UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X|[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 1997
--------------
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
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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|X No
|_|--- ---
There were 29,208,36129,889,673 shares of common stock, $.01 par value outstanding as of
April 30,October 31, 1997.
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
March 31,September 30, 1997 and June 30, 1996.......................1997. . . . . . . . . . . . . . . 3
Consolidated Statements of Income Statements -
Three Months and Nine Months Ended March 31,September 30, 1997 and 1996................................1996. . . . . . . . . . 4
Consolidated Statements of Cash Flows -
NineThree Months Ended March 31,September 30, 1997 and 1996..............1996. . . . . . . . . . 5
Notes to Consolidated Financial Statements.............................................Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations..........................Operations . . . . . . . . . . . . . . . . . . 17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . 25
Part II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K................... 30
SIGNATURE ................................................... 31SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2
PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
March 31,September 30, June 30,
ASSETS 1997 19961997
---- ----
Cash and cash equivalents $ 4,3202,165 $ 2,1456,027
Investment securities 6,500 6,5586,500
Finance receivables, net 245,141 250,484276,170 266,657
Excess servicing receivable 85,299 33,093148,009 114,376
Restricted cash 60,292 15,30479,890 67,895
Property and equipment, net 11,607 7,67015,901 13,884
Goodwill 7,2327,186 7,260
Other assets 11,577 4,910
Deferred income taxes 9,995
------- -------12,745 10,854
-------- --------
Total assets $431,968 $330,159
======= =======$548,566 $493,453
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ 29,20097,000 $ 86,00071,700
Mortgage warehouse facility 2,7026,295 345
Automobile receivables-backed notes 34,892 67,84718,407 23,689
9 1/4% Senior Notes due 2004125,000 125,000
Notes payable 2,164 4184,000 3,517
Accrued taxes and expenses 30,611 12,66940,112 39,362
Deferred income taxes 5,902
------- -------20,114 13,304
-------- --------
Total liabilities 230,471 166,934
------- -------310,928 276,917
-------- --------
Shareholders' equity:
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 33,561,28233,695,603 and
32,640,96333,255,173 shares issued 336 326337 333
Additional paid-in capital 203,614 190,005210,465 203,544
Unrealized gain on excess servicing
receivable, 1,644net of income taxes 3,709 2,954
Retained earnings (deficit) 22,163 (5,233)
------- -------
227,757 185,09846,660 33,466
-------- --------
261,171 240,297
Treasury stock, at cost
(4,435,683(3,921,028 and 4,120,4833,959,071 shares) (26,260) (21,873)
------- -------(23,533) (23,761)
-------- --------
Total shareholders' equity 201,497 163,225
------- -------237,638 216,536
-------- --------
Total liabilities and shareholders'
equity $431,968 $330,159
======= =======$548,566 $493,453
-------- --------
-------- --------
The accompanying notes are an integral part
of these consolidated financial statements
3
AMERICREDIT CORP.
Consolidated Statements of Income Statements
(Unaudited, Dollars in Thousands, Except Per Share Data)
Three Months Ended
Nine Months Ended
March 31, March 31,
------------------ -----------------September 30,
---------------------
1997 1996 1997 1996
---- ----
---- ----
Revenue:
Finance charge income $12,101 $12,650 $33,604 $39,879$ 13,061 $ 10,764
Gain on sale of receivables 17,757 7,725 45,908 13,34626,042 12,590
Servicing fee income 5,644 1,105 13,886 1,3208,713 3,643
Investment income 799 280 1,951 8361,280 468
Other income 431 588 1,053 1,151
------- ------ ------ ------
36,732 22,348 96,402 56,532
------- ------- ------ ------194 330
----------- -----------
49,290 27,795
----------- -----------
Costs and expenses:
Operating expenses 13,848 6,915 35,595 17,35720,091 9,827
Provision for losses 1,809 1,999 5,040 6,1111,906 1,617
Interest expense 4,611 3,315 11,223 10,177
------- ------- ------ ------
20,268 12,229 51,858 33,645
------- ------- ------ ------5,839 3,226
----------- -----------
27,836 14,670
----------- -----------
Income before income taxes 16,464 10,119 44,544 22,887
Provision for income taxes 6,338 3,807 17,148 8,469
------- ------- ------ ------21,454 13,125
Income tax provision 8,260 5,053
----------- -----------
Net income $ 10,12613,194 $ 6,312 $27,396 $14,418
======= ======= ====== ======8,072
----------- -----------
----------- -----------
Earnings per share $ .33.41 $ .21 $ .90 $ .48
======= ======= ====== ======.27
----------- -----------
----------- -----------
Weighted average shares
and share equivalents 31,033,230 30,082,193 30,605,841 30,175,398
========== ========== ========== ==========31,991,958 30,118,939
----------- -----------
----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements
4
AMERICREDIT CORP.
Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
NineThree Months Ended
March 31,
-------------------September 30,
------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $27,396 $14,418$ 13,194 $ 8,072
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,512 1,154853 433
Provision for losses 5,040 6,1111,906 1,617
Deferred income taxes 16,845 7,2458,121 4,501
Gain on sale of auto receivables (44,308) (13,346)(24,852) (12,590)
Amortization of excess servicing receivable 21,914 1,8879,655 5,493
Changes in assets and liabilities:
Other assets (2,634) 544(1,891) (180)
Accrued taxes and expenses 17,742 945
------- --------750 7,361
--------- ---------
Net cash provided by operating activities 43,507 18,958
------- --------7,736 14,707
--------- ---------
Cash flows from investing activities:
Purchases and originations of auto receivables (593,360) (271,626)
Purchases and originations(350,359) (172,549)
Originations of mortgage receivables (31,822)(27,393)
Principal collections and recoveries on
finance receivables 49,996 73,16210,118 18,727
Net proceeds from sale of auto receivables 524,197 153,277314,075 151,953
Net proceeds from sale of mortgage receivables 27,42424,969
Purchases of property and equipment (3,138) (2,113)
Proceeds from disposition of property and
equipment 17 4(2,028) (1,120)
Proceeds from maturities of investment
securities 58 3,42555
Increase in restricted cash (44,988) (4,705)
------- --------(11,995) (15,864)
--------- ---------
Net cash used by investing activities (71,616) (48,576)
------- --------(42,613) (18,798)
--------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 494,700 219,400264,000 142,800
Payments on bank line of credit (551,500) (147,600)(238,700) (119,000)
Net decreaseincrease in mortgage warehouse facility (607)
Proceeds from 9 1/4% Senior Notes 120,8945,950
Payments on automobile receivables-backed notes (32,955) (51,484)(5,282) (13,416)
Payments on notes payable (404) (230)
Purchase of treasury stock (4,387) (9,057)(285) (92)
Proceeds from issuance of common stock 4,543 1,859
------- --------5,332 1,962
Purchase of treasury stock (4,387)
--------- ---------
Net cash provided by financing activities 30,284 12,888
------- --------31,015 7,867
--------- ---------
Net increase (decrease) in cash and cash
equivalents 2,175 (16,730)(3,862) 3,776
Cash and cash equivalents at beginning of period 6,027 2,145
18,314
------- ----------------- ---------
Cash and cash equivalents at end of period $ 4,3202,165 $ 1,584
======= ========5,921
--------- ---------
--------- ---------
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,September 30, 1997 and for the
periods ended March 31,September 30, 1997 and 1996 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 19961997 Annual Report to Shareholders.
