-----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, NFa2KasNdh2aLk6suUfs9V7N0zLBlaPZ+nwsMr63V0uQEi9FwmYQrdDifWViGrbD 4ukvjF3S09lMzbLM+AUF5Q== 0000912057-00-024080.txt : 20000516 0000912057-00-024080.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP CENTRAL INDEX KEY: 0000804269 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 752291093 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10667 FILM NUMBER: 630714 BUSINESS ADDRESS: STREET 1: 801 CHERRY STREET, SUITE 3900 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173027000 MAIL ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: URCARCO INC DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 2000 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 1-10667 AMERICREDIT CORP. (Exact name of registrant as specified in its charter) Texas 75-2291093 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 801 CHERRY STREET, SUITE 3900, FORT WORTH, TEXAS 76102 (Address of principal executive offices, including Zip Code) (817) 302-7000 (Registrant's telephone number, including area code) 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 (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 / / There were 75,767,508 shares of common stock, $0.01 par value outstanding as of April 28, 2000. AMERICREDIT CORP. INDEX TO FORM 10-Q Part I. FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2000 and June 30, 1999 (unaudited) ................... 3 Consolidated Statements of Income and Comprehensive Income - Three Months and Nine Months Ended March 31, 2000 and 1999 (unaudited) ............................ 4 Consolidated Statements of Cash Flows - Nine Months Ended March 31, 2000 and 1999 (unaudited) ...................... 5 Notes to Consolidated Financial Statements ..................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................................ 33 Part II. OTHER INFORMATION Item 1. Legal Proceedings ............................................ 34 Item 6. Exhibits and Reports on Form 8-K ............................. 35 SIGNATURE ......................................................................... 36
2 Part I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS AMERICREDIT CORP. Consolidated Balance Sheets (Unaudited, Dollars in Thousands)
March 31, 2000 June 30, 1999 -------------- ------------- ASSETS Cash and cash equivalents $ 50,818 $ 21,189 Receivables held for sale, net 688,021 456,009 Interest-only receivables from Trusts 223,411 191,865 Investments in Trust receivables 300,169 195,598 Restricted cash 215,533 107,399 Property and equipment, net 46,396 41,145 Other assets 60,949 50,282 ---------- ---------- Total assets $1,585,297 $1,063,487 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Warehouse credit facilities $ 324,647 $ 114,659 Credit enhancement facility 45,000 Senior notes 375,000 375,000 Other notes payable 21,398 17,874 Funding payable 54,792 43,042 Accrued taxes and expenses 57,481 39,187 Deferred income taxes 86,294 73,995 ---------- ---------- Total liabilities 964,612 663,757 ---------- ---------- Shareholders' equity Preferred stock, $0.01 par value per share; 20,000,000 shares authorized, none issued Common stock, $0.01 par value per share; 120,000,000 shares authorized; 82,174,205 and 71,498,474 shares issued 822 715 Additional paid-in capital 382,203 252,194 Accumulated other comprehensive income 34,230 21,410 Retained earnings 224,953 147,610 ---------- ---------- 642,208 421,929 Treasury stock, at cost (7,131,957 and 7,375,030 shares) (21,523) (22,199) ---------- ---------- Total shareholders' equity 620,685 399,730 ---------- ---------- Total liabilities and shareholders' equity $1,585,297 $1,063,487 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements 3 AMERICREDIT CORP. Consolidated Statements of Income and Comprehensive Income (Unaudited, Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended March 31, March 31, -------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenue: Finance charge income $ 30,512 $ 18,361 $ 85,506 $ 51,538 Gain on sale of receivables 52,923 42,531 151,165 116,551 Servicing fee income 44,645 23,691 120,528 61,702 Other income 1,953 484 4,697 3,361 ----------- ----------- ----------- ----------- 130,033 85,067 361,896 233,152 ----------- ----------- ----------- ----------- Costs and expenses: Operating expenses 55,488 42,025 162,031 115,760 Provision for losses 3,986 2,286 11,229 6,589 Interest expense 17,858 9,041 48,263 25,660 Charge for closing mortgage operations 10,500 ----------- ----------- ----------- ----------- 77,332 53,352 232,023 148,009 ----------- ----------- ----------- ----------- Income before income taxes 52,701 31,715 129,873 85,143 Income tax provision 20,291 12,210 52,530 32,780 ----------- ----------- ----------- ----------- Net income 32,410 19,505 77,343 52,363 ----------- ----------- ----------- ----------- Other comprehensive income: Unrealized gain (loss) on credit enhancement assets (1,272) 2,778 20,803 9,895 Related income tax benefit (expense) 489 (1,070) (7,983) (3,810) ----------- ----------- ----------- ----------- (783) 1,708 12,820 6,085 ----------- ----------- ----------- ----------- Comprehensive income $ 31,627 $ 21,213 $ 90,163 $ 58,448 =========== =========== =========== =========== Earnings per share: Basic $ 0.43 $ 0.31 $ 1.07 $ 0.83 =========== =========== =========== =========== Diluted $ 0.41 $ 0.29 $ 1.01 $ 0.78 =========== =========== =========== =========== Weighted average shares 74,869,550 63,187,789 72,110,495 62,872,858 =========== =========== =========== =========== Weighted average shares and assumed incremental shares 79,027,907 66,514,367 76,544,943 66,822,426 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements 4 AMERICREDIT CORP. Consolidated Statements of Cash Flows (Unaudited, Dollars in Thousands)
Nine Months Ended March 31, --------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 77,343 $ 52,363 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash charge for closing mortgage operations 6,566 Depreciation and amortization 13,527 6,902 Provision for losses 11,229 6,589 Deferred income taxes 9,584 33,041 Non-cash servicing fee (31,388) (10,739) Non-cash gain on sale of auto receivables (138,753) (107,642) Distributions from Trusts 79,443 35,182 Changes in assets and liabilities: Other assets (9,972) (2,746) Accrued taxes and expenses 18,294 18,014 ----------- ----------- Net cash provided by operating activities 35,873 30,964 ----------- ----------- Cash flows from investing activities: Purchases of auto receivables (3,166,671) (1,976,508) Originations of mortgage receivables (109,688) (203,518) Principal collections and recoveries on receivables 27,849 14,783 Net proceeds from sale of auto receivables 2,894,504 1,894,383 Net proceeds from sale of mortgage receivables 122,515 198,953 Initial deposits to restricted cash (132,750) (57,250) Return of deposits from restricted cash 23,000 Net change in credit enhancement facility 45,000 Purchases of property and equipment (6,891) (8,431) Increase in other assets (7,361) (7,387) ----------- ----------- Net cash used in investing activities (333,493) (121,975) ----------- ----------- Cash flows from financing activities: Net change in warehouse credit facilities 209,988 89,923 Payments on other notes payable (8,263) (2,629) Proceeds from issuance of common stock 125,524 7,476 ----------- ----------- Net cash provided by financing activities 327,249 94,770 ----------- ----------- Net increase in cash and cash equivalents 29,629 3,759 Cash and cash equivalents at beginning of period 21,189 33,087 ----------- ----------- Cash and cash equivalents at end of period $ 50,818 $ 36,846 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements 5 AMERICREDIT CORP. Notes to Consolidated Financial Statements (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of AmeriCredit Corp. and its wholly-owned subsidiaries ("the Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements as of March 31, 2000 and for the periods ended March 31, 2000 and 1999 are unaudited, but in management's opinion include all adjustments necessary for a fair presentation of the results for such interim periods. Certain prior year amounts have been reclassified to conform to the current period presentation. The results for interim periods are not necessarily indicative of results for a full year. The interim period financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles. These interim period financial statements should be read in conjunction with the Company's consolidated financial statements which are included in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. NOTE 2 - RECEIVABLES HELD FOR SALE Receivables held for sale consist of the following (in thousands):
March 31, 2000 June 30, 1999 -------------- ------------- Auto receivables $699,450 $444,128 Less allowance for losses (20,488) (11,841) ---------- ---------- Auto receivables, net 678,962 432,287 Mortgage receivables 9,059 23,722 ---------- ---------- $688,021 $456,009 ========== ==========
A summary of the allowance for losses is as follows (in thousands):
