-----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, L8nRR/jxX/InVoI2dm5bu4YtvzQY7Cma4s4+hOFpMMrszAeIvN7wyeVcR6B4SQbD n7mlHbrATHQUYnmGvO/ltA== 0001047469-98-020495.txt : 19980518 0001047469-98-020495.hdr.sgml : 19980518 ACCESSION NUMBER: 0001047469-98-020495 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE 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: 98622648 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 817-332-70 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, DC 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, 1998 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 (IRS Employer incorporation or organization) Identification No.) 200 BAILEY AVENUE, FORT WORTH, TEXAS 76107 (Address of principal executive offices) (Zip Code) (817) 332-7000 (Registrant's telephone number, including area code) --------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 30,558,658 shares of common stock, $.01 par value outstanding as of April 30, 1998. AMERICREDIT CORP. INDEX TO FORM 10-Q Part I. FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Consolidated Balance Sheets - March 31, 1998 and June 30, 1997. . . . . . . . . . . . . . . . 3 Consolidated Statements of Income - Three Months and Nine Months Ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1998 and 1997 . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . 30 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 31 SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2 PART I - FINANCIAL INFORMATION Item I. FINANCIAL STATEMENTS AMERICREDIT CORP. Consolidated Balance Sheets (Unaudited, Dollars in Thousands) March 31, June 30, 1998 1997 ---- ---- ASSETS Cash and cash equivalents $ 9,094 $ 6,027 Investment securities 6,500 6,500 Finance receivables, net 315,070 266,657 Excess servicing receivable 218,757 114,376 Restricted cash 73,314 67,895 Property and equipment, net 20,568 13,884 Goodwill 7,037 7,260 Other assets 19,254 10,854 -------- -------- Total assets $669,594 $493,453 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $ $ 71,700 Commercial paper warehouse facility 97,592 Mortgage warehouse facility 26,436 345 Automobile receivables-backed notes 10,725 23,689 9 1/4% Senior Notes 175,000 125,000 Notes payable 6,198 3,517 Accrued taxes and expenses 56,456 39,362 Deferred income taxes 19,674 13,304 -------- -------- Total liabilities 392,081 276,917 -------- -------- Shareholders' equity: Common stock, $.01 par value per share; 120,000,000 shares authorized; 34,261,467 and 33,255,173 shares issued 343 333 Additional paid-in capital 221,114 203,544 Unrealized gain on excess servicing receivable, net of income taxes 2,925 2,954 Retained earnings 76,537 33,466 -------- -------- 300,919 240,297 Treasury stock, at cost (3,881,663 and 3,959,071 shares) (23,406) (23,761) -------- -------- Total shareholders' equity 277,513 216,536 -------- -------- Total liabilities and shareholders' equity $669,594 $493,453 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated financial statements 3 AMERICREDIT CORP. Consolidated Statements of Income (Unaudited, Dollars in Thousands, Except Per Share Data) Three Months Ended Nine Months Ended March 31, March 31, -------------------- ------------------- 1998 1997 1998 1997 ------- -------- ------- ------- Revenue: Finance charge income $13,862 $12,101 $ 40,052 $33,604 Gain on sale of receivables 32,329 17,757 86,104 45,908 Servicing fee income 10,463 5,644 29,654 13,886 Investment income 1,271 799 3,841 1,951 Other income 502 431 1,004 1,053 ------- ------- -------- ------- 58,427 36,732 160,655 96,402 ------- ------- -------- ------- Costs and expenses: Operating expenses 24,186 13,848 66,102 35,595 Provision for losses 1,791 1,809 5,546 5,040 Interest expense 6,928 4,611 18,973 11,223 ------- ------- -------- ------- 32,905 20,268 90,621 51,858 ------- ------- -------- ------- Income before income taxes 25,522 16,464 70,034 44,544 Income tax provision 9,826 6,338 26,963 17,148 ------- ------- -------- ------- Net income $ 15,696 $ 10,126 $43,071 $27,396 ------- ------- -------- ------- ------- ------- -------- ------- Earnings per share: Basic $ .52 $ .35 $ 1.44 $ .95 ------- ------- -------- ------- ------- ------- -------- ------- Diluted $ .48 $ .33 $ 1.33 $ .90 ------- ------- -------- ------- ------- ------- -------- ------- Weighted average shares outstanding 30,146,854 29,073,790 29,866,492 28,697,299 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average shares and assumed incremental shares 32,484,809 31,033,230 32,322,015 30,607,395 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
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, -------------------- 1998 1997 ---- ---- Cash flows from operating activities: Net income $43,071 $27,396 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,084 1,512 Provision for losses 5,546 5,040 Deferred income taxes 12,444 16,845 Gain on sale of auto receivables (83,094) (44,308) Amortization of excess servicing receivable 44,914 21,914 Changes in assets and liabilities: Other assets (6,162) (2,634) Accrued taxes and expenses 17,094 17,742 --------- --------- Net cash provided by operating activities 36,897 43,507 --------- --------- Cash flows from investing activities: Purchases of auto receivables (1,161,393) (593,360) Originations of mortgage receivables (94,537) (31,822) Principal collections and recoveries on receivables 17,537 49,996 Net proceeds from sale of auto receivables 1,047,499 524,197 Net proceeds from sale of mortgage receivables 70,729 27,424 Purchases of property and equipment (5,971) (3,121) Proceeds from maturities of investment securities 58 Increase in restricted cash (5,419) (44,988) --------- --------- Net cash used by investing activities (131,555) (71,616) --------- --------- Cash flows from financing activities: Borrowings on bank line of credit 746,400 494,700 Payments on bank line of credit (818,100) (551,500) Net change in commercial paper warehouse facility 97,592 Net change in mortgage warehouse facility 26,091 (607) Proceeds from 9 1/4% senior notes 47,762 120,894 Payments on automobile receivables-backed notes (12,964) (32,955) Payments on notes payable (893) (404) Purchase of treasury stock (4,387) Proceeds from issuance of common stock 11,837 4,543 --------- --------- Net cash provided by financing activities 97,725 30,284 --------- --------- Net increase in cash and cash equivalents 3,067 2,175 Cash and cash equivalents at beginning of period 6,027 2,145 --------- --------- Cash and cash equivalents at end of period $ 9,094 $ 4,320 --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements 5 z 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, 1998 and for the periods ended March 31, 1998 and 1997 are unaudited, but in management's opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. 