NOTE 2 - FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
March 31,September 30, June 30,
1997 19961997
---- ----
Auto receivables $250,764 $264,086$282,939 $275,249
Less allowance for losses (13,233) (13,602)
------- -------(13,549) (12,946)
-------- --------
Auto receivables, net 237,531 250,484269,390 262,303
Mortgage receivables 7,610
-------6,780 4,354
-------- --------
Finance receivables, net $245,141 $250,484
======= =======$276,170 $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,
------------------ -----------------September 30,
----------------------
1997 1996
1997 1996
---- ---- ---- ----------- -------
Balance at beginning of period $12,173 $18,972$12,946 $13,602 $19,951
Provision for losses 1,809 1,999 5,040 6,1111,906 1,617
Acquisition fees 8,193 4,797 21,002 12,35211,365 6,572
Allowance related to auto receivables
sold (5,113) (4,517) (13,517) (8,742)to Trusts (9,766) (4,442)
Net charge-offs-auto receivables (3,829) (4,958) (12,894) (13,139)
Net charge-offs-other (166) (406)
------ ------ ------ ------charge-offs (2,902) (4,751)
------- -------
Balance at end of period $13,233 $16,127 $13,233 $16,127
====== ====== ====== ======$13,549 $12,598
------- -------
------- -------
NOTE 3 - EXCESS SERVICING RECEIVABLE
As of March 31,September 30, 1997 and June 30, 1996,1997, the Company was servicing
$676,891,000$1,101,312,000 and $259,895,000,$863,006,000, respectively, of auto receivables which have
been sold to certain special purpose financing trusts (the "Trusts").
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 establishes
accounting and reporting standards for transfers of financial assets and applies
to the Company's periodic sales of auto receivables to the Trusts. Adoption of
SFAS 125, which was applied prospectively to transactions occurring subsequent
to December 1996, did not have a material effect on the Company's consolidated
financial position or results of operations.
The components of excess servicing receivable are as follows(infollows (in thousands):
March 31,September 30, June 30,
1997 1996
------------ ------1997
------------- --------
Interest-only strips $ 77,503 $ 59,933
Subordinated interests:
Retained interests $ 14,376 $ 21,274
Interest only strips 49,222 11,819asset-backed securities 11,278 12,589
Excess of auto receivables in Trusts
over asset-backed securities outstanding 21,701
------ ------
$ 85,299 $ 33,093
====== ======59,228 41,854
-------- --------
$148,009 $114,376
-------- --------
-------- --------
7
Excess servicing receivable consists of the following (in thousands):
March 31,September 30, June 30,
1997 1996
---- ----1997
------------- --------
Estimated future netexcess cash flows before
allowance for credit losses $154,799 $63,457$257,812 $200,869
Allowance for credit losses (61,217) (25,616)
------- -------(94,549) (74,925)
-------- --------
Estimated future netexcess cash flows 93,582 37,841
Unamortized discount at 12% (8,283) ( 4,748)
------- -------
$ 85,299 $ 33,093
======= =======163,263 125,944
Discount to present value (15,254) (11,568)
-------- --------
$148,009 $114,376
-------- --------
-------- --------
A summary of excess servicing receivable is as follows (in thousands):
Three Months Ended
Nine Months Ended
March 31, March 31,
------------------ -----------------September 30,
----------------------
1997 1996
1997 1996
---- ---- ---- ------------ -------
Balance at beginning of period $59,780 $ 9,243$114,376 $33,093
$ 0
Additions 35,316 13,597 74,120 22,84042,059 15,056
Increase in unrealized gain 1,229
Amortization (9,797) (1,887) (21,914) (1,887)
------ ------ ------ ------(9,655) (5,493)
-------- -------
Balance at end of period $85,299 $20,953 $85,299 $20,953
====== ====== ====== ======$148,009 $42,656
-------- -------
-------- -------
NOTE 4 - ACQUISITIONDEBT
In November 1996,October 1997, the Company acquired Rancho Vista Mortgage Corporation
("RVMC"),entered into a California corporation, which originates and sells home equity
mortgage loans. The purchase price of $7,100,000 consisted of 400,000 shares of
common stock. The acquisition has been accounted for as a purchase and the
excess of the purchase price over net assets acquired was assigned to goodwill.
The results of operations of RVMC have been included in the consolidated
financial statements since the acquisition date. In January 1997, RVMC changed
its name to Americredit Corporation of California and now operates under the
name AmeriCredit Mortgage Services.
8
NOTE 5 - DEBT
The Company has arestated revolving credit
agreement with a group of banks under which the Company may borrow up to $240$310
million, subject to a defined borrowing base. Aggregate borrowings of
$29,200,000$97,000,000 and $86,000,000$71,700,000 were outstanding as of March
31,September 30, 1997 and
June 30, 1996,1997, respectively. Borrowings under the credit agreement are
collateralized by certain auto receivables and bear interest based upon the
Company's option, at either the prime rate (8.50% as of March 31, 1997) or 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, which expires in
October 1997,1998, contains various restrictive covenants requiring certain
minimum financial ratios and results and placing certain limitations on
the incurrencepayment of
additional debt, capital expenditures, cash dividends and repurchase of common stock.