Three Months Ended Nine Months Ended March 31, March 31, ---------------------------- --------------------------- 2000 1999 2000 1999 ---------- ------------ ---------- ---------- Balance at beginning of period $ 16,861 $ 8,377 $ 11,841 $ 12,756 Provision for losses 3,986 2,286 11,229 6,589 Acquisition fees 26,935 17,185 69,433 44,614 Allowance related to auto receivables sold to Trusts (24,827) (15,014) (66,164) (47,702) Net charge-offs (2,467) (2,285) (5,851) (5,708) ---------- ------------ ---------- ---------- Balance at end of period $ 20,488 $ 10,549 $ 20,488 $ 10,549 ========== ========== ========== ==========
6 NOTE 3 - CREDIT ENHANCEMENT ASSETS As of March 31, 2000 and June 30, 1999, the Company was servicing $5,250.5 million and $3,661.3 million, respectively, of auto receivables which have been sold to certain special purpose financing trusts (the "Trusts"). The Company has retained an interest in these receivables in the form of credit enhancement assets. Credit enhancement assets consist of the following (in thousands):
March 31, 2000 June 30, 1999 -------------- ------------- Interest-only receivables from Trusts $223,411 $191,865 Investments in Trust receivables 300,169 195,598 Restricted cash 215,533 107,399 -------------- ------------- $739,113 $494,862 ============== =============
A summary of activity in the credit enhancement assets is as follows (in thousands):
Three Months Ended Nine Months Ended March 31, March 31, -------------------------- --------------------------- 2000 1999 2000 1999 ------------ ----------- ------------ ------------ Balance at beginning of period $685,061 $381,701 $494,862 $286,309 Non-cash gain on sale of auto receivables 46,083 37,239 138,753 107,642 Accretion of present value discount 11,223 9,196 31,388 24,139 Initial deposits to restricted cash 40,750 21,000 132,750 57,250 Return of deposits from restricted cash (23,000) (23,000) Change in unrealized gain (1,272) 2,778 20,803 9,895 Distributions from Trusts (42,732) (10,261) (79,443) (35,182) Permanent impairment write-down (5,000) (13,400) ------------ ----------- ------------ ------------ Balance at end of period $739,113 $413,653 $739,113 $413,653 ============ =========== ============ ============
A summary of the allowance for losses included as a component of the interest-only receivables is as follows (in thousands):
Three Months Ended Nine Months Ended March 31, March 31, ---------------------------- ----------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ----------- Balance at beginning of period $452,221 $256,599 $ 354,338 $179,359 Assumptions for cumulative credit losses 106,883 73,251 302,289 204,441 Permanent impairment write-down 5,000 13,400 Net charge-offs (51,530) (35,833) (149,053) (98,183) ------------ ------------ ------------ ----------- Balance at end of period $507,574 $299,017 $ 507,574 $299,017 ============ ============ ============ ===========
7 NOTE 4 - WAREHOUSE CREDIT FACILITIES Warehouse credit facilities consist of the following (in thousands):
March 31, 2000 June 30, 1999 --------------- -------------- Commercial paper facilities $320,669 $ 94,369 Credit agreements 3,978 1,306 Mortgage facility - 18,984 --------------- -------------- $324,647 $114,659 =============== ==============
The Company has three separate funding agreements with administrative agents on behalf of institutionally managed commercial paper conduits and bank groups with aggregate structured warehouse financing availability of $1.4 billion. The first facility was expanded in March 2000, increasing the amount of available structured warehouse financing to $725 million from $675 million, and matures in September 2000. The second facility provides for available structured warehouse financing of $250 million through September 2000. The third facility provides for available structured warehouse financing of $375 million through March 2001. Under these funding agreements, the Company transfers auto receivables to special purpose finance subsidiaries of the Company, and these subsidiaries in turn issue notes, collateralized by such auto receivables, to the agents. The agents provide funding under the notes to the subsidiaries pursuant to an advance formula and the subsidiaries forward the funds to the Company in consideration for the transfer of auto receivables. While these subsidiaries are included in the Company's consolidated financial statements, these subsidiaries are separate legal entities and the auto receivables and other assets held by the subsidiaries are legally owned by these subsidiaries and are not available to creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the funding agreements bear interest at commercial paper, London Interbank Offered Rates ("LIBOR") or prime rates plus specified fees depending upon the source of funds provided by the agents. The funding agreements contain various covenants requiring certain minimum financial ratios and results. The Company had a revolving credit agreement with a group of banks under which the Company could borrow up to $90 million, subject to a defined borrowing base. The credit agreement expired in March 2000 and was not renewed by the Company. In March 2000, the Company's Canadian subsidiary renewed its convertible revolving term credit agreement with a bank, increasing the amount the subsidiary may borrow under the credit agreement from $20 million to $30 million Cdn., subject to a defined borrowing base. Borrowings under the credit agreement are collateralized by certain Canadian auto receivables and bear interest at the Canadian prime rate. The credit agreement, which expires in March 2001, contains various restrictive covenants requiring certain 8 minimum financial ratios and results and placing certain limitations on the prepayment of senior notes, cash dividends and repurchase of common stock. NOTE 5 - CREDIT ENHANCEMENT FACILITY In October 1999, the Company entered into a credit enhancement facility with a financial institution under which the Company may borrow up to $225 million to fund a portion of the initial restricted cash deposit required in its securitization transactions. The Company had previously utilized reinsurance arrangements to reduce the initial restricted cash deposit. These arrangements were reinsurance agreements and not funded debt and therefore were not recorded as such on the Company's consolidated balance sheet. Borrowings under the credit enhancement facility are available on a revolving basis through October 2001 and are collateralized by the Company's credit enhancement assets. The facility contains covenants requiring certain asset performance ratios. NOTE 6 - CHARGE FOR CLOSING MORTGAGE OPERATIONS As a result of declining premiums received for the sale of mortgage loans in the secondary markets, the Company ceased wholesale originations of mortgage loans and closed its mortgage loan production and processing offices during the quarter ended December 31, 1999. The Company recognized a pre-tax charge of $10.5 million related to the closing of the mortgage operations. The charge consisted of a $6.6 million write-off of goodwill, $2.0 million of reserves against mortgage receivables held for sale and $1.9 million of severance, facility closing and other costs. Reserves and accrued costs remaining at March 31, 2000 were $2.5 million. Since the goodwill write-off is not deductible for income tax reporting purposes, the charge amounted to approximately $9.0 million after related income tax benefits. NOTE 7 - SUPPLEMENTAL INFORMATION Cash payments (receipts) for interest costs and income taxes consist of the following (in thousands):
Nine Months Ended March 31, --------------------------- 2000 1999 ----------- ------------ Interest costs (none capitalized) $45,500 $ 29,237 Income taxes 37,611 (14,000)
During the nine months ended March 31, 2000 and 1999, the Company entered into lease agreements for property and equipment of $11,787,000 and $8,978,000 respectively. 9 NOTE 8 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS The payment of principal, premium, if any, and interest on the Company's senior notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly-owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the senior notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. The following supplementary information presents consolidating financial data for (i) AmeriCredit Corp. (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the Company and its subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on a consolidated basis. Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Earnings of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. 10 AmeriCredit Corp. Consolidating Balance Sheet March 31, 2000 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated ----------- ----------- ---------- ------------ ------------ ASSETS Cash and cash equivalents $ $ 63,918 $ (13,100) $ $ 50,818 Receivables held for sale, net 338,653 349,368 688,021 Interest-only receivables from Trusts 2,278 221,133 223,411 Investments in Trust receivables 300,169 300,169 Restricted cash 215,533 215,533 Property and equipment, net 349 46,047 46,396 Other assets 10,775 30,947 19,227 60,949 Due (to) from affiliates 696,575 (664,947) (31,628) Investment in affiliates 266,818 123,737 1,100 (391,655) -------- --------- ---------- --------- ---------- Total assets $976,795 $ (61,645) $1,061,802 $(391,655) $1,585,297 ======== ========= ========== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Warehouse credit facilities $ $ 3,978 $ 320,669 $ $ 324,647 Credit enhancement facility 45,000 45,000 Senior notes 375,000 375,000 Other notes payable 21,398 21,398 Funding payable 54,711 81 54,792 Accrued taxes and expenses 23,625 32,080 1,776 57,481 Deferred income taxes (63,913) (60,854) 211,061 86,294 -------- --------- ---------- --------- ---------- Total liabilities 356,110 29,915 578,587 964,612 -------- --------- ---------- --------- ---------- Shareholders' equity Common stock 822 32 1 (33) 822 Additional paid-in capital 382,203 39,086 123,925 (163,011) 382,203 Accumulated other comprehensive income 34,230 34,230 (34,230) 34,230 Retained earnings 224,953 (130,678) 325,059 (194,381) 224,953 -------- --------- ---------- --------- ---------- 642,208 (91,560) 483,215 (391,655) 642,208 Treasury stock (21,523) (21,523) -------- --------- ---------- --------- ---------- Total shareholders' equity 620,685 (91,560) 483,215 (391,655) 620,685 -------- --------- ---------- --------- ---------- Total liabilities and shareholders' equity $976,795 $ (61,645) $1,061,802 $(391,655) $1,585,297 ======== ========= ========== ========= ==========