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. Such interim period financial statements should be read in conjunction with the Company's consolidated financial statements which were included in the Company's 1997 Annual Report to Shareholders. The Company adopted the requirements of Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") effective for periods ended December 31, 1997 and thereafter. SFAS 128 establishes new standards for computing and presenting earnings per share, replacing existing accounting standards. All prior period earnings per share and related weighted average share amounts have been restated to conform to the requirements of SFAS 128. NOTE 2 - FINANCE RECEIVABLES Finance receivables consist of the following (in thousands): March 31, June 30, 1998 1997 ---- ---- Auto receivables $299,335 $275,249 Less allowance for losses (12,479) (12,946) -------- -------- Auto receivables, net 286,856 262,303 Mortgage receivables 28,214 4,354 -------- -------- Finance receivables, net $315,070 $266,657 -------- -------- -------- --------
6 A summary of the allowance for losses is as follows (in thousands): Three Months Ended Nine Months Ended March 31, March 31, -------------------- ------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Balance at beginning of period $11,350 $12,173 $12,946 $13,602 Provision for losses 1,791 1,809 5,546 5,040 Acquisition fees 13,499 8,193 35,545 21,002 Allowance related to auto receivables sold to Trusts (12,257) (5,113) (34,030) (13,517) Net charge-offs (1,904) (3,829) (7,528) (12,894) ------- ------- ------- ------- Balance at end of period $12,479 $13,233 $12,479 $13,233 ------- ------- ------- ------- ------- ------- ------- -------
NOTE 3 - EXCESS SERVICING RECEIVABLE As of March 31, 1998 and June 30, 1997, the Company was servicing $1,625.5 million and $863.0 million, respectively, of auto receivables which have been sold to certain special purpose financing trusts (the "Trusts"). The components of excess servicing receivable are as follows(in thousands): March 31, June 30, 1998 1997 ---- ---- Interest-only strips $118,632 $ 59,933 Subordinated interests: Retained asset-backed securities 8,784 12,589 Excess of auto receivables in Trusts over asset-backed securities outstanding 91,341 41,854 -------- -------- $218,757 $114,376 -------- -------- -------- --------
7 Excess servicing receivable consists of the following (in thousands): March 31, June 30, 1998 1997 ---- ---- Estimated future excess cash flows before allowance for credit losses $382,248 $200,869 Allowance for credit losses (141,227) (74,925) -------- -------- Estimated future excess cash flows 241,021 125,944 Discount to present value (22,264) (11,568) -------- -------- $218,757 $114,376 -------- -------- -------- --------
A summary of excess servicing receivable is as follows (in thousands): Three Months Ended Nine Months Ended March 31, March 31, --------------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Balance at beginning of period $179,788 $ 59,780 $114,376 $33,093 Additions 61,511 35,316 149,300 74,120 Net change in unrealized gain (746) (5) Amortization (21,796) (9,797) (44,914) (21,914) -------- -------- -------- ------- Balance at end of period $218,757 $ 85,299 $218,757 $85,299 -------- -------- -------- ------- -------- -------- -------- -------
NOTE 4 - DEBT In October 1997, the Company entered into a restated revolving credit agreement with a group of banks under which the Company may borrow up to $310 million, subject to a defined borrowing base. The Company amended the agreement in April 1998 reducing the line of credit to $265 million and extending the maturity to April 1999. There were no outstanding borrowings as of March 31, 1998. Aggregate borrowings of $71.7 million were outstanding as of June 30, 1997. Borrowings under the credit agreement are collateralized by certain auto receivables and bear interest at various market London Interbank Offered Rates ("LIBOR") plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/4% of the unused portion of the credit agreement. The credit agreement contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on payment of cash dividends and repurchase of common stock. In October 1997, the Company entered into a funding agreement with a funding agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available to the Company. Aggregate borrowings of $97.6 million were outstanding as of March 31, 1998. Under the funding agreement, the Company 8 transfers auto receivables to CP Funding Corp. ("CPFC"), a special purpose finance subsidiary of the Company, and CPFC in turn issues a note, collateralized by such auto receivables, to the funding agent. The funding agent provides funding under the note to CPFC pursuant to an advance formula and CPFC forwards the funds to the Company in consideration for the transfer of auto receivables. While CPFC is a consolidated subsidiary of the Company, CPFC is a separate legal entity and the auto receivables transferred to CPFC and the other assets of CPFC are legally owned by CPFC and not available to creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the note bear interest at commercial paper, LIBOR or prime rates plus specified fees depending upon the source of funds provided by the funding agent to CPFC. The funding agreement, which expires in October 1998, contains various covenants requiring certain minimum financial ratios and results. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $35 million, subject to a defined borrowing base. Aggregate borrowings of $26.4 million and $.3 million were outstanding as of March 31, 1998 and June 30, 1997, respectively. Borrowings under the facility are collateralized by certain mortgage receivables and bear interest at LIBOR plus 1%. The Company is also required to pay an annual commitment fee equal to 1/8% of the unused portion of the facility. The facility expires in February 1999. In January 1998, the Company issued an additional $50 million of its 9 1/4% Senior Notes which are due in February 2004. These additional notes have substantially the same terms as the Company's original $125 million of 9 1/4% Senior Notes issued in February 1997. NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION Cash payments for interest costs and income taxes consist of the following (in thousands): Nine Months Ended March 31, -------------------- 1998 1997 ---- ---- Interest costs (none capitalized) $22,577 $13,526 Income taxes 14,520 570
