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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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(Address of principal executive offices)
(Zip Code)
(817) 332-7000
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(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 28,504,473 shares of common stock, $.01 par value outstanding as of
May 6, 1996.
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
March 31, 1996 and June 30, 1995 . . . . . . . . . . . . . . . . 3
Consolidated Income Statements -
Three Months and Nine Months Ended
March 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended
March 31, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 22
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2
PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
March 31, June 30,
1996 1995
-------- --------
ASSETS
Cash and cash equivalents $ 1,584 $ 18,314
Restricted cash 9,712 5,007
Investment securities 6,840 10,265
Finance receivables, net 251,470 221,888
Excess servicing receivable 20,953
Property and equipment, net 6,991 6,036
Deferred income taxes 13,457 19,788
Other assets 3,883 4,427
-------- --------
Total assets $314,890 $285,725
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Automobile receivables-backed notes $ 83,036 $ 134,520
Bank line of credit 71,800
Notes payable 486 716
Accrued taxes and expenses 3,827 3,263
-------- --------
Total liabilities 159,149 138,499
-------- --------
Shareholders' equity:
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 32,516,853 and
32,117,201 shares issued,
respectively 326 321
Additional paid-in capital 188,341 185,573
Accumulated deficit (12,406) ( 26,824)
-------- --------
176,261 159,070
Treasury stock, at cost
(4,055,368 and 3,400,039 shares) (20,520) ( 11,844)
-------- --------
Total shareholders' equity 155,741 147,226
-------- --------
Total liabilities and shareholders'
equity $314,890 $285,725
-------- --------
-------- --------
The accompanying notes are an integral part of these consolidated financial
statements
3
AMERICREDIT CORP.
Consolidated Income Statements
(Unaudited, Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- ------------------
1996 1995 1996 1995
------- ------- ------- -------
Revenue:
Finance charge income $12,650 $ 8,237 $39,879 $19,375
Gain on sale of receivables 7,725 13,346
Servicing fee income 1,105 1,320
Investment income 280 355 836 1,002
Other income 588 374 1,151 1,028
------- ------- ------- -------
22,348 8,966 56,532 21,405
------- ------- ------- -------
Costs and expenses:
Operating expenses 6,915 3,740 17,357 10,257
Provision for losses 1,999 1,152 6,111 2,689
Interest expense 3,315 1,424 10,177 1,837
------- ------- ------- -------
12,229 6,316 33,645 14,783
------- ------- ------- -------
Income before income taxes 10,119 2,650 22,887 6,622
Provision for income taxes 3,807 8,469 79
------- ------- ------- -------
Net income $6,312 $2,650 $14,418 $6,543
------- ------- ------- -------
------- ------- ------- -------
Earnings per share $ .21 $ .09 $ .48 $ .22
------- ------- ------- -------
------- ------- ------- -------
Weighted average shares
and share equivalents 30,082,193 30,259,850 30,175,398 30,191,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
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,
--------------------
1996 1995
Cash flows from operating activities:
Net income $14,418 $ 6,543
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,154 976
Provision for losses 6,111 2,689
Deferred income taxes 7,245
Gain on sale of receivables (13,346)
Amortization of excess servicing receivable 1,887
Changes in assets and liabilities:
Other assets 544 (471)
Accrued taxes and expenses 945 223
-------- --------
Net cash provided by operating
activities 18,958 9,960
-------- --------
Cash flows from investing activities:
Purchases and originations of finance
receivables (271,626) (150,348)
Principal collections and recoveries on
finance receivables 73,162 48,033
Net proceeds from sale of receivables 153,277
Purchases of property and equipment (2,113) (1,065)
Proceeds from disposition of property
and equipment 4 61
Proceeds from sales and maturities of
investment securities 3,425 15,099
Increase in restricted cash (4,705) (4,002)
-------- --------
Net cash used by investing activities (48,576) (92,222)
-------- --------
Cash flows from financing activities:
Borrowings on bank line of credit 219,400 40,300
Payments on bank line of credit (147,600) (15,600)
Proceeds from issuance of automobile
receivables-backed notes 51,000
Payments on automobile receivables-backed notes (51,484) (8,343)
Payments on notes payable (230) (165)
Purchase of treasury stock (9,057) (1,244)
Proceeds from issuance of common stock 1,859 579
-------- --------
Net cash provided by
financing activities 12,888 66,527
-------- --------
Net decrease in cash and cash equivalents (16,730) (15,735)
Cash and cash equivalents at beginning of period 18,314 15,756
-------- --------
Cash and cash equivalents at end of period $ 1,584 $ 21
-------- --------
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, 1996 and for the periods
ended March 31, 1996 and 1995 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 1995 Annual Report to Shareholders.