11 AmeriCredit Corp. Consolidating Balance Sheet June 30, 1999 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- ASSETS Cash and cash equivalents $ $ 20,246 $ 943 $ $ 21,189 Receivables held for sale, net 256,771 199,238 456,009 Interest-only receivables from Trusts 1,337 190,528 191,865 Investments in Trust receivables 195,598 195,598 Restricted cash 107,399 107,399 Property and equipment, net 349 40,796 41,145 Other assets 11,510 30,170 8,602 50,282 Due (to) from affiliates 567,368 (478,520) (88,848) Investment in affiliates 198,339 118,024 1,050 (317,413) --------------- --------------- --------------- --------------- --------------- Total assets $778,903 $ (12,513) $614,510 $(317,413) $1,063,487 =============== =============== =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Warehouse credit facilities $ $ 20,290 $ 94,369 $ $ 114,659 Senior notes 375,000 375,000 Other notes payable 17,874 17,874 Funding payable 43,042 43,042 Accrued taxes and expenses 16,062 22,860 265 39,187 Deferred income taxes (29,763) (42,016) 145,774 73,995 --------------- --------------- --------------- --------------- --------------- Total liabilities 379,173 44,176 240,408 663,757 --------------- --------------- --------------- --------------- --------------- Shareholders' equity Common stock 715 203 3 (206) 715 Additional paid-in capital 252,194 108,475 118,840 (227,315) 252,194 Accumulated other comprehensive income 21,410 21,410 (21,410) 21,410 Retained earnings 147,610 (165,367) 233,849 (68,482) 147,610 --------------- --------------- --------------- --------------- --------------- 421,929 (56,689) 374,102 (317,413) 421,929 Treasury stock (22,199) (22,199) --------------- --------------- --------------- --------------- --------------- Total shareholders' equity 399,730 (56,689) 374,102 (317,413) 399,730 --------------- --------------- --------------- --------------- --------------- Total liabilities and shareholders' equity $778,903 $ (12,513) $614,510 $(317,413) $1,063,487 =============== =============== =============== =============== ===============
12 AmeriCredit Corp. Consolidating Income Statement Nine Months Ended March 31, 2000 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Revenue: Finance charge income $ $ 54,546 $ 30,960 $ $ 85,506 Gain on sale of receivables (14) 13,578 137,601 151,165 Servicing fee income 115,511 29,652 (24,635) 120,528 Other income 33,519 4,010 675 (33,507) 4,697 Equity in income of affiliates 75,763 (75,763) --------------- --------------- --------------- --------------- --------------- 109,268 187,645 198,888 (133,905) 361,896 --------------- --------------- --------------- --------------- --------------- Costs and expenses: Operating expenses 359 186,245 62 (24,635) 162,031 Provision for losses 5,967 5,262 11,229 Interest expense 30,578 5,937 45,255 (33,507) 48,263 Charge for closing mortgage operations 10,500 10,500 --------------- --------------- --------------- --------------- --------------- 30,937 208,649 50,579 (58,142) 232,023 --------------- --------------- --------------- --------------- --------------- Income before income taxes 78,331 (21,004) 148,309 (75,763) 129,873 Income tax provision 988 (5,557) 57,099 52,530 --------------- --------------- --------------- --------------- --------------- Net income $ 77,343 $(15,447) $ 91,210 $(75,763) $ 77,343 =============== =============== =============== =============== ===============
13 AmeriCredit Corp. Consolidating Income Statement Nine Months Ended March 31, 1999 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated --------------- --------------- --------------- --------------- --------------- Revenue: Finance charge income $ $ 27,503 $ 24,035 $ $ 51,538 Gain on sale of receivables (6,394) 3,202 119,743 116,551 Servicing fee income 80,403 7,975 (26,676) 61,702 Other income 22,134 2,657 584 (22,014) 3,361 Equity in income of affiliates 56,474 (56,474) --------------- --------------- --------------- --------------- --------------- 72,214 113,765 152,337 (105,164) 233,152 --------------- --------------- --------------- --------------- --------------- Costs and expenses: Operating expenses 7,513 134,886 37 (26,676) 115,760 Provision for losses 2,471 4,118 6,589 Interest expense 13,566 16,918 17,190 (22,014) 25,660 --------------- --------------- --------------- --------------- --------------- 21,079 154,275 21,345 (48,690) 148,009 --------------- --------------- --------------- --------------- --------------- Income before income taxes 51,135 (40,510) 130,992 (56,474) 85,143 Income tax provision (1,228) (18,654) 52,662 32,780 --------------- --------------- --------------- --------------- --------------- Net income $ 52,363 $(21,856) $ 78,330 $ (56,474) $ 52,363 =============== =============== =============== =============== ===============
14 AmeriCredit Corp. Consolidating Statement of Cash Flow Nine Months Ended March 31, 2000 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated --------------- -------------- --------------- --------------- --------------- Cash flow from operating activities: Net income $ 77,343 $ (15,447) $ 91,210 $ (75,763) $ 77,343 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash charge for closing mortgage operations 6,566 6,566 Depreciation & amortization 13,527 13,527 Provision for losses 5,967 5,262 11,229 Deferred income taxes (28,882) (18,838) 57,304 9,584 Non-cash servicing fee income (31,388) (31,388) Non-cash gain on sale of auto receivables (138,753) (138,753) Distributions from Trusts 79,443 79,443 Equity in income of affiliates (75,763) 75,763 Changes in assets and liabilities: Other assets 735 (9,358) (1,349) (9,972) Accrued taxes & expenses 7,563 9,220 1,511 18,294 --------------- -------------- --------------- --------------- --------------- Net cash provided by operating activities (19,004) (8,363) 63,240 35,873 --------------- -------------- --------------- --------------- --------------- Cash flows from investing activities: Purchase of auto receivables (3,166,671) (3,084,178) 3,084,178 (3,166,671) Originations of mortgage receivables (109,688) (109,688) Principal collections and recoveries on receivables (6,514) 34,363 27,849 Net proceeds from sale of auto receivables 3,084,178 2,894,504 (3,084,178) 2,894,504 Net proceeds from sale of mortgage receivables 122,515 122,515 Initial deposits to restricted cash (132,750) (132,750) Net change in credit enhancement facility 45,000 45,000 Purchases of property and equipment (6,891) (6,891) Increase in other assets 1,915 (9,276) (7,361) Net change in investment in affiliates 20,104 (26,822) (50) 6,768 --------------- -------------- --------------- --------------- --------------- Net cash used by investing activities 20,104 (107,978) (252,387) 6,768 (333,493) --------------- -------------- --------------- --------------- --------------- Cash flows from financing activities: Net change in warehouse credit facilities (16,312) 226,300 209,988 Payments on other notes payable (8,263) (8,263) Proceeds from issuance of common stock 125,524 1,685 5,083 (6,768) 125,524 Net change in due (to) from affiliates (118,361) 174,640 (56,279) --------------- -------------- --------------- --------------- --------------- Net cash provided by financing activities (1,100) 160,013 175,104 (6,768) 327,249 --------------- -------------- --------------- --------------- --------------- Net increase in cash and cash equivalents 43,672 (14,043) 29,629 Cash and cash equivalents at beginning of period 20,246 943 21,189 --------------- -------------- --------------- --------------- --------------- Cash and cash equivalents at end of period $ $ 63,918 $ (13,100) $ $ 50,818 =============== ============== =============== =============== ===============