During the nine months ended March 31, 1998 and 1997, the Company entered into capital lease obligations of $3.6 million and $2.3 million, respectively, for the purchase of certain equipment. NOTE 6 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS The payment of principal, premium, if any, and interest on the Company's 9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary 9 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 9 1/4% 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. Therefore, the separate financial statements of the Subsidiary Guarantors are not deemed material. The following supplemental schedules present consolidating financial information 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 on the equity method for purposes of the presentation set forth below. 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, 1998 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ $ 7,556 $ 1,538 $ $ 9,094 Investment securities 6,500 6,500 Finance receivables, net 159,336 155,734 315,070 Excess servicing receivable (1,614) 8,238 212,133 218,757 Restricted cash 73,314 73,314 Property and equipment, net 154 20,414 20,568 Goodwill 7,037 7,037 Other assets 7,638 7,520 4,096 19,254 Due (to) from affiliates 314,716 (182,664) (132,052) Investment in affiliates 110,413 13,921 2 (124,336) -------- --------- --------- --------- -------- Total assets $437,807 $ 41,358 $ 314,765 $(124,336) $669,594 -------- --------- --------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Commercial paper warehouse facility $ $ $ 97,592 $ $ 97,592 Mortgage warehouse facility 26,436 26,436 Automobile receivables- backed notes 10,725 10,725 9 1/4% Senior Notes 175,000 175,000 Notes payable 6,170 28 6,198 Accrued taxes and expenses 8,561 44,346 3,549 56,456 Deferred income taxes (29,437) (15,332) 64,443 19,674 -------- --------- --------- --------- -------- Total liabilities 160,294 55,478 176,309 392,081 -------- --------- --------- --------- -------- Shareholders' equity: Common stock 343 203 3 (206) 343 Additional paid-in capital 221,114 108,336 13,921 (122,257) 221,114 Unrealized gain on excess servicing receivable 2,925 2,925 (2,925) 2,925 Retained earnings 76,537 (122,659) 121,607 1,052 76,537 -------- --------- --------- --------- -------- 300,919 (14,120) 138,456 (124,336) 300,919 Treasury stock (23,406) (23,406) -------- --------- --------- --------- -------- Total shareholders' equity 277,513 (14,120) 138,456 (124,336) 277,513 -------- --------- --------- --------- -------- Total liabilities and shareholders' equity $437,807 $ 41,358 $ 314,765 $(124,336) $669,594 -------- --------- --------- --------- -------- -------- --------- --------- --------- --------
11 AmeriCredit Corp. Consolidating Balance Sheet June 30, 1997 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ $ 3,988 $ 2,039 $ $ 6,027 Investment securities 6,500 6,500 Finance receivables, net 240,912 25,745 266,657 Excess servicing receivable (777) 12,096 103,057 114,376 Restricted cash 67,895 67,895 Property and equipment, net 136 13,748 13,884 Goodwill 7,260 7,260 Other assets 4,447 5,304 1,103 10,854 Due (to) from affiliates 277,369 (197,656) (79,713) Investment in affiliates 56,764 (56,764) -------- --------- --------- --------- -------- Total assets $344,439 $ 85,652 $ 120,126 $(56,764) $493,453 -------- --------- --------- --------- -------- -------- --------- --------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $ $ 71,700 $ $ $ 71,700 Mortgage warehouse facility 345 345 Automobile receivables-backed notes 23,689 23,689 9 1/4% Senior Notes 125,000 125,000 Notes payable 3,484 33 3,517 Deferred income taxes (8,669) (5,547) 27,520 13,304 Accrued taxes and expenses 8,088 27,987 3,287 39,362 -------- --------- --------- --------- -------- Total liabilities 127,903 94,518 54,496 276,917 -------- --------- --------- --------- -------- Shareholders' equity: Common stock 333 203 3 (206) 333 Additional paid-in capital 203,544 98,336 (98,336) 203,544 Unrealized gain on excess servicing receivable 2,954 2,954 (2,954) 2,954 Retained earnings 33,466 (107,405) 62,673 44,732 33,466 -------- --------- --------- --------- -------- 240,297 (8,866) 65,630 (56,764) 240,297 Treasury stock (23,761) (23,761) -------- --------- --------- --------- -------- Total shareholders'equity 216,536 (8,866) 65,630 (56,764) 216,536 -------- --------- --------- --------- -------- Total liabilities and shareholders' equity $344,439 $ 85,652 $ 120,126 $(56,764) $493,453 -------- --------- --------- --------- -------- -------- --------- --------- --------- --------
12 AmeriCredit Corp. Consolidating Income Statement Nine Months Ended March 31, 1998 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $ $ 29,421 $ 10,631 $ $ 40,052 Gain on sale of receivables (5,199) 1,653 89,650 86,104 Servicing fee income 65,084 4,825 (40,255) 29,654 Investment income 22,335 300 3,232 (22,026) 3,841 Other income 772 232 1,004 Equity in income of affiliates 43,680 (43,680) -------- --------- --------- --------- -------- 60,816 97,230 108,570 (105,961) 160,655 -------- --------- --------- --------- -------- Costs and expenses: Operating expenses 7,801 98,566 (10) (40,255) 66,102 Provision for losses 5,546 5,546 Interest expense 10,325 17,923 12,751 (22,026) 18,973 -------- --------- --------- --------- -------- 18,126 122,035 12,741 (62,281) 90,621 -------- --------- --------- --------- -------- Income before income taxes 42,690 (24,805) 95,829 (43,680) 70,034 Provision for income taxes (381) (9,551) 36,895 26,963 -------- --------- --------- --------- -------- Net income $43,071 $ (15,254) $ 58,934 $ (43,680) $ 43,071 -------- --------- --------- --------- -------- -------- --------- --------- --------- --------