NOTE 2 - FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
March 31, June 30,
1995 1995
---- ----
Indirect finance receivables:
Precomputed interest $211,702 $191,700
Simple interest 109,186 95,660
-------- --------
320,888 287,360
Other finance receivables 68 1,373
-------- --------
Total finance receivables 320,956 288,733
Less unearned finance charges and fees (53,359) ( 46,894)
-------- --------
Principal amount of finance receivables 267,597 241,839
Less allowance for losses (16,127) ( 19,951)
-------- --------
Finance receivables, net $251,470 $221,888
-------- --------
-------- --------
6
The Company's finance contracts typically provide for finance charges on either
a precompute or simple interest basis. Precomputed interest finance receivables
include principal and unearned finance charges. Simple interest finance
receivables include principal only.
A summary of the allowance for losses is as follows (in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
Balance at beginning of period $18,972 $13,034 $19,951 $ 9,330
Provision for losses 1,999 1,152 6,111 2,689
Acquisition fees on indirect
finance receivables 4,797 4,018 12,352 9,234
Allowance related to receivables
sold (4,517) (8,742)
Net charge-offs-indirect (4,958) (1,776) (13,139) (4,009)
Net charge-offs-other ( 166) ( 252) ( 406) (1,068)
------- ------- ------- -------
Balance at end of period $16,127 $16,176 $16,127 $16,176
------- ------- ------- -------
------- ------- ------- -------
NOTE 3 - SALE OF FINANCE RECEIVABLES
On December 21, 1995, the Company completed a sale of finance receivables to the
AmeriCredit Automobile Receivables Trust 1995-B (the "1995-B Trust") and the
issuance to investors of $65.0 million of automobile receivables-backed
certificates of the 1995-B Trust. On March 4, 1996, the Company completed a sale
of finance receivables to the AmeriCredit Automobile Receivables Trust 1996-A
("the 1996-A Trust") and the issuance to investors of $89.4 million of
automobile receivables-backed certificates of the 1996-A Trust. The Company
retained a subordinated interest in each of the Trusts. The 1995-B Trust and
1996-A Trust certificates have pass through interest rates of 6.10% and 5.70%,
respectively. Financial Security Assurance Inc. ("FSA") issued financial
guaranty insurance policies for the benefit of the investors.
The Company recognized a gain on the sale of finance receivables to each of the
Trusts. The gains represent the difference between the sales proceeds, net of
transaction costs, and the Company's net carrying value of the receivables sold,
plus excess servicing (see Note 4).
7
NOTE 4 - EXCESS SERVICING RECEIVABLE
Excess servicing receivable represents the Company's subordinated interest in
the Trusts, including excess servicing on the finance receivables sold to the
Trusts. The excess servicing receivable is equal to the present value of
estimated future collections and recoveries on the finance receivables sold to
the Trusts, less the present value of required principal and interest payments
to the investors, base servicing fees payable to the Company at an annualized
rate of 2.5% of finance receivables serviced and certain other fees. The
calculation of excess servicing includes estimates of future credit losses and
prepayment rates for the remaining term of the finance receivables sold since
these factors impact the amount and timing of future collections and recoveries
on the pools of finance receivables. If future credit losses and prepayment
rates exceed the Company's estimates, excess servicing receivable will be
adjusted through a charge to operations. Favorable credit loss and prepayment
experience compared to the Company's estimates would result in additional
servicing fee income. The excess servicing receivable is amortized using the
interest method against realized excess servicing fee income.