15 AmeriCredit Corp. Consolidating Statement of Cash Flow Nine Months Ended March 31, 1999 (Unaudited, Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated --------------- -------------- --------------- --------------- --------------- Cash flow from operating activities: Net income $ 52,363 $ (21,856) $ 78,330 $ (56,474) $ 52,363 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization 41 6,861 6,902 Provision for losses 2,471 4,118 6,589 Deferred income taxes (955) (19,070) 53,066 33,041 Non-cash servicing fee income (10,739) (10,739) Non-cash gain on sale of auto receivables (107,642) (107,642) Distributions from Trusts 35,182 35,182 Equity in income of affiliates (56,474) 56,474 Changes in assets and liabilities: Other assets 1,766 (6,811) 2,299 (2,746) Accrued taxes & expenses 7,369 5,448 5,197 18,014 --------------- -------------- --------------- --------------- --------------- Net cash provided by operating activities 4,110 (32,957) 59,811 30,964 --------------- -------------- --------------- --------------- --------------- Cash flows from investing activities: Purchase of auto receivables (1,976,508) (2,121,289) 2,121,289 (1,976,508) Originations of mortgage receivables (203,518) (203,518) Principal collections and recoveries on receivables (6,744) 21,527 14,783 Net proceeds from sale of auto receivables 2,121,289 1,894,383 (2,121,289) 1,894,383 Net proceeds from sale of mortgage receivables 198,953 198,953 Initial deposits to restricted cash (57,250) (57,250) Return of deposits from restricted cash 23,000 23,000 Purchases of property and equipment 134 (8,565) (8,431) Increase in other assets (4,094) (3,293) (7,387) --------------- -------------- --------------- --------------- --------------- Net cash used by investing activities 134 120,813 (242,922) (121,975) --------------- -------------- --------------- --------------- --------------- Cash flows from financing activities: Net change in warehouse credit facilities (3,030) 92,953 89,923 Payments on other notes payable (2,625) (4) (2,629) Proceeds from issuance of common stock 7,327 149 7,476 Net change in due (to) from affiliates (8,946) (84,173) 93,119 --------------- -------------- --------------- --------------- --------------- Net cash provided by financing activities (4,244) (87,058) 186,072 94,770 --------------- -------------- --------------- --------------- --------------- Net increase in cash and cash equivalents 798 2,961 3,759 Cash and cash equivalents at beginning of period 30,157 2,930 33,087 --------------- -------------- --------------- --------------- --------------- Cash and cash equivalents at end of period $ $ 30,955 $ 5,891 $ $ 36,846 =============== ============== =============== =============== ===============
16 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company generates earnings and cash flow primarily from the purchase, securitization and servicing of auto receivables. The Company purchases auto finance contracts from franchised and select independent automobile dealerships. To fund the acquisition of receivables prior to securitization, the Company utilizes borrowings under its warehouse credit facilities. The Company generates finance charge income on its receivables pending securitization ("receivables held for sale") and pays interest expense on borrowings under its warehouse credit facilities. The Company sells receivables to securitization trusts ("Trusts") that, in turn, sell asset-backed securities to investors. By securitizing its receivables, the Company is able to lock in the gross interest rate spread between the yield on such receivables and the interest rate payable on the asset-backed securities. The Company recognizes a gain on the sale of receivables to the Trusts which represents the difference between the sale proceeds to the Company, net of transaction costs, and the Company's net carrying value of the receivables, plus the present value of the estimated future excess cash flows to be received by the Company over the life of the securitization. Excess cash flows result from the difference between the interest received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses. Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by an insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to the Company. In addition to excess cash flows, the Company earns monthly base servicing fee income of 2.25% per annum on the outstanding principal balance of receivables securitized ("serviced receivables"). In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"), which originates and sells mortgage loans. Receivables originated in this business are referred to as mortgage receivables. Such receivables are generally packaged and sold for cash on a servicing released whole-loan basis. The Company recognizes a gain at the time of sale. The premiums received by AMS for the sale of mortgage loans in the secondary markets deteriorated since the Company's acquisition of AMS. The average net premium received on sales decreased to a low of 1.9% for the three months ended September 30, 1999 from 5.6% for the period from the date of acquisition of AMS through June 30, 1997. As a result, during October 1999, Company management assessed various options with respect to the operations of AMS and decided to cease the operations of AMS. The AMS wholesale mortgage loan 17 production and processing offices have been closed and the assets of AMS are being liquidated. The Company incurred a pre-tax charge of $10.5 million in the three months ended December 31, 1999 related to the closing of its mortgage operations. The charge consists of a $6.6 million write-off of goodwill, $2.0 million of reserves against mortgage receivables held for sale and $1.9 million severance, facility closing and other costs. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands):
Three Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto: Held for sale $ 533,259 $ 308,375 Serviced 5,060,612 2,970,569 ----------------- ------------------ 5,593,871 3,278,944 Mortgage 11,849 29,290 ----------------- ------------------ $5,605,720 $3,308,234 ================= ==================
Average managed receivables outstanding increased by 69% as a result of higher loan purchase volume. The Company purchased $1,155.1 million of auto loans during the three months ended March 31, 2000, compared to purchases of $766.8 million during the three months ended March 31, 1999. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's branch network. Loan production at branch offices opened prior to March 31, 1998 was 25% higher for the twelve months ended March 31, 2000 versus the twelve months ended March 31, 1999. The Company operated 186 auto lending branch offices as of March 31, 2000, compared to 168 as of March 31, 1999. Finance charge income consisted of the following (in thousands):
Three Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto $30,512 $17,652 Mortgage 709 ----------------- ------------------ $30,512 $18,361 ================= ==================
18 The increase in finance charge income is due primarily to an increase of 73% in average auto receivables held for sale in the three months ended March 31, 2000 versus the three months ended March 31, 1999. The Company's effective yield on its auto receivables held for sale decreased to 23.0% for the three months ended March 31, 2000 from 23.2% for the three months ended March 31, 1999. The effective yield is higher than the contractual rates of the Company's auto finance contracts as a result of finance charge income earned between the date the auto finance contract is originated by the automobile dealership and the date the auto finance contract is funded by the Company. The gain on sale of receivables consisted of the following (in thousands):
Three Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto $52,923 $40,514 Mortgage 2,017 ----------------- ------------------ $52,923 $42,531 ================= ==================
The increase in gain on sale of auto receivables resulted from the sale of $1,025.0 million of receivables in the three months ended March 31, 2000 as compared to $700.0 million of receivables sold in the three months ended March 31, 1999. The gain as a percentage of the sales proceeds decreased to 5.2% for the three months ended March 31, 2000 from 5.8% for the three months ended March 31, 1999 as a result of an increase in US Treasury and other short term interest rates. Significant assumptions used in determining the gain on sale of auto receivables were as follows:
Three Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Cumulative credit losses (including deferred gains) 10.9% 11.0% Discount rate used to estimate present value: Interest-only receivables from Trusts 12.0% 12.0% Investment in Trust receivables 7.8% 7.8% Restricted cash 7.8% 7.8%