13 AmeriCredit Corp. Consolidating Income Statement Nine Months Ended March 31, 1997 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $ $ 26,571 $ 7,033 $ $33,604 Gain on sale of receivables 1,600 44,308 45,908 Servicing fee income 39,483 2,671 (28,268) 13,886 Investment income 11,352 117 1,569 (11,087) 1,951 Other income 72 857 124 1,053 Equity in income of affiliates 24,221 (24,221) -------- --------- --------- --------- -------- 35,645 68,628 55,705 (63,576) 96,402 -------- --------- --------- --------- -------- Costs and expenses: Operating expenses 5,349 57,041 1,473 (28,268) 35,595 Provision for losses 5,040 5,040 Interest expense 1,960 11,160 9,190 (11,087) 11,223 -------- --------- --------- --------- -------- 7,309 73,241 10,663 (39,355) 51,858 -------- --------- --------- --------- -------- Income before income taxes 28,336 (4,613) 45,042 (24,221) 44,544 Income tax provision 940 232 15,976 17,148 -------- --------- --------- --------- -------- Net income $27,396 $(4,845) $29,066 $(24,221) $27,396 -------- --------- --------- --------- -------- -------- --------- --------- --------- --------
14 AmeriCredit Corp. Consolidating Statement of Cash Flow Nine Months Ended March 31, 1998 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Cash flows from operating activities: Net income $43,071 $ (15,254) $ 58,934 $ (43,680) $ 43,071 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 35 3,049 3,084 Provision for losses 5,546 5,546 Deferred income taxes (14,670) (9,785) 36,899 12,444 Gain on sale of auto receivables 5,199 1,357 (89,650) (83,094) Amortization of excess servicing receivable (4,362) 2,501 46,775 44,914 Equity in income of affiliates (43,680) 43,680 Changes in assets and liabilities: Other assets (953) (2,216) (2,993) (6,162) Accrued taxes and expenses 473 16,359 262 17,094 -------- ----------- ----------- ---------- ----------- Net cash provided (used) by operating activities (14,887) 1,557 50,227 36,897 -------- ----------- ----------- ---------- ----------- Cash flows from investing activities: Purchases of auto receivables (1,161,393) (1,252,650) 1,252,650 (1,161,393) Originations of mortgage receivables (94,537) (94,537) Principal collections and recoveries on receivables 8,581 8,956 17,537 Net proceeds from sale of auto receivables 1,252,650 1,047,499 (1,252,650) 1,047,499 Net proceeds from sale of mortgage receivables 70,729 70,729 Purchases of property and equipment (53) (5,918) (5,971) Increase in restricted cash (5,419) (5,419) Net change in investment in affiliates (9,998) (3,921) (2) 13,921 -------- ----------- ----------- ---------- ----------- Net cash provided (used) by investing activities (10,051) 66,191 (201,616) 13,921 (131,555) -------- ----------- ----------- ---------- ----------- Cash flows from financing activities: Borrowings on bank line of credit 746,400 746,400 Payments on bank line of credit (818,100) (818,100) Net change in commercial paper warehouse facility 97,592 97,592 Net change in mortgage warehouse facility 26,091 26,091 Proceeds from 9 1/4% senior notes 47,762 47,762 Payments on automobile receivables- backed notes (12,964) (12,964) Payments on notes payable (888) (5) (893) Net change in due (to) from affiliates (33,773) (18,566) 52,339 Proceeds from issuance of common stock 11,837 13,921 (13,921) 11,837 -------- ----------- ----------- ---------- ----------- Net cash provided (used) by financing activities 24,938 (64,180) 150,888 (13,921) 97,725 -------- ----------- ----------- ---------- ----------- Net increase (decrease) in cash and cash equivalents 3,568 (501) 3,067 Cash and cash equivalents at beginning of period 3,988 2,039 6,027 -------- ----------- ----------- ---------- ----------- Cash and cash equivalents at end of period $ $ 7,556 $ 1,538 $ $ 9,094 -------- -------- -------- -------- ------- -------- -------- -------- -------- -------
15 AmeriCredit Corp. Consolidating Statement of Cash Flow Nine Months Ended March 31, 1997 (Unaudited, Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Cash flows from operating activities: Net income $ 27,396 $ (4,845) $ 29,066 $ (24,221) $ 27,396 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23 1,489 1,512 Provision for losses 5,040 5,040 Deferred income taxes 8,101 (3,177) 11,921 16,845 Gain on sale of auto receivables (44,308) (44,308) Amortization of excess servicing receivable 4,161 17,753 21,914 Equity in income of affiliates (24,221) 24,221 Changes in assets and liabilities: Other assets 983 (2,403) (1,214) (2,634) Accrued taxes and expenses 294 14,855 2,593 17,742 --------- --------- --------- --------- --------- Net cash provided by operating activities 12,576 15,120 15,811 43,507 --------- --------- --------- --------- --------- Cash flows from investing activities: Purchases of auto receivables (593,360) (553,832) 553,832 (593,360) Originations of mortgage receivables (31,822) (31,822) Principal collections and recoveries on receivables 17,016 32,980 49,996 Net proceeds from sale of auto receivables 553,832 524,197 (553,832) 524,197 Net proceeds from sale of mortgage receivables 27,424 27,424 Purchases of property and equipment (48) (3,073) (3,121) Proceeds from maturities of investment securities 58 58 Increase in restricted cash (44,988) (44,988) Net change in investment in affiliates 4,359 (4,359) --------- --------- --------- --------- --------- Net cash provided (used) by investing activities 4,369 (34,342) (41,643) (71,616) --------- --------- --------- --------- --------- Cash flows from financing activities: Borrowings on bank line of credit 494,700 494,700 Payments on bank line of credit (551,500) (551,500) Net increase in mortgage warehouse facility (607) (607) Proceeds from 9 1/4% senior notes 120,894 120,894 Payments on automobile receivables- backed notes (32,955) (32,955) Payments on notes payable (404) (404) Net change in due (to) from affiliates (132,678) 72,528 60,150 Proceeds from issuance of common stock 4,543 4,543 Purchase of treasury stock (4,387) (4,387) --------- --------- --------- --------- --------- Net cash provided (used) by financing activities (12,032) 15,121 27,195 30,284 --------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 4,913 (4,101) 1,363 2,175 Cash and cash equivalents at beginning of period (4,913) (87) 7,145 2,145 --------- --------- --------- --------- --------- Cash and cash equivalents at end of period $ $ (4,818) $ 8,508 $ $ 4,320 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