Excess servicing receivable consists of the following (in thousands):
March 31,
1996
--------
Estimated future net cash flows before
allowance for credit losses $ 38,645
Allowance for credit losses (14,846)
--------
Estimated future net cash flows 23,799
Unamortized discount at 12% ( 2,846)
--------
$ 20,953
--------
--------
8
A summary of excess servicing receivable is as follows (in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1996
---- ----
Balance at beginning of period $ 9,243 $ 0
Excess servicing related to
receivables sold 13,597 22,840
Amortization (1,887) (1,887)
-------- --------
Balance at end of period $ 20,953 $20,953
-------- --------
-------- --------
NOTE 5 - DEBT
Automobile receivables-backed notes consist of the following (in thousands):
March 31, June 30,
1996 1995
---- ----
Series 1994-A notes, interest at 8.19%,
collateralized by certain finance
receivables in the principal amount
of $18,036, final maturity in
December 1999. $17,646 $35,350
Series 1995-A notes, interest at 6.55%,
collateralized by certain finance
receivables in the principal
amount of $66,756, final maturity
in September 2000. 65,390 99,170
-------- --------
$ 83,036 $134,520
-------- --------
-------- --------
The Series 1994-A notes were issued in December 1994 and initially aggregated
$51,000,000. The Series 1995-A notes were issued in June 1995 and initially
aggregated $99,170,000. Each series of notes was issued by a wholly-owned
special purpose subsidiary of the Company which holds the related finance
receivables. Principal and interest on the notes are payable monthly from
collections and recoveries on the specific pools of finance receivables. FSA
issued financial guaranty insurance policies for the benefit of the noteholders
of each series.
9
The Company has a revolving credit agreement with a group of banks under which
the Company may borrow up to $150 million, subject to a defined borrowing base.
The Company had $71,800,000 and $-0- outstanding under this facility as of March
31, 1996 and June 30, 1995, respectively. Borrowings under the credit agreement
are collateralized by certain indirect finance receivables and bear interest,
based upon the Company's option, at either the reference prime rate or various
market London Interbank Offered Rates plus 1.65%. The Company is also required
to pay an annual commitment fee equal to 3/8% of the unused portion of the
credit agreement. The credit agreement, which expires in October 1996, contains
various restrictive covenants requiring certain minimum financial ratios and
results and placing certain limitations on the incurrence of additional debt,
capital expenditures, cash dividends and repurchase of common stock.
NOTE 6 - RESTRICTED CASH
In connection with the issuance of financial guaranty insurance policies by FSA,
the Company is required to establish a cash account with a trustee for the
benefit of FSA and the investors for each issue of automobile receivables-backed
securities. Such cash accounts are shown as restricted cash on the Company's
consolidated balance sheets. Monthly collections and recoveries from each pool
of finance receivables in excess of required principal and interest payments on
the securities and servicing and other fees are added to the restricted cash
accounts until the balance reaches a specified percentage of the pool of finance
receivables, and thereafter are distributed to the Company. In the event that
monthly collections and recoveries from any pool of finance receivables are
insufficient to make required principal and interest payments to the investors
and pay servicing and other fees, any shortfall would be drawn from the
restricted cash accounts.
Certain agreements with FSA contain restrictive covenants relating to
delinquency, default and net loss ratios in the pools of finance receivables
supporting the automobile receivables-backed securities. A default on these
restrictive covenants would result in an increase in the specified levels of the
restricted cash accounts and, in certain cases, removal of the Company as
servicer of the finance receivables.
NOTE 7 - INCOME TAXES
The Company's effective income tax rate on income before income taxes differs
from the U.S. statutory tax rate as follows:
10
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
U.S. statutory tax rate 35% 35% 35% 35%
Change in valuation allowance (35) (35)
Other 3 2 1
---- ---- ---- ----
38% 0% 37% 1%
---- ---- ---- ----
---- ---- ---- ----
At June 30, 1995, the Company has net operating loss carryforwards of
approximately $45,000,000 for income tax reporting purposes which expire between
2007 and 2009 and an alternative minimum tax carryforward of $1,602,000 with no
expiration date.
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
Nine Months Ended
March 31,
--------------------
1996 1995
---- ----
Interest costs (none capitalized) $9,551 $1,516
Income taxes $1,229
During the nine months ended March 31, 1995, the Company sold certain property
and equipment for cash and a note receivable of $184,000.