On February 4, 1997, the Company completed a private placement of $125 million
of 9 1/4% Senior Notes due 2004. Interest on the notes is payable semi-annually,
commencing in August 1997. The notes, which are unsecured, may be redeemed at
the option of the Company after February 2001 at a premium declining to par in
February 2003. The Indenture pursuant to which the notes were issued contains
restrictions including limitations on the Company's ability to incur additional
indebtedness other than certain secured indebtedness, pay cash dividends and
repurchase common stock.
On February 6,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. Under the funding agreement, the
Company transfers auto receivables to CP Funding Corp. ("CPFC"), a special
purpose finance subsidiary of the Company, and CPFC in turn issues a note,
8
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 $75 million, subject to a defined borrowing
base. Aggregate borrowings of $2,702,000$6,295,000 and $345,000 were outstanding as of
March 31, 1997.September 30, 1997 and June 30, 1997, respectively. Borrowings under the
facility are collateralized by certain mortgage receivables and bear interest
based upon the Company's option, at either the prime rate or various market London Interbank Offered Rates ("LIBOR")LIBOR plus 1.25%. 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 1998.
9
Automobile receivables-backed notes consist of the following (in thousands):
March 31, June 30,
1997 1996
---- ----
Series 1994-A notes, interest at 8.19%,
collateralized by certain auto
receivables in the principal
amount of $6,331, paid in full in
April 1997. $ 5,686 $13,671
Series 1995-A notes, interest at 6.55%,
collateralized by certain auto
receivables in the principal
amount of $30,011, final maturity
in September 2000. 29,206 54,176
------- -------
$34,892 $67,847
======= =======
NOTE 6 - INCOME TAXES
The Company's effective income tax rate on income before income taxes differs
from the U.S. statutory tax rate as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
U.S. statutory tax rate 35.0% 35.0% 35.0% 35.0%
Other 3.5 2.6 3.5 2.0
---- ---- ---- ----
38.5% 37.6% 38.5% 37.0%
==== ==== ==== ====
10
NOTE 75 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
NineThree Months Ended
March 31,September 30,
------------------
1997 1996
---- ---------- ------
Interest costs (none capitalized) $13,526 $9,551$8,630 $2,995
Income taxes 570 1,22929 4
During the ninethree months ended March 31,September 30, 1997, the Company entered into
capital lease obligations of $2,332,000$768,000 for the purchase of certain equipment.
NOTE 86 - RECENT ACCOUNTING DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share, replacing existing accounting standards. The new
standard requires dual presentation of basic and diluted earnings per share
and a reconciliation between the two amounts. Basic earnings per share
excludes dilution, and diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised and converted into common stock. SFAS 128 is effective
for financial statements issued for periods ending after December 15, 1997.
The Company's basic earnings per share computed pursuant to the new standard
would have been
9
.45 and .28 for the three months ended September 30, 1997 and 1996,
respectively. Diluted earnings per share computed pursuant to the new
standard would not be materially different from earnings per share presented
in the consolidated statements of income.
NOTE 7 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's 9
1/4% Senior Notes due 2004 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
notes.9 1/4% Senior Notes. The Company believes that the condensed consolidating
financial information for the Company, the combined Subsidiary Guarantors and
the Combinedcombined 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.
Investments in subsidiaries are accounted for by AmeriCredit Corp. on the equity
method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in AmeriCredit Corp's. investment accounts
and earnings. The principal elimination entries set forth below eliminate
investments in subsidiaries and intercompany balances and transactions.
Set forth below isfollowing 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.
11Investments 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
As of March 31,September 30, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash equivalents $ $ (4,188)488 $ 8,5081,677 $ $ 4,3202,165
Investment securities 6,500 6,500
Finance receivables, net 209,193 35,948 245,141255,329 20,841 276,170
Excess servicing receivable 12,695 72,604 85,299(1,351) 11,383 137,977 148,009
Restricted cash 60,292 60,29279,890 79,890
Property and equipment, net 108 11,499 11,607152 15,749 15,901
Goodwill 7,232 7,2327,186 7,186
Other assets 4,811 4,624 2,142 11,5776,231 5,316 1,198 12,745
Due (to) from affiliates 257,205 (179,514) (77,691)264,389 (165,641) (98,748)
Investment in affiliates 62,699 (62,699)85,022 1 2 (85,025)
-------- --------- -------- --------- --------
Total assets $360,943 $ 129,811 $142,837 $(85,025) $548,566
-------- --------- -------- --------- --------
-------- --------- -------- Total assets $331,323 $ 61,541 $101,803 $(62,699) $431,968
======== ========= ======== ======== ========--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ $ 29,20097,000 $ $ $ 29,20097,000
Mortgage warehouse facility 2,702 2,7026,295 6,295
Automobile receivables-backed
notes 34,892 34,89218,407 18,407
9 1/4% Senior Notes due 2004 125,000 125,000
Notes payable 2,130 34 2,1643,969 31 4,000
Accrued taxes and expenses 3,547 24,564 2,500 30,6115,451 32,701 1,960 40,112
Deferred income taxes 793 (6,812) 11,921 5,902(11,115) (6,483) 37,712 20,114
-------- --------- -------- --------- --------
Total liabilities 123,305 129,544 58,079 310,928
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock 337 203 3 (206) 337
Additional paid-in capital 210,465 108,336 (108,336) 210,465
Unrealized gain on excess
servicing receivable 3,709 3,709 (3,709) 3,709
Retained earnings 46,660 (108,272) 81,046 27,226 46,660
-------- --------- -------- --------- --------
261,171 267 84,758 (85,025) 261,171
Treasury stock (23,533) (23,533)
-------- --------- -------- --------- --------
Total shareholders' equity 237,638 267 84,758 (85,025) 237,638
-------- --------- -------- --------- --------
Total liabilities and
shareholders' equity $360,943 $ 129,811 $142,837 $ (85,025) $548,566
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
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 131,470 49,688 49,313 230,471127,903 94,518 54,496 276,917
-------- --------- -------- -------- --------
Shareholders' equity:
Common stock 336 202333 203 3 (205) 336(206) 333
Additional paid-in capital 203,614 118,243 (118,243) 203,614203,544 98,336 (98,336) 203,544
Unrealized gain on excess
servicing receivable 1,644 1,6442,954 2,954 (2,954) 2,954
Retained earnings (deficit) 22,163 (106,592) 50,843 55,749 22,16333,466 (107,405) 62,673 44,732 33,466
-------- --------- -------- -------- --------
226,113 11,853 52,490 (62,699) 227,757240,297 (8,866) 65,630 (56,764) 240,297
Treasury stock at cost (26,260) (26,260)(23,761) (23,761)
-------- --------- -------- -------- --------
Total shareholders' equity 199,853 11,853 52,490 (62,699) 201,497shareholders'equity 216,536 (8,866) 65,630 (56,764) 216,536
-------- --------- -------- -------- --------
Total liabilities and
shareholders' equity $331,323$344,439 $ 61,541 $101,803 $(62,699) $431,968
======== ========= ======== ======== ========85,652 $120,126 $(56,764) $493,453
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
12
AmeriCredit Corp.