16 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company generates earnings and cash flow primarily through 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 ("owned receivables") and pays interest expense on borrowings under its warehouse credit facilities. The Company sells receivables to securitization trusts ("Trusts") or special purpose finance subsidiaries 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 servicing fee income of between 2.25% and 2.50% per annum of the outstanding principal balance of receivables securitized ("serviced receivables"). In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"), which originates and sells home equity mortgage loans. The acquisition was accounted for as a purchase, and the results of operations for AMS have been included in the consolidated financial statements since the acquisition date. 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. 17 RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands): Three Months Ended March 31, ------------------------- 1998 1997 ---- ---- Auto: Owned $ 242,002 $247,091 Serviced 1,500,798 593,973 ---------- -------- 1,742,800 841,064 Mortgage 20,975 9,020 ---------- -------- $1,763,775 $850,084 ---------- -------- ---------- --------
Average managed receivables outstanding increased by 107% as a result of higher loan purchase volume. The Company purchased $480.5 million of auto loans during the three months ended March 31, 1998, compared to purchases of $244.5 million during the three months ended March 31, 1997. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 119 auto lending branch offices as of March 31, 1998, compared to 79 as of March 31, 1997. The Company purchased $43.0 million of mortgage loans during the three months ended March 31, 1998 as compared to $24.1 million during the three months ended March 31, 1997. Finance charge income consisted of the following (in thousands): Three Months Ended March 31, ------------------------- 1998 1997 ---- ---- Auto $ 13,387 $ 11,844 Mortgage 475 257 --------- -------- $ 13,862 $ 12,101 --------- -------- --------- --------
The increase in finance charge income is due primarily to an increase in the Company's effective yield on its owned auto receivables to 22.4% for the three months ended March 31, 1998 from 19.4% for the three months ended March 31, 1997. The effective yield rose for the three months ended March 31, 1998 due to increased auto loan purchases and correspondingly higher levels of finance 18 charge income earned between the auto finance contract date 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, ------------------------- 1998 1997 ---- ---- Auto $31,563 $16,457 Mortgage 766 1,300 ------- ------- $32,329 $17,757 ------- ------- ------- -------
The increase in gain on sale of auto receivables resulted from the sale of $435.0 million of receivables in the three months ended March 31, 1998 as compared to $208.3 million of receivables sold in the three months ended March 31, 1997. The gains amounted to 7.3% and 7.9% of the sales proceeds for the three months ended March 31, 1998 and 1997, respectively. Significant assumptions used in determining the gain on sale of auto receivables were as Three Months Ended March 31, ------------------------- 1998 1997 ---- ---- Cumulative credit losses 10.8% 9.3% Excess cash flow discount rate 12.0% 12.0%
The gain on sale of mortgage receivables decreased due to a decrease in average premiums received on sales to 3.4% for the three months ended March 31, 1998 compared to 5.8% for the three months ended March 31, 1997. Mortgage receivables sold were $22.6 million for the three months ended March 31, 1998 and 1997. Servicing fee income increased to $10.5 million, or 2.8% of average serviced auto receivables, for the three months ended March 31, 1998, as compared to $5.6 million, or 3.9% of average serviced auto receivables, for the three months ended March 31, 1997. 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, 1998 also includes a $3.0 million charge to increase credit loss reserves related to certain of the Company's prior securitization transactions. Such credit loss reserves are netted against excess servicing receivable in the Company's consolidated balance sheets. The growth in servicing fee income exclusive of the aforementioned charge is primarily due to the increase in average serviced auto receivables outstanding for the three months ended March 31, 1998 compared to the three months ended March 31, 1997. 19 Investment income increased to $1.3 million for the three months ended March 31, 1998 from $.8 million for the three months ended March 31, 1997 primarily as a result of higher restricted cash balances. Restricted cash is used as credit enhancement for the Trusts and generally increases as greater amounts of receivables are sold to the Trusts. COSTS AND EXPENSES: Operating expenses as an annualized percentage of average managed receivables outstanding decreased to 5.6% (5.3% excluding operating expenses of $1.3 million related to the mortgage business) for the three months ended March 31, 1998 as compared to 6.7% (6.2% excluding operating expenses of $1.1 million related to the mortgage business) for the three months ended March 31, 1997. 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 $10.3 million, or 75%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses was $1.8 million for the three months ended March 31, 1998 and 1997. Average owned auto receivables outstanding remained relatively unchanged for the same periods. Interest expense increased to $6.9 million for the three months ended March 31, 1998 from $4.6 million for the three months ended March 31, 1997 due to higher debt levels and effective interest rates. Average debt outstanding was $300.5 million and $208.2 million for the three months ended March 31, 1998 and 1997, respectively. The Company's effective rate of interest paid on its debt increased to 9.4% from 9.0% as a result of the issuance of 9 1/4% Senior Notes in February 1997 and January 1998. The Company's effective income tax rate was 38.5% for the three months ended March 31, 1998 and 1997, respectively. 20 NINE MONTHS ENDED MARCH 31, 1998 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 1997 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands): Nine Months Ended March 31, ------------------------- 1998 1997 ---- ---- Auto: Owned $ 244,218 $227,134 Serviced 1,251,566 482,186 ---------- -------- 1,495,784 709,320 Mortgage 14,635 7,598 ---------- -------- $1,510,419 $716,918 ---------- -------- ---------- --------