During the nine months ended March 31, 1995, a capital lease obligation of
$564,000 was incurred when the Company entered into a lease for equipment.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AS COMPARED TO
THREE MONTHS ENDED MARCH 31, 1995
REVENUE:
The Company's average net owned and serviced finance receivables outstanding
consisted of the following (in thousands):
Three Months Ended
March 31,
------------------------------
1996 1995
---- ----
Indirect-owned $264,695 $156,072
Indirect-serviced 112,387
-------- --------
377,082 156,072
Other 141 4,655
-------- --------
$377,223 $160,727
-------- --------
-------- --------
The Company's finance charge income consisted of the following (in thousands):
Three Months Ended
March 31,
------------------------------------
1996 1995
---- ----
Indirect $12,647 100% $8,055 98%
Other 3 0% 182 2%
------- --- ------ ---
$12,650 100% $8,237 100%
------- --- ------ ---
------- --- ------ ---
The increase in indirect finance charge income is due to growth of 70% in
average net indirect-owned finance receivables outstanding. The Company
purchased $122.7 million of indirect loans during the three months ended March
31, 1996, compared to $69.4 million during the three months ended March 31,
1995. 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 48 branch offices as of March 31, 1996, compared to 26 as of
12
March 31, 1995. The decrease in other finance charge income is due to the
ongoing liquidation of the related receivables portfolios.
The Company's effective yield on its finance receivables decreased to 19.2% from
20.8%.
Gain on sale of receivables resulted from the transfer of finance receivables to
the AmeriCredit Automobile Receivables Trust 1996-A (the "1996-A Trust") in
March 1996 and the issuance to investors of $89.4 million of automobile
receivables-backed certificates of the Trust. The gain on sale of receivables
represented 8.6% of the original certificate balance. The Company's issuances
of automobile receivables-backed securities in the fiscal year ended June 30,
1995 were structured as debt issuances by subsidiaries of the Company and thus
were accounted for as borrowings. Since the Company intends to structure future
issuances of automobile receivables-backed securities in a manner which will
result in the recognition of a gain on sale of receivables, the amount and
timing of such future transactions will significantly impact the Company's
earnings from quarter to quarter.
Servicing fee income represents the Company's base servicing fee, net excess
servicing fees and other fees on finance receivables sold to the Trusts.
Investment income decreased as a result of lower average cash and cash
equivalents and investment securities balances for the three months ended March
31, 1996.
Other income for the three months ended March 31, 1996 and 1995 included
$275,000 and $222,000, respectively, related to the Company's participation in
certain joint ventures which acquire and collect distressed receivables
portfolios.
COST AND EXPENSES:
Operating expenses as an annualized percentage of average net owned and serviced
finance receivables outstanding decreased to 7.3% for the three months ended
March 31, 1996 as compared to 9.4% for the three months ended March 31, 1995.
The ratio improved as a result of the Company's ability to leverage its fixed
overhead costs by growing its finance receivables portfolio. The dollar amount
of operating expenses increased by $3.2 million, or 85%, primarily due
13
to the addition of branch offices and branch management and portfolio servicing
staff.
The provision for losses increased to $1,999,000 as compared to $1,152,000.
Further discussion concerning the provision for losses is included under the
caption, "Finance Receivables".
Interest expense of $3,315,000 for the three months ended March 31, 1996
resulted from borrowings on the Company's bank line of credit and the issuance
of $51 million and $99.2 million of automobile receivables-backed notes in
December 1994 and June 1995, respectively. Interest expense of $1,424,000 for
the three months ended March 31, 1995 resulted primarily from borrowings on the
Company's bank line of credit and the issuance of $51 million of automobile
receivables-backed notes in December 1994.
The provision for income taxes in the three months ended March 31, 1996 resulted
primarily from amortization of the Company's deferred tax asset at the federal
statutory income tax rate. In the fourth quarter of fiscal 1995, the Company
recognized a deferred tax asset equal to the expected future tax savings from
using its net operating loss carryforward and other future tax benefits. Based
on the Company's trend of positive operating results since entering the indirect
automobile finance business in September 1992 and future expectations, the
Company determined that it was more likely than not that its net operating loss
carryforward and other future tax benefits would be fully utilized prior to
expiration of the carryforward periods. The deferred tax asset is being
amortized through a non-cash income tax provision against the Company's earnings
as the net operating loss carryforward and other future tax benefits are
utilized. The Company will not pay regular federal income taxes until the net
operating loss carryforward and other future tax benefits have been fully
recovered. Prior to the fourth quarter of fiscal 1995, the Company had offset
the deferred tax asset with a valuation allowance. Accordingly, there was no
provision for federal income taxes in the three months ended March 31, 1995.