The discount rates used to estimate the present value of credit enhancement assets are based on the relative risks of each asset type. Interest-only receivables represent estimated future excess cash flows in the Trusts, which involves a greater degree of risk than investments in Trust receivables and restricted cash. Investments in Trust receivables and restricted cash represent assets currently held by the Trustee and are senior to the interest-only receivables for credit enhancement purposes. 19 Servicing fee income increased to $44.6 million, or 3.5% of average serviced auto receivables, for the three months ended March 31, 2000, as compared to $23.7 million, or 3.2% of average serviced auto receivables, for the three months ended March 31, 1999. Servicing fee income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. Servicing fee income for the three months ended March 31, 1999 also includes a charge of $5.0 million to increase credit loss reserves related to certain of the Company's fiscal 1997 and 1996 securitization transactions since the Company's reassessment of estimated cumulative credit losses for these transactions exceeded the original estimates. The growth in servicing fee income exclusive of the aforementioned charge is attributable to the increase in average serviced auto receivables outstanding for the three months ended March 31, 2000 compared to the three months ended March 31, 1999. COSTS AND EXPENSES: Operating expenses as an annualized percentage of average managed receivables outstanding decreased to 4.0% (due to the closing of the mortgage business there were no mortgage operating expenses incurred) for the three months ended March 31, 2000, compared to 5.2% (4.9% excluding operating expenses of $2.4 million related to the mortgage business) for the three months ended March 31, 1999. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $13.5 million, or 32%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses increased to $4.0 million for the three months ended March 31, 2000 from $2.3 million for the three months ended March 31, 1999 due to higher average amounts of auto receivables held for sale. As a percentage of average receivables held for sale, the provision for losses was 3.0% for the three months ended March 31, 2000 and 1999. Interest expense increased to $17.9 million for the three months ended March 31, 2000 from $9.0 million for the three months ended March 31, 1999 due to higher debt levels and effective interest rates. Average debt outstanding was $709.0 million and $447.6 million for the three months ended March 31, 2000 and 1999, respectively. The Company's effective rate of interest paid on its debt increased to 10.1% from 8.2% as a result of increased average amounts of senior notes outstanding which have a higher cost than the Company's other forms of balance sheet debt. The Company's effective income tax rate was 38.5% for the three months ended March 31, 2000 and 1999. 20 NINE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 1999 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands):
Nine Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto: Held for sale $ 496,599 $ 292,629 Serviced 4,514,551 2,600,123 ----------------- ------------------ 5,011,150 2,892,752 Mortgage 27,431 24,903 ----------------- ------------------ $5,038,581 $2,917,655 ================= ==================
Average managed receivables outstanding increased by 73% as a result of higher loan purchase volume. The Company purchased $3,167.8 million of auto loans during the nine months ended March 31, 2000, compared to purchases of $1,990.9 million during the nine months ended March 31, 1999. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's branch network. Loan production at branch offices opened prior to March 31, 1998 was 25% higher for the twelve months ended March 31, 2000 versus the twelve months ended March 31, 1999. The Company operated 186 auto lending branch offices as of March 31, 2000, compared to 168 as of March 31, 1999. Finance charge income consisted of the following (in thousands):
Nine Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto $84,449 $49,798 Mortgage 1,057 1,740 ----------------- ------------------ $85,506 $51,538 ================= ==================
The increase in finance charge income is due primarily to an increase of 70% in average auto receivables held for sale in the nine months ended March 31, 2000 versus the nine months ended March 31, 1999. The Company's effective yield on its auto receivables held for sale decreased to 22.6% for the nine months ended March 31, 2000 from 22.7% for the nine months ended March 31, 1999. The effective yield is higher than the contractual rates of the Company's auto finance contracts as a result of finance charge income earned between the date 21 the auto finance contract is originated by the automobile dealership and the date the auto finance contract is funded by the Company. The gain on sale of receivables consisted of the following (in thousands):
Nine Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Auto $149,654 $111,452 Mortgage 1,511 5,099 ----------------- ------------------ $151,165 $116,551 ================= ==================
The increase in gain on sale of auto receivables resulted from the sale of $2,925.0 million of receivables in the nine months ended March 31, 2000 as compared to $1,920.0 million of receivables sold in the nine months ended March 31, 1999. The gain as a percentage of the sales proceeds decreased to 5.1% for the nine months ended March 31, 2000 from 5.8% for the nine months ended March 31, 1999 as a result of an increase in US Treasury and other short term interest rates. Significant assumptions used in determining the gain on sale of auto receivables were as follows:
Nine Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Cumulative credit losses (including deferred gains) 10.9% 11.2% Discount rate used to estimate present value: Interest-only receivables from Trusts 12.0% 12.0% Investment in Trust receivables 7.8% 7.8% Restricted cash 7.8% 7.8%
The discount rates used to estimate the present value of credit enhancement assets are based on the relative risks of each asset type. Interest-only receivables represent estimated future excess cash flows in the Trusts, which involves a greater degree of risk than investments in Trust receivables and restricted cash. Investments in Trust receivables and restricted cash represent assets currently held by the Trustee and are senior to the interest-only receivables for credit enhancement purposes. Servicing fee income increased to $120.5 million, or 3.6% of average serviced auto receivables, for the nine months ended March 31, 2000, as compared to $61.7 million, or 3.2% of average serviced auto receivables, for the nine months ended March 31, 1999. Servicing fee income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the 22 auto receivables sold to the Trusts. Servicing fee income for the nine months ended March 31, 1999 also includes a charge of $13.4 million to increase credit loss reserves related to certain of the Company's fiscal 1997 and 1996 securitization transactions since the Company's reassessment of estimated cumulative credit losses for these transactions exceeded the original estimates. The growth in servicing fee income exclusive of the aforementioned charge is attributable to the increase in average serviced auto receivables outstanding for the nine months ended March 31, 2000 compared to the nine months ended March 31, 1999. COSTS AND EXPENSES: Operating expenses as an annualized percentage of average managed receivables outstanding decreased to 4.3% (4.2% excluding operating expenses of $2.1 million related to the mortgage business) for the nine months ended March 31, 2000, compared to 5.3% (5.0% excluding operating expenses of $6.7 million related to the mortgage business) for the nine months ended March 31, 1999. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $46.3 million, or 40%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses increased to $11.2 million for the nine months ended March 31, 2000 from $6.6 million for the nine months ended March 31, 1999 due to higher average amounts of auto receivables held for sale. As a percentage of average receivables held for sale, the provision for losses was 3.0% for the nine months ended March 31, 2000 and 1999. Interest expense increased to $48.3 million for the nine months ended March 31, 2000 from $25.7 million for the nine months ended March 31, 1999 due to higher debt levels and effective interest rates. Average debt outstanding was $649.3 million and $396.0 million for the nine months ended March 31, 2000 and 1999, respectively. The Company's effective rate of interest paid on its debt increased to 9.9% from 8.6% as a result of increased average amounts of senior notes outstanding which have a higher cost than the Company's other forms of balance sheet debt. The Company's effective income tax rate was 40.5% and 38.5% for the nine months ended March 31, 2000 and 1999, respectively. The increase in the effective tax rate is due to the non-deductible write-off of goodwill from the closing of the mortgage operations. 23 PRO FORMA "PORTFOLIO-BASED" EARNINGS DATA In addition to reporting results of operations in accordance with generally accepted accounting principles ("GAAP"), the Company has elected to present pro forma results of operations which treat securitization transactions as financings rather than sales of receivables. The Company refers to this presentation as pro forma "portfolio-based" earnings data. In its consolidated financial statements prepared in accordance with GAAP, the Company records a gain on the sale of receivables in securitization transactions primarily representing the present value of estimated future excess cash flows related to the receivables sold. Future excess cash flows consist of finance charges and fees to be collected on the receivables less interest payable on the asset-backed securities, credit losses and expenses of the Trusts. The Company also earns servicing fees for managing the receivables sold. The pro forma "portfolio-based" earnings data presents the Company's operating results under the assumption that securitization transactions are financings and no gain on sale or servicing fee income is recognized. Instead, finance charges and fees are recognized over the life of the securitized receivables as accrued and interest and other costs related to the asset-backed securities are also recognized as accrued. Credit losses are recorded as incurred. While the pro forma "portfolio-based" earnings data does not purport to present the Company's operating results in accordance with GAAP, the Company believes such presentation provides another measure for assessing the Company's performance. The pro forma "portfolio-based" earnings data were as follows, excluding the effect of the mortgage charge (in thousands):