Average managed receivables outstanding increased by 111% as a result of higher loan purchase volume. The Company purchased $1,176.7 million of auto loans during the nine months ended March 31, 1998, compared to purchases of $603.9 million during the nine months ended March 31, 1997. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 119 auto lending branch offices as of March 31, 1998, compared to 79 as of March 31, 1997. The Company purchased $94.5 million of mortgage loans during the nine months ended March 31, 1998 as compared to $31.8 million from the date of acquisition of AMS through March 31, 1997. Finance charge income consisted of the following (in thousands): Nine Months Ended March 31, ------------------------- 1998 1997 ---- ---- Auto $ 39,032 $ 33,316 Mortgage 1,020 288 -------- -------- $ 40,052 $ 33,604 -------- -------- -------- --------
The increase in finance charge income is due primarily to an increase of 8% in average owned auto receivables outstanding for the nine months ended March 31, 1998 versus the nine months ended March 31, 1997 and an increase in the Company's effective yield on its owned auto receivables to 21.3% for the nine months ended March 31, 1998 from 19.5% for the nine months ended March 31, 1997. The effective yield rose for the nine months ended March 31, 1998 due to increased auto loan purchases and correspondingly higher levels of finance 21 charge income earned between the auto finance contract date 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, ------------------------- 1998 1997 ---- ---- Auto $83,094 $44,308 Mortgage 3,010 1,600 ------- ------- $86,104 $45,908 ------- ------- ------- -------
The increase in gain on sale of auto receivables resulted from the sale of $1,117.5 million of receivables in the nine months ended March 31, 1998 as compared to $553.8 million of receivables sold in the nine months ended March 31, 1997. The gains amounted to 7.4% and 8.0% of the sales proceeds for the nine months ended March 31, 1998 and 1997, respectively. Significant assumptions used in determining the gain on sale of auto receivables were as follows: Nine Months Ended March 31, ------------------------- 1998 1997 ---- ---- Cumulative credit losses 10.4% 9.4% Excess cash flow discount rate 12.0% 12.0%
The gain on sale of mortgage receivables resulted from the sale of $70.7 million of mortgage receivables in the nine months ended March 31, 1998 as compared to $27.4 million of mortgage receivables sold from the date of acquisition of AMS through March 31, 1997. The average premiums received on sales were 4.3% and 5.8% for the nine months ended March 31, 1998 and 1997, respectively. Servicing fee income increased to $29.7 million, or 3.2% of average serviced auto receivables, for the nine months ended March 31, 1998, as compared to $13.9 million, or 3.8% of average serviced auto receivables, for the nine months ended March 31, 1997. 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 nine months ended March 31, 1998 also includes a $3.5 million charge to increase credit loss reserves related to certain of the Company's prior securitization transactions. Such credit loss reserves are netted against excess servicing receivable in the Company's consolidated balance sheets. The growth in servicing fee income exclusive of the aforementioned charge is primarily due to the increase in average serviced auto receivables outstanding for the nine months ended March 31, 1998 compared to the nine months ended March 31, 1997. 22 Investment income increased to $3.8 million for the nine months ended March 31, 1998 from $2.0 million for the nine months ended March 31, 1997 primarily as a result of higher restricted cash balances. Restricted cash is used as credit enhancement for the Trusts and generally increases as greater amounts of receivables are sold to the Trusts. COSTS AND EXPENSES: Operating expenses as an annualized percentage of average managed receivables outstanding decreased to 5.9% (5.5% excluding operating expenses of $3.9 million related to the mortgage business) for the nine months ended March 31, 1998 as compared to 6.7% (6.4% excluding operating expenses of $1.4 million related to the mortgage business) for the nine months ended March 31, 1997. 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 $30.5 million, or 86%, 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 $5.5 million for the nine months ended March 31, 1998 as compared to $5.0 million for the nine months ended March 31, 1997 due to higher average owned auto receivables outstanding. Interest expense increased to $19.0 million for the nine months ended March 31, 1998 from $11.2 million for the nine months ended March 31, 1997 due to higher debt levels and effective interest rates. Average debt outstanding was $271.7 million and $178.1 million for the nine months ended March 31, 1998 and 1997, respectively. The Company's effective rate of interest paid on its debt increased to 9.3% from 8.4% as a result of the issuance of 9 1/4% Senior Notes in February 1997 and January 1998. The Company's effective income tax rate was 38.5% for the nine months ended March 31, 1998 and 1997, respectively. FINANCE RECEIVABLES 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 future losses in the owned auto receivables portfolio. 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 future credit losses expected over the life of the auto receivables sold. The Company sells mortgage receivables for cash on a servicing released, whole-loan basis. Such receivables are generally held by the Company for less than 23 90 days. Accordingly, no allowance for losses is provided by the Company for the mortgage receivables. 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 provisions for losses and the allowance for losses. Although the Company uses many resources to assess the adequacy of the allowance for losses, there is no precise method for estimating the ultimate losses in the receivables portfolio. 