Consolidating Income Statement
NineThree Months Ended March 31,September 30, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $12,084 $ 977 $ $13,061
Gain on sale of receivables (1,737) 2,070 25,709 26,042
Servicing fee income 11,380 1,760 (4,427) 8,713
Investment income 2,609 28 1,101 (2,458) 1,280
Other income 118 76 194
Equity in income of
affiliates 17,502 (17,502)
------- ------- ------- -------- -------
18,374 25,680 29,623 (24,387) 49,290
------- ------- ------- -------- -------
Costs and expenses:
Operating expenses 2,630 21,908 (20) (4,427) 20,091
Provision for losses 1,906 1,906
Interest expense 3,174 3,567 1,556 (2,458) 5,839
------- ------- ------- -------- -------
5,804 27,381 1,536 (6,885) 27,836
------- ------- ------- -------- -------
Income before income taxes 12,570 (1,701) 28,087 (17,502) 21,454
Provision for income taxes (624) (794) 9,678 8,260
------- ------- ------- -------- -------
Net income $13,194 $ (907) $18,409 $(17,502) $13,194
------- ------- ------- -------- -------
------- ------- ------- -------- -------
13
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $ 26,5717,909 $ 7,0332,855 $ $ 33,604$10,764
Gain on sale of receivables 1,600 44,308 45,90812,590 12,590
Servicing fee income 39,483 2,671 (28,268) 13,88611,848 124 (8,329) 3,643
Investment income 11,352 117 1,569 (11,087) 1,9513,317 102 299 (3,250) 468
Other income 72 857 124 1,05328 120 182 330
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 (loss) before
income taxes 28,336 (4,613) 45,042 (24,221) 44,544
Provision for income taxes 940 232 15,976 17,148
-------- --------- -------- -------- --------
Net income (loss) $27,396 $(4,845) $29,066 $(24,221) $27,396
======= ======= ======= ======== =======
13
AmeriCredit Corp.
Consolidating Income Statement
Nine Months Ended March 31, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $23,759 $ 16,120 $ $39,879
Gain on sale of receivables 12,449 897 13,346
Servicing fee income 16,001 (14,681) 1,320
Investment income 7,572 1,161 503 (8,400) 836
Other income 258 308 585 1,151
Equity in income of
affiliates 17,888 (17,888)6,384 (6,384)
------- ------- ------- -------- -------- -------
25,718 53,678 18,105 (40,969) 56,5329,729 19,979 16,050 (17,963) 27,795
------- ------- --------------- -------- -------
Costs and expenses:
Operating expenses 2,410 27,008 2,620 (14,681) 17,357948 17,235 (27) (8,329) 9,827
Provision for losses 6,111 6,1111,617 1,617
Interest expense 421 11,101 7,055 (8,400) 10,17715 2,777 3,684 (3,250) 3,226
------- ------- ------- -------- -------- -------
2,831 44,220 9,675 (23,081) 33,645963 21,629 3,657 (11,579) 14,670
------- ------- ------- -------- -------- -------
Income (loss) before income taxes 22,887 9,458 8,430 (17,888) 22,8878,766 (1,650) 12,393 (6,384) 13,125
Provision for income taxes 8,469 8,469694 42 4,317 5,053
------- ------- --------------- -------- -------
Net income (loss) $14,418 $ 9,4588,072 $(1,692) $ 8,430 $(17,888) $14,418
======= ======= ======== ======== =======8,076 $ (6,384) $ 8,072
------- ------- ------- -------- -------
------- ------- ------- -------- -------
14
AmeriCredit Corp.