Three Months Ended Nine Months Ended March 31, March 31, --------------------------------- ---------------------------------- 2000 1999 2000 1999 ---------------- --------------- ---------------- ---------------- Finance charge, fee and other income $ 272,093 $160,312 $ 737,163 $ 431,346 Funding costs (107,991) (55,281) (282,742) (151,936) ---------------- ---------------- ---------------- ---------------- Net margin 164,102 105,031 454,421 279,410 Operating expenses (55,488) (42,025) (162,031) (115,760) Credit losses (53,997) (38,118) (154,904) (103,891) ---------------- ---------------- ---------------- ---------------- Pre-tax "portfolio-based" income 54,617 24,888 137,486 59,759 Income taxes (21,028) (9,582) (52,933) (23,007) ---------------- ---------------- ---------------- ---------------- Net "portfolio-based" income $ 33,589 $ 15,306 $ 84,553 $ 36,752 ================ ================ ================ ================ Diluted "portfolio-based" earnings per share $0.43 $0.23 $1.10 $0.55 ================ ================ ================ ================
24 The pro-forma return on managed assets for the Company's auto business was as follows:
Three Months Ended Nine Months Ended March 31, March 31, --------------------------------- ---------------------------------- 2000 1999 2000 1999 ---------------- ---------------- ---------------- ---------------- Finance charge, fee and other income 19.6% 19.5% 19.5% 19.5% Funding costs (7.8) (6.8) (7.5) (6.9) ---------------- ---------------- ---------------- ---------------- Net margin 11.8 12.7 12.0 12.6 Operating expenses (4.0) (4.9) (4.2) (5.0) Credit losses (3.9) (4.7) (4.1) (4.8) ---------------- ---------------- ---------------- ---------------- Pre-tax return on managed assets 3.9 3.1 3.7 2.8 Income taxes (1.5) (1.2) (1.4) (1.1) ---------------- ---------------- ---------------- ---------------- Return on managed assets 2.4% 1.9% 2.3% 1.7% ================ ================ ================ ================
CREDIT QUALITY The Company provides financing in relatively high-risk markets, and therefore, charge-offs are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheets as a reserve against estimated losses which may occur in the receivables held for sale portfolio prior to the sale of such receivables in securitization transactions. The Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis. Such acquisition fees are also recorded in the consolidated balance sheets as an allowance for losses. When the Company sells auto receivables to the Trusts, the calculation of the gain on sale of receivables is reduced by an estimate of cumulative credit losses expected over the life of the auto receivables sold. The Company reviews static pool origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends, and other information in order to make the necessary judgments as to the appropriateness of the assumptions for cumulative credit losses, provisions for losses, and allowance for losses. Although the Company uses many resources to assess the adequacy of loss reserves, there is no precise method for estimating the ultimate losses in the receivables portfolio. 25 The following table presents certain data related to the receivables portfolio (dollars in thousands):
March 31, 2000 ------------------------------------------------------------------------- Held for Sale -------------------------------------- Auto Managed Auto Auto Mortgage Total Serviced Portfolio ------------ ------------ ------------ --------------- --------------- Principal amount of receivables $699,450 $ 9,059 $708,509 $5,250,468 $5,949,918 =============== =============== Allowance for losses (20,488) (20,488) $ (507,574) (a) $ (528,062) ------------ ------------ ------------ =============== =============== Receivables, net $678,962 $ 9,059 $688,021 ============ ============ ============ Number of outstanding contracts 51,788 134 462,815 514,603 ============ ============ =============== =============== Average principal amount of outstanding contract (in dollars) $ 13,506 $67,605 $ 11,345 $ 11,562 ============ ============ =============== =============== Allowance for losses as a percentage of receivables 2.9% 9.7% 8.9% ============ =============== ===============
(a) The allowance for losses related to serviced auto receivables is factored into the valuation of interest-only receivables from Trusts in the Company's consolidated balance sheets. The following is a summary of managed auto receivables which are (i) more than 30 days delinquent, but not in repossession, and (ii) in repossession (dollars in thousands):
March 31, 2000 March 31, 1999 -------------------------------- --------------------------------- Amount Percent Amount Percent ----------------- ------------- ------------------ ------------- Delinquent contracts: 31 to 60 days $360,169 6.0% $220,022 6.2% Greater than 60 days 123,936 2.1 80,668 2.3 ----------------- ------------- ------------------ ------------- 484,105 8.1 300,690 8.5 In repossession 45,089 0.8 31,431 0.9 ----------------- ------------- ------------------ ------------- $529,194 8.9% $332,121 9.4% ================= ============= ================== =============
In accordance with its policies and guidelines, the Company at times offers payment deferrals to consumers, whereby the consumer is allowed to move a delinquent payment to the end of the loan by paying a fee (approximately the interest portion of the payment deferred). Contracts receiving a payment deferral as an average quarterly percentage of average managed auto receivables outstanding were 4.0% and 4.3% for the three and nine months ended March 31, 2000, respectively, and 4.6% for both the three and nine months ended March 31, 1999. The Company believes that payment deferrals granted according to its policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio. 26 The following table presents charge-off data with respect to the Company's managed auto receivables portfolio (dollars in thousands):
Three Months Ended Nine Months Ended March 31, March 31, --------------------------------- ---------------------------------- 2000 1999 2000 1999 ---------------- ---------------- ---------------- ---------------- Net charge-offs: Held for sale $ 2,467 $ 2,285 $ 5,851 $ 5,708 Serviced 51,530 35,833 149,053 98,183 ---------------- ---------------- ---------------- ---------------- $53,997 $38,118 $154,904 $103,891 ================ ================ ================ ================ Net charge-offs as an annualized percentage of average managed auto receivables outstanding 3.9% 4.7% 4.1% 4.8% ================ ================ ================ ================ Net recoveries as a percentage of gross repossession charge-offs 53.5% 53.6% 53.2% 51.4% ================ ================ ================ ================
Delinquency and charge-off ratios typically fluctuate over time as a portfolio matures. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a portfolio with a different level of seasoning. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands):
Nine Months Ended March 31, ------------------------------------- 2000 1999 ----------------- ------------------ Operating activities $ 35,873 $ 30,964 Investing activities (333,493) (121,975) Financing activities 327,249 94,770 ----------------- ------------------ Net change in cash and cash equivalents $ 29,629 $ 3,759 ================= ==================
The Company's primary sources of cash have been cash flows from operating activities, including cash distributions from the Trusts, borrowings under its warehouse credit facilities, sales of auto receivables to Trusts in securitization transactions and proceeds from issuance of debt and equity. The Company's primary uses of cash have been purchases and originations of receivables and funding credit enhancement requirements for securitization transactions. The Company required cash of $3,166.7 million and $1,976.5 million for the purchase of auto finance contracts during the nine months ended March 31, 2000 and 1999, respectively. These purchases were funded initially utilizing warehouse credit facilities and subsequently through the sale of auto receivables in securitization transactions. 27 In March 2000, the Company expanded its funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a group of banks increasing the amount of structured warehouse financing available under the agreement to $725 million from $675 million. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in September 2000. A total of $234.9 million was outstanding under this facility as of March 31, 2000. The Company also has a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a bank under which up to $250 million of structured warehouse financing is available. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in September 2000. A total of $85.8 million was outstanding under this facility as of March 31, 2000. In March 2000, the Company renewed its funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a bank under which up to $375 million of structured warehouse financing is available. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in March 2001. There were no outstanding balances under this agreement as of March 31, 2000. The Company had a revolving credit agreement with a group of banks under which the Company could borrow up to $90 million, subject to a defined borrowing base. The credit agreement expired in March 2000 and was not renewed by the Company. In addition, in March 2000, the Company's Canadian subsidiary convertible revolving term credit agreement with a bank was renewed and the amount of borrowings available thereunder was increased to $30.0 million Cdn., from $20 million Cdn., subject to a defined borrowing base. The Company utilizes this facility to fund Canadian auto lending activities. The maturity date of the facility is March 2001. A total of $4.0 million was outstanding under the Canadian facility at March 31, 2000. As is customary in the Company's industry, the above warehouse credit facilities need to be renewed on an annual basis. The Company has historically been successful in renewing and expanding these facilities on an annual basis. If the Company was unable to renew these facilities on acceptable terms, there could be a material adverse effect on the Company's financial position, results of operations and liquidity. The Company has completed twenty auto receivable securitization transactions through March 31, 2000. The proceeds from the transactions were primarily used to repay borrowings outstanding under the Company's warehouse credit facilities. 28 A summary of these transactions is as follows:
Original Balance at Amount March 31, 2000 Transaction Date (in millions) (in millions) - ----------------------- ----------------------------------- ---------------------- ----------------------- 1994-A December 1994 $ 51.0 Paid in full 1995-A June 1995 99.2 Paid in full 1995-B December 1995 65.0 Paid in full 1996-A March 1996 89.4 Paid in full 1996-B May 1996 115.9 Paid in full 1996-C August 1996 175.0 Paid in full 1996-D November 1996 200.0 23.0 1997-A March 1997 225.0 36.2 1997-B May 1997 250.0 48.9 1997-C August 1997 325.0 82.0 1997-D November 1997 400.0 122.0 1998-A February 1998 425.0 150.6 1998-B May 1998 525.0 216.3 1998-C August 1998 575.0 278.2 1998-D November 1998 625.0 339.7 1999-A February 1999 700.0 440.5 1999-B May 1999 1,000.0 725.1 1999-C August 1999 1,000.0 843.2 1999-D October 1999 900.0 807.0 2000-A January 2000 1,300.0 1,269.3 ---------------------- ----------------------- $9,045.5 $5,382.0 ====================== =======================
In connection with securitization transactions, the Company is required to fund certain credit enhancement levels set by the insurer of the asset-backed securities issued by the Trusts. The Company typically makes an initial deposit to a restricted cash account and subsequently uses excess cash flows generated by the Trusts to either increase the restricted cash account or repay the outstanding asset-backed securities on an accelerated basis, thus creating additional credit enhancement through overcollateralization in the Trusts. When the credit enhancement levels reach specified percentages of the Trust's pool of receivables, excess cash flows are distributed to the Company. Although the aggregate amount of excess cash flow does not change, the timing of the Company's receipt of excess cash flow distributions is dependent on the type of structure used. Historically, the Company has used a structure that involved a higher initial cash deposit that resulted in receipt of excess cash flow distributions approximately seven to nine months after the receivables were securitized. Beginning in November 1997, the Company began to employ a structure that involved a lower initial cash deposit and the use of reinsurance and other alternative credit enhancements. Under this structure the Company expects to begin to receive excess cash flow distributions approximately 15 to 18 months after receivables are securitized. 29 The reinsurance used to reduce the Company's initial cash deposit in the structure described above has typically been arranged by the insurer of the asset-backed securities. As of March 31, 2000, the Company had commitments from the insurer for an additional $35.0 million of reinsurance to reduce initial cash deposits in future securitization transactions. In addition, the Company has a credit enhancement facility with a financial institution under which the Company may borrow up to $225 million to fund a portion of the initial cash deposit in future securitization transactions, similar to the amount covered by the reinsurance described above. Borrowings under the credit enhancement facility, which matures in October 2001, are collateralized by the Company's credit enhancement assets. A total of $45.0 million was outstanding under this facility at March 31, 2000. Initial deposits to restricted cash accounts were $132.8 million ($87.8 million net of borrowings under the credit enhancement facility) and $57.3 million for the nine months ended March 31, 2000 and 1999, respectively. Excess cash flows distributed to the Company were $79.4 million and $35.2 million for the nine months ended March 31, 2000 and 1999 respectively. In addition, the Company received $23.0 million representing a return of deposits to restricted cash accounts during the nine months ended March 31, 1999. Certain agreements with the insurer provide that if delinquency, default and net loss ratios in a Trust's pool of receivables exceed certain targets, the specified credit enhancement levels would be increased. As of March 31, 2000, none of the Company's securitizations had delinquency, default and net loss ratios in excess of the targeted levels. The Company issued 9,200,000 shares of its common stock in a public offering in August and September 1999 for net proceeds of approximately $111.5 million. The Company operated 186 auto lending branch offices as of March 31, 2000 and plans to open an additional nine branches through the remainder of fiscal 2000 and expand loan production capacity at existing auto lending branch offices where appropriate. While the Company has been able to establish and grow its auto finance business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. As of March 31, 2000, the Company had $50.8 million in cash and cash equivalents. The Company also had available borrowing capacity of $258.9 million under its warehouse credit facilities pursuant to the borrowing base requirements of such agreements. The Company estimates that it will require additional external capital for fiscal 2000 in addition to existing capital resources in order to fund expansion of its lending activities. The Company anticipates that such funding will be in the form of additional securitization transactions and renewal and expansion of its warehouse credit facilities. There can be no assurance that funding will be available to the Company through these sources or, if available, that it will be on terms acceptable to the Company. 30 INTEREST RATE RISK The Company's earnings are affected by changes in interest rates as a result of its dependence upon the issuance of interest-bearing securities and the incurrence of debt to fund its lending activities. Several factors can influence the Company's ability to manage interest rate risk. First, auto finance contracts are purchased at fixed interest rates, while the amounts borrowed under warehouse credit facilities bear interest at variable rates that are subject to frequent adjustment to reflect prevailing market interest rates. Second, the interest rate demanded by investors in securitizations is a function of prevailing market rates for comparable transactions and the general interest rate environment. Because the auto finance contracts originated by the Company have fixed interest rates, the Company bears the risk of smaller gross interest rate spreads in the event interest rates increase during the period between the date receivables are purchased and the completion and pricing of securitization transactions. The Company utilizes several strategies to minimize the risk of interest rate fluctuations, including the use of derivative financial instruments, the regular sale of auto receivables to the Trusts and pre-funding of securitization transactions. Pre-funding securitizations is the practice of issuing more asset-backed securities than the amount of receivables initially sold to the Trust. The proceeds from the pre-funded portion are held in an escrow account until additional receivables are sold to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, borrowing costs are locked in with respect to the loans subsequently delivered to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between the money market yields earned on the proceeds held in escrow prior to subsequent delivery of receivables and the interest rate paid on the asset-backed securities outstanding. Derivative financial instruments are utilized to manage the gross interest rate spread on the Company's securitization transactions. The Company sells fixed rate auto receivables to Trusts that, in turn, sell either fixed rate or floating rate securities to investors. The fixed rates on securities issued by the Trusts are indexed to rates on U.S. Treasury Notes with similar average maturities or various London Interbank Offered Rates ("LIBOR"). The