24 The following table presents certain data related to the receivables portfolio (dollars in thousands): March 31, 1998 --------------------------------------------------------- Balance Auto Sheet Auto Managed Owned Mortgage Total Serviced Portfolio ----- -------- ----- -------- --------- Principal amount of receivables $299,335 $ 28,214 $327,549 $1,625,461 $1,924,796(2) -------- -------- -------- ---------- ---------- -------- -------- -------- ---------- ---------- Allowance for losses (12,479) (12,479) $ (141,227)(1) $ (153,706)(2) -------- -------- -------- ---------- ---------- -------- -------- -------- ---------- ---------- Finance receivables, net $286,856 $ 28,214 $315,070 -------- -------- -------- -------- -------- -------- Number of outstanding contracts 25,999 241 155,860 181,859(2) -------- -------- ---------- ---------- -------- -------- ---------- ---------- Average amount of outstanding contract (principal amount) (in dollars) $ 11,513 $117,071 $ 10,429 $ 10,584(2) -------- -------- ---------- ---------- -------- -------- ---------- ---------- Allowance for losses as a percentage of receivables 4.2% 8.7% 8.0%(2) -------- ---------- ---------- -------- ---------- ----------
(1) The allowance for losses related to serviced auto receivables is netted against excess servicing receivable in the Company's consolidated balance sheets. (2) Includes auto receivables only. The following is a summary of managed auto receivables which are (i) more than 60 days delinquent, but not in repossession, and (ii) in repossession (dollars in thousands): March 31, ----------------- 1998 1997 ---- ---- Delinquent contracts $50,653 $29,484 Delinquent contracts as a percentage of managed auto receivables 2.6% 3.2% Contracts in repossession $23,274 $13,331 Contracts in repossession as a percentage of managed auto receivables 1.2% 1.4%
In accordance with its policies and guidelines, the Company at times offers payment deferrals to customers, whereby the customer 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 a percentage of average managed auto receivables were 4.5% and 4.0% for the three months ended March 31, 1998 and 1997, respectively, and 13.6% and 12.8% for the nine months ended March 31, 1998 and 1997, respectively. 25 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, ------------------ ----------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net charge-offs: Owned $ 1,904 $ 3,829 $ 7,528 $12,894 Serviced 20,941 7,506 53,390 16,190 ------- ------- ------- ------- $22,845 $11,335 $60,918 $29,084 ------- ------- ------- ------- ------- ------- ------- ------- Net charge-offs as an annualized percentage of average managed auto receivables outstanding 5.3% 5.5% 5.4% 5.5% ------- ------- ------- ------- ------- ------- ------- -------
The Company began its indirect automobile finance business in September 1992 and has grown its managed auto receivables portfolio to $1.9 billion as of March 31, 1998. The Company expects that its delinquency and charge-offs will increase over time as the portfolio matures and its portfolio growth rate moderates. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a more seasoned portfolio. 26 LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands): Nine Months Ended March 31, -------------------- 1998 1997 ---- ---- Operating activities $ 36,897 $ 43,507 Investing activities (131,555) (71,616) Financing activities 97,725 30,284 --------- -------- Net increase in cash and cash equivalents $ 3,067 $ 2,175 --------- -------- --------- --------
The Company's primary sources of cash have been collections and recoveries on its receivables portfolio, borrowings under its warehouse credit facilities, sales of auto receivables to Trusts in securitization transactions, excess cash flow distributions from the Trusts and the issuance of its 9 1/4% Senior Notes. The Company's line of credit arrangement with a group of banks provides for borrowings up to $265 million, subject to a defined borrowing base. The Company utilizes the line of credit to fund its auto lending activities and daily operations. The Company amended the agreement in April 1998 reducing the line of credit to $265 million from $310 million and extending the maturity to April 1999. There were no outstanding balances under the line of credit as of March 31, 1998. In October 1997, the Company entered into a funding agreement with a funding agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available to the Company. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in October 1998. A total of $97.6 million was outstanding under this facility as of March 31, 1998. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $35 million, subject to a defined borrowing base, to fund mortgage loan originations. The facility expires in February 1999. A total of $26.4 million was outstanding under the mortgage warehouse facility as of March 31, 1998. In February 1998, the Company completed its twelfth securitization transaction with the issuance of $425 million of asset-backed securities through the AmeriCredit Automobile Receivables Trust 1998-A. The proceeds from the transaction were used to repay the borrowings then outstanding under the Company's warehouse facilities. In January 1998, the Company issued an additional $50 million of its 9 1/4% Senior Notes which are due in February 2004. These additional notes have 27 substantially the same terms as the Company's original $125 million of 9 1/4% Senior Notes issued in February 1997. The Company's primary use of cash has been purchases and originations of receivables. The Company purchased $1,176.7 million of auto finance contracts during the nine months ended March 31, 1998 requiring cash of $1,161.4 million, net of acquisition fees and other items. The Company operated 119 auto lending branch offices as of March 31, 1998 and plans to open six additional branches in the remainder of fiscal 1998 and 45 branches in fiscal 1999. The Company may also expand loan production capacity at existing 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. The Company's Board of Directors has authorized the repurchase of up to 6,000,000 shares of the Company's common stock. A total of 4,594,700 shares at an aggregate purchase price of $27.3 million had been purchased pursuant to this program through March 31, 1998, although no common stock has been