated November 23, 1988). 4.2 Series Supplement dated as of June 29, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-B Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated June 27, 1989). 4.3 Series Supplement dated as of August 30, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-C Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated August 30, 1989). 4.4 Series Supplement dated as of November 29, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-D Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated November 29, 1989). 4.5 Series Supplement dated as of December 19, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated December 19, 1989). 4.6 Supplemental Indenture dated as of December 21, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated December 19, 1989). 4.7 Supplemental Indenture dated as of December 28, 1989 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1989-E Bonds (incorporated by reference to Exhibit 4.3 to Form 8-K dated December 19, 1989). 4.8 Series Supplement dated as of March 27, 1990 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1990-I Bonds (incorporated by reference to Exhibit 4.1 to Form 8-K dated March 27, 1990).
PREMIER ACCEPTANCE CORPORATION (a wholly-owned subsidiary of U.S. Bancorp) INDEX TO EXHIBITS
Exhibit Description of Exhibit Form of Filing - ------- ----------------------------------------------------------------------------- -------------- 4.9 Series Supplement dated as of September 27, 1990 to Indenture dated as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and First Bank National Association, as Trustee, relating to the Series 1990-II Bonds (incorporated by reference to Exhibit 4.2 to Form 8-K dated September 26, 1990). 4.10 The resignation of First Trust National Association as trustee for the Company's Mortgage-Backed Bonds, Series 1 through 5 and the resignation of First Bank National Association as trustee for the Company's Mortgage-Backed Bonds, Series 6 through 25, Series 1989-A through 1989-E and Series 1990-I and Series 1990-II. Norwest Bank Minnesota, National Association was appointed successor trustee to both First Trust National Association and First Bank National Association under the indentures pursuant to which such bonds have been issued (incorporated by reference to Item 5. in Form 8-K dated June 28, 1991). 4.11 Amendment and Series Supplement dated as of October 31, 1991 to Indenture as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and Norwest Bank Minnesota, National Association, as Trustee, relating to Series 1989-E Bonds (incorporated by reference to Exhibit 4.65 in Form 10-K dated September 27, 1991). 4.12 Amendment and Series Supplement dated as of October 31, 1991 to Indenture as of November 23, 1988 between Premier Acceptance Corporation, as Issuer, and Norwest Bank Minnesota, National Association, as Trustee, relating to Series 1990-II Bonds (incorporated by reference to Exhibit 4.66 in Form 10-K dated September 27, 1991). 4.13 Series Supplement dated November 23, 1994 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 26 (incorporated by reference to Exhibit 4.2 to Form 8-K dated November 23, 1994). 4.14 Series Supplement dated December 23, 1994 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 27 (incorporated by reference to Exhibit 4.1 to Form 8-K dated December 23, 1994). 4.15 Series Supplement dated February 23, 1995 to Indenture dated November 23, 1988 between Premier Acceptance Corporation, as issuer, and Norwest Bank Minnesota, National Association, as trustee, relating to Series 28 (incorporated by reference to Exhibit 4.1 to Form 8-K dated February 23, 1995). 4.16 Revolving Credit Agreement between Piper Jaffray Companies Inc., as borrower, and Premier Acceptance Corporation, as lender, dated September 1, 1995. 23a Consent of Ernst & Young LLP, Independent Auditors. electronic transmission 23b Consent of Deloitte & Touche LLP, Independent Auditors. electronic transmission 27 Financial Data Schedule. electronic transmission
EX-23 2 EX-23(A) Exhibit 23a CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement (Form S-3) No. 33-33261 of Premier Acceptance Corporation of our report dated March 23, 1999, with respect to the financial statements of Premier Acceptance Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1998 and for the three-month period ended December 31, 1997. /s/ Ernst & Young LLP Minneapolis, Minnesota March 23, 1999 EX-23 3 EX-23(B) Exhibit 23b CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement No. 33-33261 on Form S-3 of our report dated November 5, 1997, December 15, 1997 as to the transaction described in the first paragraph of Note 1, appearing in this Annual Report on Form 10-K of Premier Acceptance Corporation (a former wholly-owned subsidiary of Piper Jaffray Companies Inc.) for the year ended December 31, 1998. /s/ Deloitte & Touche LLP Minneapolis, Minnesota March 23, 1999 EX-27 4 EXHIBIT-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF PREMIER ACCEPTANCE CORPORATION AS OF AND FOR YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1,578,248 26,240,897 159,073 0 0 0 0 0 28,942,750 1,702,569 23,544,000 0 0 1,000 2,297,223 28,942,750 0 2,732,113 0 0 548,110 0 3,513,852 (1,329,849) (518,641) (811,208) 0 0 0 (811,208) 0 0 NOT APPLICABLE - CO DOES NOT HAVE CLASSIFIED BALANCE SHEET. REVENUES CONSIST OF INTEREST INCOME AND DISCOUNT ACCRETION ONLY. INTEREST EXPENSE INCLUDES AMORTIZATION OF PREMIUM ON INVESTMENTS. NOT APPLICABLE - CO DOES NOT COMPUTE EPS.
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