Company has periodically used Forward U.S. Treasury rate lock agreements to lock in the indexed rate for specific anticipated securitization transactions. The floating rates on securities issued by the Trusts are indexed to LIBOR. The Company uses Interest Rate Swap agreements to convert the floating rate exposures on these securities to a fixed rate. The Company utilizes these derivative financial instruments to modify its net interest sensitivity to levels deemed appropriate based on the Company's risk tolerance. Management monitors the Company's hedging activities to ensure that the value of hedges, their correlation to the contracts being hedged and the amounts being hedged 31 continue to provide effective protection against interest rate risk. All transactions are entered into for purposes other than trading. The Company made cash payments of $0 and $5.8 million for the nine months ended March 31, 2000 and 1999, respectively, to settle Forward U.S. Treasury rate lock agreements. These amounts were included in the gain on sale of receivables in securitization transactions and are recovered over time through a higher gross interest rate spread on the related securitization transaction. There were no outstanding Forward U.S. Treasury rate lock agreements as of March 31, 2000. There can be no assurance that the Company's strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on the Company's profitability. FORWARD LOOKING STATEMENTS The preceding Management's Discussion and Analysis of Financial Condition and Results of Operations section contains several "forward-looking statements". Forward-looking statements are those which use words such as "believe", "expect", "anticipate", "intend", "plan", "may", "will", "should", "estimate", "continue" or other comparable expressions. These words indicate future events and trends. Forward-looking statements are the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to many risks and uncertainties which could cause actual results to differ significantly from historical results or from those anticipated by the Company. The most significant risks are detailed from time to time in the Company's filings and reports with the Securities and Exchange Commission including the Company's Annual Report on Form 10-K for the year ended June 30, 1999. It is advisable not to place undue reliance on the Company's forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 32 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Because the Company's funding strategy is dependent upon the issuance of interest-bearing securities and the incurrence of debt, fluctuations in interest rates impact the Company's profitability. Therefore, the Company employs various hedging strategies to minimize the risk of interest rate fluctuations. See "Management's Discussion and Analysis - Interest Rate Risk" for additional information regarding such market risks. 33 Part II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, fraud and discriminatory treatment of credit applicants, which could take the form of a plaintiffs' class action complaint. The Company, as the assignee of finance contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. One proceeding in which the Company is a defendant has been brought as a putative class action and is pending in the State of California. A settlement has been reached in this matter and preliminary court approval for the settlement obtained; following notice to class members, the Company believes that final court approval will be obtained and the matter concluded before June 30, 2000. The cost of the settlement has been accrued in the Company's consolidated financial statements as of March 31, 2000. Two additional proceedings in which the Company is a defendant have also been brought in the form of class action complaints. One proceeding, pending in the State of Georgia, claims that the Company miscalculated rebates on certain precomputed retail installment contracts in Georgia. The other proceeding, pending in the State of Tennessee, claims that certain loan pricing structures used by the Company and motor vehicle dealers violate various Tennessee laws. In the opinion of management, both of these lawsuits are without merit and the Company intends to defend vigorously. Management believes that the Company has taken prudent steps to address the litigation risks associated with the Company's business activities. However, there can be no assurance that the Company will be able to successfully defend against all such claims or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's automobile finance business. On April 8, 1999, a putative class action complaint was filed against the Company and certain of the Company's officers and directors alleging violations of Section 10(b) of the Securities Exchange Act of 1934 arising from the Company's use of the cash-in method of measuring and accounting for credit enhancement assets in the financial statements for the second, third and fourth quarters of fiscal year 1997, fiscal year 1998 and the first quarter of fiscal year 1999. The Company believes that its previous use of the cash-in method of measuring and accounting for credit enhancement assets was consistent with then current generally accepted accounting principles and accounting practices of other finance companies. As required by the Financial Accounting Standards Board's Special Report, "A Guide to Implementation of Statement 125 on Accounting for Transfers and Servicing of Financial Assets 34 and Extinguishment of Liabilities, Second Edition," dated December 1998 and related statements made by the staff of the Commission, the Company retroactively changed the method of measuring and accounting for credit enhancement assets to the cash-out method and restated the Company's financial statements for the three months ended September 30, 1998 and the fiscal years ended June 30, 1998, 1997 and 1996. The Company's original motion to dismiss this litigation was granted on December 22, 1999. On February 1, 2000, the plaintiffs filed an amended complaint and the Company subsequently filed an additional motion to dismiss with respect to this amended complaint. The court granted the Company's subsequent motion to dismiss and dismissed the litigation with prejudice on April 21, 2000. The time period for possible appeals from these dismissals has not elapsed. In the opinion of management this litigation is without merit, as evidenced by the court's dismissal and the Company intends to vigorously defend against any future appeals. In the opinion of management, the resolution of the proceedings described in this section will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. Item 2. CHANGES IN SECURITIES Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable Item 5. OTHER INFORMATION Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 11.1 Statement Re: Computation of Per Share Earnings 27.1 Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarterly period ended March 31, 2000. Certain subsidiaries and affiliates of the Company filed reports on Form 8-K during the quarterly period ended March 31, 2000 reporting monthly information related to securitization trusts. 35 SIGNATURE 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. AmeriCredit Corp. ------------------------------ (Registrant) Date: May 12, 2000 By: /s/ Daniel E. Berce ------------------------------ (Signature) Daniel E. Berce Chief Financial Officer 36 EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended March 31, March 31, --------------------------------- ---------------------------------- 2000 1999 2000 1999 ---------------- ---------------- ---------------- ---------------- Weighted average shares outstanding 74,869,550 63,187,789 72,110,495 62,872,858 Incremental shares resulting from assumed exercise of stock options 4,158,357 3,326,578 4,434,448 3,949,568 ---------------- ---------------- ---------------- ---------------- Weighted average shares and assumed incremental shares 79,027,907 66,514,367 76,544,943 66,822,426 ================ ================ ================ ================ NET INCOME $32,410 $19,505 $77,343 $52,363 ================ ================ ================ ================ EARNINGS PER SHARE: Basic $0.43 $0.31 $1.07 $0.83 ================ ================ ================ ================ Diluted $0.41 $0.29 $1.01 $0.78 ================ ================ ================ ================
Basic earnings per share have been computed by dividing net income by weighted average shares outstanding. Diluted earnings per share have been computed by dividing net income by the weighted average shares and assumed incremental shares. Assumed incremental shares were computed using the treasury stock method. The average common stock market prices for the period was used to determine the number of incremental shares. EX-27.1 3 EXHIBIT 27.1 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2000, FILED AS PART OF FORM 10-Q QUARTERLY REPORT FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q QUARTERLY REPORT FOR THE NINE MONTHS ENDED MARCH 31, 2000. 1,000 9-MOS JUN-30-2000 JUL-01-1999 MAR-31-2000 50,818 0 708,509 (20,488) 0 0 68,247 (21,851) 1,585,297 0 766,045 0 0 822 619,863 1,585,297 0 361,896 0 172,531 0 11,229 48,263 129,873 52,530 77,343 0 0 0 77,343 1.07 1.01
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