Consolidating Statement of Cash Flow
NineThree Months Ended March 31,September 30, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Cash flow from operating activities:
Net income $ 27,39613,194 $ (4,845)(907) $ 29,06618,409 $ (24,221)(17,502) $ 27,396
--------- --------- --------- --------- ---------13,194
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 23 1,489 1,5126 847 853
Provision for losses 5,040 5,0401,906 1,906
Deferred income taxes 8,101 (3,177) 11,921 16,845(625) (1,446) 10,192 8,121
Gain on sale of auto receivables (44,308) (44,308)1,737 (880) (25,709) (24,852)
Amortization of excess servicing
receivable 4,161 17,753 21,914(1,163) 2,783 8,035 9,655
Equity in income of affilities (24,221) 24,221affiliates (17,502) 17,502
Changes in assets and liabilities:
Other assets 983 (2,403) (1,214) (2,634)(1,784) (12) (95) (1,891)
Accrued taxes and expenses 294 14,855 2,593 17,742
---------(2,637) 4,714 (1,327) 750
-------- --------- --------- --------- ---------
Net cash provided (used) by operating
activities 12,576 15,120 15,811 43,507
---------(8,774) 7,005 9,505 7,736
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases and originations of auto receivables (593,360) (553,832) 553,832 (593,360)
Purchases and originations(350,359) (331,246) 331,246 (350,359)
Originations of mortgage receivables (31,822) (31,822)(27,393) (27,393)
Principal collections and recoveries on
finance receivables 17,016 32,980 49,9965,214 4,904 10,118
Net proceeds from sale of auto receivables 553,832 524,197 (553,832) 524,197331,246 314,075 (331,246) 314,075
Net proceeds from sale of mortgage receivables 27,424 27,42424,969 24,969
Purchases of property and equipment (48) (3,090) (3,138)
Proceeds from disposition of property
and equipment 17 17
Proceeds from maturities of investment
securities 58 58(22) (2,006) (2,028)
Increase in restricted cash (44,988) (44,988)(11,995) (11,995)
Net change in investment in affiliates 4,359 (4,359)
---------(10,000) 10,000
-------- --------- --------- --------- ---------
Net cash used by investing
activities 4,369 (34,342) (41,643) (71,616)
---------(10,022) (8,329) (24,262) (42,613)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 494,700 494,700264,000 264,000
Payments on bank line of credit (551,500) (551,500)(238,700) (238,700)
Net increase in mortgage warehouse facility (607) (607)
Proceeds from 9 1/4% Senior Notes 120,894 120,8945,950 5,950
Payments on automobile receivables-
backedreceivables-backed notes (32,955) (32,955)(5,282) (5,282)
Payments on notes payable (404) (404)(283) (2) (285)
Net change in due (to) from affiliates (132,678) 72,528 60,15013,747 (33,424) 19,677
Proceeds from issuance of common stock 4,543 4,543
Purchase of treasury stock (4,387) (4,387)
---------5,332 5,332
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities (12,032) 15,121 27,195 30,284
---------18,796 (2,176) 14,395 31,015
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 4,913 (4,101) 1,363 2,175(3,500) (362) (3,862)
Cash and cash equivalents at beginning of
period (4,913) (87) 7,145 2,145
---------3,988 2,039 6,027
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ $ (4,188)488 $ 8,5081,677 $ $ 4,320
========= ========= ========= ========= =========2,165
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
15
AmeriCredit Corp.
Consolidating Statement of Cash Flow
NineThree Months Ended March 31,September 30, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Cash flow from operating activities:
Net income $ 14,4188,072 $ 9,458(1,692) $ 8,4308,076 $ (17,888)(6,384) $ 14,4188,072
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 114 1,040 1,1546 427 433
Provision for losses 6,111 6,1111,617 1,617
Deferred income taxes 7,245 7,245(372) 134 4,739 4,501
Gain on sale of auto receivables (13,346) (13,346)(12,590) (12,590)
Amortization of excess servicing
receivable 1,887 1,8874,361 1,132 5,493
Equity in income of affilities (17,888) 17,888(6,384) 6,384
Changes in assets and liabilities:
Other assets 803 (546) 287 544(349) 9 160 (180)
Accrued taxes and expenses (396) 1,735 (394) 945
---------(2,429) 9,746 44 7,361
-------- --------- --------- --------- ---------
Net cash provided by operating
activities 4,296 6,339 8,323 18,958
---------(1,456) 14,602 1,561 14,707
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases and originations of auto receivables (271,626) (153,277) 153,277 (271,626)(172,549) (154,419) 154,419 (172,549)
Principal collections and recoveries on
finance receivables 24,602 48,560 73,1626,012 12,715 18,727
Net proceeds from sale of auto receivables 153,277 153,277 (153,277) 153,277154,419 151,953 (154,419) 151,953
Purchases of property and equipment (102) (4,547) 2,536 (2,113)
Proceeds from disposition of property
and equipment 2,536 4 (2,536) 4(5) (1,115) (1,120)
Proceeds from maturities of investment
securities 3,425 3,42555 55
Increase in restricted cash (4,705) (4,705)(15,864) (15,864)
Net change in investment in affiliates (13,221) 13,218 3
---------1,201 (1,201)
-------- --------- --------- --------- ---------
Net cash used by investing activities (7,362) (85,072) 43,858 (48,576)
---------1,251 (14,434) (5,615) (18,798)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 219,400 219,400142,800 142,800
Payments on bank line of credit (147,600) (147,600)(119,000) (119,000)
Payments on automobile receivables-
backed notes (51,484) (51,484)(13,416) (13,416)
Payments on notes payable (230) (230)(92) (92)
Net change in due (to) from affiliates (10,290) 11,869 (1,579)782 (17,686) 16,904
Proceeds from issuance of common stock 1,859 1,8591,962 1,962
Purchase of treasury stock (9,057) (9,057)
---------(4,387) (4,387)
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities (17,718) 83,669 (53,063) 12,888
---------(1,735) 6,114 3,488 7,867
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (20,784) 4,936 (882) (16,730)(1,940) 6,282 (566) 3,776
Cash and cash equivalents at beginning of
period 17,187 (6,394) 7,521 18,314
---------(4,913) (87) 7,145 2,145
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ (3,597)(6,853) $ (1,458)6,195 $ 6,6396,579 $ $ 1,584
========= ========= ========= ========= =========5,921
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
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,
retention, 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 bank line of credit.warehouse credit facilities. The
Company generates finance charge income on its owned receivables pending
securitization ("owned receivables") and pays interest expense on borrowings
under its bank line of credit.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 theseits receivables, the Company is able to lock in
the gross interest rate spread between the yield on such receivables and the
interest rate paidpayable on the asset-backed securities. The Company recognizes
a gain on the sale of the 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. Monthly excessExcess cash flow distributions are received from
the Trusts resultingflows 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.
The Company typically begins to receive excess cash flow distributions
approximately fiveseven to sevennine months after the receivables are securitized,
although these time periods may be shorter or longer depending upon the
structure of the securitization. Prior to such time as the Company begins to
receive excess cash flow, excess cash flow is 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 flow is distributed to the Company.
In addition to excess cash flow, the Company earns basemonthly servicing feesfee
income of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized.securitized ("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS",
formerly Rancho Vista Mortgage Company ("RVMC"Company"), which originates and sells home
equity mortgage loans. The name of RVMC has been
changed to Americredit Corporation of California. The acquisition has
17
beenwas accounted for as a purchase, and
the results of operations for RVMCAMS 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 to
investors for cash on a servicing released, whole-loan
basis. The Company recognizes a gain at the time of sale.