repurchased since September 1996. Certain restrictions contained in the Indenture pursuant to which the 9 1/4% Senior Notes were issued limit the amount of common stock which may be repurchased by the Company. As of March 31, 1998, the Company had $15.6 million in cash and cash equivalents and investment securities. The Company also had available borrowing capacity of $98.7 million under its bank line of credit pursuant to the borrowing base requirement of such credit agreement. The Company estimates that it will require additional external capital for the remainder of fiscal 1998 in addition to these existing capital resources and collections and recoveries on its receivables portfolio and excess cash flow distributions from the Trusts in order to fund expansion of its lending activities, capital expenditures, and other costs and expenses. The Company anticipates that such funding will be in the form of additional securitization transactions. 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. Since 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. The Company utilizes several strategies to minimize the risk of interest rate fluctuations, including the use of hedging instruments, the regular sale of auto receivables to the Trusts and pre-funding securitizations, whereby the amount of asset-backed securities issued in a securitization exceeds the amount of receivables initially sold to the Trust. The proceeds from the pre-funded portion are held in an escrow account until the Company sells additional receivables to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, the Company locks in the borrowing costs with respect to the loans it subsequently delivers to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between 28 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. There can be no assurance that these 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. YEAR 2000 ISSUE The Company is in the preliminary stages of investigating the impact of the year 2000 issue and developing a remediation plan. The year 2000 issue is whether the Company's or its vendors' computer systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company is in the process of conducting an initial assessment of applicable computer systems to identify the systems that could be affected by the year 2000 issue and has determined that modification or replacement of portions of existing software will be required. The Company is utilizing both internal and external resources to identify, modify or replace and test systems for year 2000 compliance. The Company plans to complete application modifications and upgrades by December 31, 1998, with testing to take place in the first quarter of calendar year 1999. While the Company has not yet fully evaluated the cost of year 2000 compliance, such costs are not expected to be material to the Company's results of operations and liquidity. The Company presently believes that with modifications to existing software and conversion to new software, the year 2000 issue will not pose significant operational problems for the Company's computer systems. However, if such modifications and conversions are not made, or are not completed timely, the year 2000 issue could have a material impact on the operations of the Company. In addition, there can be no assurance that unforeseen problems in the Company's computer systems, or the systems of third parties on which the Company's computers rely, would not have an adverse effect on the Company's systems or operations. FORWARD LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed above are forward looking statements that involve risks and uncertainties including competitive factors, the management of growth, and other risks 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, 1997. Such statements are only predictions and actual events or results may differ materially. 29 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The disclosures required pursuant to Item 305 of Regulation S-K are not yet effective for the Company. Such disclosures will be included in the Company's filings commencing with its Annual Report on Form 10-K for the year ending June 30, 1998. 30 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Not Applicable 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 filed the following reports on Form 8-K during the quarterly period ended March 31, 1998: (i) Report filed January 22, 1998 announcing the commencement by the Company of an offering of $50 million in Senior Notes, and (ii) Report filed January 30, 1998 announcing the completion of such offering of $50 million in Senior Notes. In addition, certain subsidiaries and affiliates of the Company filed reports on Form 8-K during the quarterly period ended March 31, 1998 reporting monthly information related to securitization trusts. 31 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 15, 1998 By: /s/ Daniel E. Berce ------------------------------ (Signature) Daniel E. Berce Chief Financial Officer 32 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, ------------------ ----------------- 1998 1997 1998 1997 ---- ---- ---- ---- Weighted average shares outstanding 30,146,854 29,073,790 29,866,492 28,697,299 Incremental shares resulting from assumed exercise of stock options 2,337,955 1,959,440 2,455,523 1,910,096 ---------- ---------- ---------- ---------- Weighted average shares and assumed incremental shares 32,484,809 31,033,230 32,322,015 30,607,395 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME $ 15,696 $ 10,126 $ 43,071 $ 27,396 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS PER SHARE: Basic $ .52 $ .35 $ 1.44 $ .95 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Diluted $ .48 $ .33 $ 1.33 $ .90 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share has been computed by dividing net income by the weighted average shares outstanding. Diluted earnings per share has 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 price for the period was used to determine the number of incremental shares. 33 EX-27.1 3 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 82,408 6,500 327,549 (12,479) 0 0 27,191 (6,623) 669,594 0 315,951 0 0 343 277,170 669,594 0 160,655 0 66,102 0 5,546 18,973 70,034 26,963 43,071 0 0 0 43,071 1.44 1.33
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