While the Company has been primarily involved in the above activities since
September 1992, the Company had previously operated in other businesses. For
purposes of the following discussion, receivables originated in businesses
previously operated by the Company are referred to as other receivables and
revenue earned therein is referred to as other finance charge income.17
RESULTS OF OPERATIONS
Three Months Ended March 31,THREE MONTHS ENDED SEPTEMBER 30, 1997 as compared to
Three Months Ended March 31,AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
Revenue:REVENUE:
The Company's average managed receivables outstanding consisted of the
following (in thousands):
Three Months Ended
March 31,
-------------------September 30,
------------------
1997 1996
---- ----
Auto:
Owned $247,091 $264,695$ 245,988 $218,667
Serviced 593,973 112,387
------- -------
841,064 377,0821,013,034 362,748
---------- --------
1,259,022 581,415
Mortgage 9,020
Other 141
------- -------
$850,084 $377,223
======= =======8,502
---------- --------
$1,267,524 $581,415
---------- --------
---------- --------
Average managed receivables outstanding increased by 125%118% as a result of
higher loan purchase volume. The Company purchased $244.5$355.1 million of auto
loans during the three months ended March 31,September 30, 1997, compared to purchases
of $122.7$175.9 million during the three months ended March 31,September 30, 1996. 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 7999 auto lending branch offices as of March 31,September 30, 1997, compared to
4860 as of March 31,September 30, 1996.
18
The Company purchased $24.1$27.4 million of mortgage loans during the three months
ended March 31,September 30, 1997.
The Company's financeFinance charge income consisted of the following (in thousands):
Three Months Ended
March 31,September 30,
------------------
1997 1996
---- ----
Auto $ 11,84412,859 $ 12,64710,764
Mortgage 257
Other 3
------- -------202
-------- --------
$ 12,10113,061 $ 12,650
======= =======10,764
-------- --------
-------- --------
The decreaseincrease in finance charge income is due primarily to a reductionan increase of 7%12%
in average owned auto receivables outstanding for the three months ended
March 31,September 30, 1997 versus the three months ended March 31,September 30, 1996.
18
The Company's effective yield on its owned auto receivables increased to
19.4%20.7% for the three months ended September 30, 1997 from 19.2%.19.5% for the three
months ended September 30, 1996.
The gain on sale of receivables consists of the following (in thousands):
Three Months Ended
March 31,September 30,
------------------
1997 1996
---- ----
Auto $16,457 $ 7,725$24,852 $12,590
Mortgage 1,3001,190
------- -------
$17,757 $ 7,725
======= =======$26,042 $12,590
------- -------
------- -------
The increase in gain on sale of auto receivables resulted from the sale of
$208.3$332.5 million of receivables in the three months ended March 31,September 30, 1997 as
compared to $89.4$155.2 million of receivables sold in the three months ended
March
31,September 30, 1996. The gains amounted to 7.9%7.5% and 8.6%8.1% of the sales
proceeds for the three months ended March 31,September 30, 1997 and 1996,
respectively.
The gain on sale of mortgage receivables resulted from the sale of $22.6$25.0
million of mortgage receivables.
19
Servicing fee income increased to $5.6$8.7 million, or 3.9%3.4% of average serviced
auto receivables, for the three months ended March 31,September 30, 1997, as compared
to $1.1$3.6 million, or 3.9%4.0% of average serviced auto receivables, for the three
months ended March 31,September 30, 1996. Servicing fee income represents accretion
of the present value discount on estimated future excess servicing receivable,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. The growth in servicing fee
income is primarily due to the increase in average serviced auto receivables
outstanding for the three months ended March 31,September 30, 1997 compared to the
three months ended March 31,September 30, 1996.
Investment income increased to $799,000$1,280,000 for the three months ended
March 31,September 30, 1997 from $280,000$468,000 for the three months ended March 31,September 30,
1996 primarily as a result of higher restricted cash balances. Restricted
cash is used as credit enhancement for the Trusts and investment securities balances.
Costs and Expenses: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 6.7% (6.2%6.3% (5.9% excluding operating expenses of $1,053,000$1.3
million related to the mortgage business) for the three months ended
March 31,September 30, 1997 as compared to 7.3%6.7% for the three months ended March 31,September
30, 1996. The ratio improved as a result of economies of scale realized from
a growing receivables portfolio and automation of loan origination,
processing and
19
servicing functions. The dollar amount of operating expenses increased by
$6.9$10.3 million, or 100%104%, primarily due to the addition of auto lending branch
offices and management, auto loan processing and servicing staff and the
recently acquired mortgage business.
The provision for losses decreasedincreased to $1.8$1.9 million for the three months ended
March 31,September 30, 1997 as compared to $2.0$1.6 million for the three months ended
March 31,
1996. Further discussion concerning the provision for losses is included under
the caption, "Finance Receivables".September 30, 1996 due to higher average owned auto receivables outstanding.
Interest expense increased to $4.6$5.8 million for the three months ended
March 31,September 30, 1997 from $3.3$3.2 million for the three months ended March 31,September 30,
1996 due to higher debt levels and effective rates of interest.interest rates. Average debt
outstanding was $208.2$243.4 million and $166.3$163.3 million for the three months ended
March 31,September 30, 1997 and 1996, respectively. The Company's effective rate of
interest paid on its debt increased to 9.0%9.5% from 7.9%7.8% as a result of the
issuance of the 9 1/4% Senior Notes in February 1997.
The Company's effective income tax rate increased towas 38.5% for the three months ended
March 31, 1997 from 37.6% for the three months ended March 31, 1996 due
20
to a larger portion of the Company's income being generated in states which
have higher tax rates.
Nine Months Ended March 31, 1997 as compared to
Nine Months Ended March 31, 1996
Revenue:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
Nine Months Ended
March 31,
-------------------
1997 1996
---- ----
Auto:
Owned $227,134 $266,685
Serviced 482,186 52,039
------- -------
709,320 318,724
Mortgage 7,598
Other 566
------- -------
$716,918 $319,290
======= =======
Average managed receivables outstanding increased by 125% as a result of higher
loan purchase volume. The Company purchased $603.9 million of auto loans during
the nine months ended March 31, 1997, compared to purchases of $284.0 million
during the nine months ended March 31, 1996. 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 79 auto lending branch
offices as of March 31, 1997, compared to 48 as of March 31, 1996.
The Company purchased $31.8 million of mortgage loans from the date of
acquisition of RVMC through March 31, 1997.
21
The Company's finance charge income consisted of the following (in thousands):
Nine Months Ended
March 31,
------------------
1997 1996
---- ----
Auto $ 33,316 $ 39,855
Mortgage 288
Other 24
-------- --------
$ 33,604 $ 39,879
======== ========
The decrease in finance charge income is due to a reduction of 15% in average
owned auto receivables outstanding for the nine months ended March 31, 1997
versus the nine months ended March 31, 1996. Prior to December 1995, all of the
auto finance contracts purchased by the Company were held as owned auto
receivables on the Company's consolidated balance sheets. The Company began
selling auto receivables to the Trusts in December 1995, reducing average owned
receivables with corresponding increases in average serviced receivables.
The Company's effective yield on its owned auto finance receivables decreased to
19.5% from 19.9%.
The gain on sale of receivables consists of the following (in thousands):
Nine Months Ended
March 31,
------------------
1997 1996
---- ----
Auto $44,308 $13,346
Mortgage 1,600
------ ------
$45,908 $13,346
======= =======
The increase in gain on sale of auto receivables resulted from the sale of
$553.8 million of receivables in the nine months ended March 31, 1997 as
compared to $154.4 million of receivables sold in the nine months ended March
31, 1996. The gains amounted to 8.0% and 8.6% of the sales proceeds for the nine
months ended March 31,September 30, 1997 and 1996, respectively.
The gain on sale of mortgage receivables resulted from the sale of $27.4 million
of mortgage receivables.
22
Servicing fee income increased to $13.9 million or 3.8% of average serviced auto
receivables, for the nine months ended March 31, 1997, as compared to $1.3
million or 3.3% of average serviced auto receivables, for the nine months ended
March 31, 1996. Servicing fee income represents accretion of the discount on
excess servicing receivable, base servicing fees and other fees earned by the
Company as servicer of the auto receivables sold to the Trusts. The growth in
servicing fee income is primarily due to the increase in average serviced auto
receivables for the nine months ended March 31, 1997 compared to the nine months
ended March 31, 1996.
Investment income increased to $1,951,000 for the nine months ended March 31,
1997 from $836,000 for the nine months ended March 31, 1996 as a result of
higher restricted cash and investment securities balances.
Costs and Expenses:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 6.7% (6.4% excluding operating expenses of $1,403,000
related to the mortgage business) for the nine months ended March 31, 1997 as
compared to 7.2% for the nine months ended March 31, 1996. 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 $18.2 million, or 105%, primarily due
to the addition of auto lending branch offices and management, auto loan
processing and servicing staff and the recently acquired mortgage business.
The provision for losses decreased to $5.0 million for the nine months ended
March 31, 1997 as compared to $6.1 million for the nine months ended March 31,
1996. Further discussion concerning the provision for losses is included under
the caption, "Finance Receivables".
Interest expense increased to $11.2 million for the nine months ended March 31,
1997 from $10.2 million for the nine months ended March 31, 1996 due to higher
debt levels. Average debt outstanding was $178.1 million and $160.8 million for
the nine months ended March 31, 1997 and 1996, respectively. The Company's
effective rate of interest paid on its debt was 8.4% for each period.
The Company's effective income tax rate increased to 38.5% for the nine months
ended March 31, 1997 from 37.0% for the nine months ended March 31, 1996 due to
a larger portion of the Company's income being generated in states which have
higher tax rates.
23
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 automobile
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. TheWhen the Company
sells auto receivables to the Trusts, the calculation of excess servicing receivable includesthe gain on sale of
receivables is reduced by an allowance for estimatedestimate of future credit losses expected over
the remaining termlife of the auto receivables sold to the Trusts and serviced by the Company.sold.
The Company sells the mortgage receivables for cash on a servicing released,
whole-loan basis. Such receivables are generally held by the Company for
less than 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, collections information,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 periodic provisionprovisions 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 accurately
estimating the ultimate losses in the receivables portfolio.
2420
The following table presents certain data related to the receivables
portfolio (dollars in thousands):
March 31,September 30,
1997
-------------------------------------------------------------------------------------------------------------------
Balance
Auto Sheet Auto TotalManaged
Owned Mortgage Total Serviced Portfolio
----- -------- ----- -------- ----------------- ---------- ----------
Principal amount of receivables $250,764$282,939 $ 7,610 $258,374 $676,891 $935,265
======== ========6,780 $289,719 $1,101,312 $1,384,251 (2)
---------- ----------
---------- ----------
Allowance for losses (13,233) (13,233) $(61,217)(13,549) (13,549) $ (94,549)(1) $(74,450)
-------$ (108,098)(2)
-------- ------- ======== ========-------- -------- ---------- ----------
---------- ----------
Finance receivables, net $237,531$269,390 $ 7,610 $245,141
======== ======= ========6,780 $276,170
-------- -------- --------
-------- -------- --------
Number of outstanding contracts 25,650 92 69,221 94,87125,594 55 108,294 133,888 (2)
======== ======= ======== ========-------- -------- ---------- ----------
-------- -------- ---------- ----------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 9,776 $82,71711,055 $123,272 $ 9,77910,170 $ 9,77810,339 (2)
======== ======= ======== ========-------- -------- ---------- ----------
-------- -------- ---------- ----------
Allowance for losses as a percentage
of receivables 5.3% 9.0% 8.0%4.8% 8.6% 7.8%(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,
-------------------September 30,
--------------------
1997 1996
---- ----------- -------
Delinquent contracts $29,484 $13,593$46,531 $22,446
Delinquent contracts as a percentage
of managed auto receivables 3.2% 3.2%
253.4% 3.5%
Contracts in repossession $18,571 $8,963
Contracts in repossession as a percentage
of managed auto receivables 1.3% 1.4%
21
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,September 30,
-------------------- ------------------
1997 1996
1997 1996
---- ---- ---- ----------- ------
Net charge-offs:
Owned $3,829 $4,958 $12,894 $13,139$ 2,902 $4,751
Serviced 7,506 285 16,190 31914,542 3,287
------- ------
$17,444 $8,038
------- ------
------- ------ ------
$11,335 $5,243 $29,084 $13,458
====== ====== ====== ======
Net charge-offs as an
annualized percentage of
average managed auto
receivables outstanding 5.5% 5.6% 5.5%
5.6%
=== === === ===
The Company recorded periodic provisions for losses as charges to operations of
$1.8 million and $2.0 million for the three months ended March 31, 1997 and
1996, respectively, and $5.0 million and $6.1 million for the nine months ended
March 31, 1997 and 1996, respectively. The decreased loss provisions are a
result of lower average owned auto receivables outstanding for the periods ended
March 31, 1997 versus the periods ended March 31, 1996.--- ---
--- ---
The Company began its indirect automobile finance business in September 1992
and the
Company has grown its managed auto receivables portfolio to $927.7 million$1.4 billion as of
March 31,September 30, 1997. The Company expects that its delinquency and charge-offs
will increase over time as the portfolio matures and its receivablesportfolio 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.
2622
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
NineThree Months Ended
March 31,
-------------------September 30,
------------------
1997 1996
---- ----
Operating activities $43,507 $18,958$ 7,736 $ 14,707
Investing activities (71,616) (48,576)(42,613) (18,798)
Financing activities 30,284 12,888
------- -------
Net 31,015 7,867
-------- --------
Net(decrease)increase (decrease) in
cash and cash equivalents $ 2,175 ($16,730)
======= =======
In addition to the net change in cash and cash equivalents shown above, the
Company also had net decreases in investment securities of $58,000 and
$3,425,000 for the nine months ended March 31, 1997 and 1996, respectively. Such
amounts are included as investing activities in the above table.(3,862) $ 3,776
-------- --------
-------- --------
The Company's primary sources of cash have been collections and recoveries on
its finance receivables portfolio, borrowings under its bank linewarehouse credit facilities,
sales of credit and
mortgage warehouse facility, the issuance of automobile receivables-backed
securitiesauto receivables to Trusts in securitization transactions, and excess
cash flow distributions from the Trusts.
The Company's bankTrusts and the issuance of its 9 1/4% Senior
Notes.
In October 1997, the Company expanded its line of credit arrangement with a
group of banks providesto provide for borrowings up to $240$310 million subjectand extended the
maturity of the facility to a defined borrowing base. The facility
matures in October 1997.1998. The Company utilizes the line of
credit to fund its daily auto lending activities and daily operations. A total of
$29.2$97.0 million was outstanding under the line of credit as of March 31,September 30,
1997.
On February 4, 1997, the Company completed the issuance of $125 million of
9 1/4% Senior Notes due 2004. Interest on the notes is payable semi-annually,
commencing in August 1997. The notes, which are unsecured, may be redeemed at
the option of the Company after February 2001 at a premium declining to par in
February 2003. The net proceeds from the offering were used to pay down
outstanding borrowings under the bank line of credit.
On February 6,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.
The Company also has a mortgage warehouse facility with a bank under which
the Company may borrow up to $75 million, subject to a defined borrowing
base. Borrowings under the facility are collateralized by
certain mortgage receivables and bear interest, based upon the Company's option,
at either the prime rate or various market London Interbank Offered
27
Rates ("LIBOR") plus 1.25%. The Company is also requiredbase, to pay an annual
commitment fee equal to 1/8% of the unused portion of the facility.fund home equity loan originations. The facility expires in
February 1998. A total of $2.7$6.3 million was outstanding under the mortgage
warehouse facility as of March 31,September 30, 1997.
In MarchAugust 1997, the Company completed its eighthtenth securitization transaction
with the issuance of $225$325 million of automobile receivables-backedasset-backed securities through the
AmeriCredit Automobile Receivables Trust 1997-A.1997-C. The proceeds from the
transaction were used to repay a portion of the borrowings then outstanding under the
Company's bank line of credit.
The Company's primary use of cash has been purchases and originations of
auto
receivables. The Company purchased $603.9$355.1 million of auto finance contracts
during the ninethree months ended March 31,September 30, 1997 requiring cash of $593.4$350.4
million, net of acquisition fees and other factors.items. The Company operated 7999
auto lending branch offices as of March 31, 1997. The CompanySeptember 30, 1997 and plans to open six26
additional
23
branches in the remainder of fiscal 1997 and forty branches in fiscal 1998. The companyCompany may also expand loan
production capacity at existing offices where appropriate. While the Company
has been able to establish and grow its automobileauto 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$27.4 million had been purchased pursuant
to this program through March 31,September 30, 1997. Certain restrictions contained
in the Indenture pursuant to which the 9 1/4% Senior Notes were issued prevent the Company from
repurchasing additional common stock for the remainder of fiscal 1997 and limit
the amount of common stock which may be repurchased thereafter.by the Company.
As of March 31,September 30, 1997, the Company had $10.8$8.7 million in cash and cash
equivalents and investment securities. The Company also had available
borrowing capacity of $123.9$75.6 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 19971998 in addition to these existing capital resources and
collections and recoveries on its finance receivables portfolio and excess cash flow
distributions from the Trusts in order to fund expansion of its automobile and mortgage lending
businesses,activities, capital expenditures, and other costs and expenses.
28
The Company anticipates that such funding maywill be in the form of additional
securitization transactions and implementionthe issuance of other warehouse financing
facilities.debt or equity securities.
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 other debt, fluctuations in
interest rates impact the Company's profitability. The Company usesutilizes
several strategies to minimize the risk of interest rate fluctuations,
including the use of hedging instruments, the regular sale of financeauto
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 purchases and delivers 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 loansreceivables 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.
2924
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.
25
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 did not file any reports on Form 8-K during the
quarterly period ended March 31,September 30, 1997.
Certain subsidiaries and affiliates of the Company filed monthly reports
on Form 8-K during the quarterly period ended March 31,September 30, 1997
reporting monthly information related to securitization trusts.
3026
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 14,November 12, 1997 By: /s/ Daniel E. Berce
--------------------------------------------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
3127