14
NINE MONTHS ENDED MARCH 31, 1996 AS COMPARED TO
NINE MONTHS ENDED MARCH 31, 1995
REVENUE:
The Company's average net owned and serviced finance receivables outstanding
consisted of the following (in thousands):
Nine Months Ended
March 31,
------------------------------
1996 1995
---- ----
Indirect-owned $266,685 $117,630
Indirect-serviced 52,039
-------- --------
318,724 117,630
Other 566 8,443
-------- --------
$319,290 $126,073
-------- --------
-------- --------
The Company's finance charge income consisted of the following (in thousands):
Nine Months Ended
March 31,
---------------------------------
1996 1995
---- ----
Indirect $39,855 100% $18,207 94%
Other 24 0% 1,168 6%
-------- --- ------- ---
$ 39,879 100% $19,375 100%
-------- --- ------- ---
-------- --- ------- ---
The increase in indirect finance charge income is due to growth of 127% in
average net indirect-owned finance receivables outstanding. The Company
purchased $284.0 million of indirect loans during the nine months ended March
31, 1996, compared to $152.9 million during the nine months ended March 31,
1995. This growth resulted from loan production at branches open during both
periods as well as expansion of the Company's loan production capacity. The
decrease in other finance charge income is due to the ongoing liquidation of the
related receivables portfolios.
The Company's effective yield on its finance receivables decreased to 19.9%
from 20.5%.
15
Gain on sale of receivables resulted from the transfers of finance receivables
to the 1995-B and 1996-A Trusts and the issuance to investors of $154.4 million
of automobile receivables-backed certificates of the Trusts in the nine months
ended March 31, 1996.
Servicing fee income represents the Company's base servicing fee, net excess
servicing fees and other fees on the finance receivables sold to the Trusts.
Investment income decreased as a result of lower average cash and cash
equivalents and investment securities balances for the nine months ended March
31, 1996.
Other income for the nine months ended March 31, 1996 and 1995 included $275,000
and $614,000, respectively, related to the Company's participation in certain
joint ventures which acquire and collect distressed receivables portfolios.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average net owned and serviced
finance receivables outstanding decreased to 7.2% for the nine months ended
March 31, 1996 as compared to 10.9% for the nine months ended March 31, 1995.
The ratio improved as a result of the Company's ability to leverage its fixed
overhead costs by growing its finance receivables portfolio. The dollar amount
of operating expenses increased by $7.1 million, or 69%, primarily due to the
addition of branch offices and branch management and portfolio servicing staff.
The provision for losses increased to $6.1 million as compared to $2.7 million.
Further discussion concerning the provision for losses is included under the
caption, "Finance Receivables".
Interest expense of $10.2 million for the nine months ended March 31, 1996
resulted from borrowings on the Company's bank line of credit and the issuance
of $51 million and $99.2 million of automobile receivables-backed notes in
December 1994 and June 1995, respectively. Interest expense of $1.8 million for
the nine months ended March 31, 1995 resulted primarily from borrowings on the
Company's bank line of credit and the issuance of $51 million of automobile
receivables-backed notes in December 1994.
16
The provision for income taxes in the nine months ended March 31, 1996 resulted
primarily from amortization of the Company's deferred tax asset at the federal
statutory income tax rate. In the fourth quarter of fiscal 1995, the Company
recognized a deferred tax asset equal to the expected future tax savings from
using its net operating loss carryforward and other future tax benefits. Prior
to the fourth quarter of fiscal 1995, the Company had offset the deferred tax
asset with a vaulation allowance. Accordingly, there was no provision for
federal income taxes in the nine months ended March 31, 1995.
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 sheet as a reserve against estimated future losses in the
owned finance receivables portfolio. The Company typically purchases individual
finance contracts with a non-refundable acquisition fee on a non-recourse basis.
Such acquisition fees are also recorded in the consolidated balance sheet as an
allowance for losses. The calculation of excess servicing receivable includes
an allowance for estimated future losses over the remaining term of the finance
receivables sold and serviced by the Company.
The Company reviews historical origination and charge-off relationships, charge-
off experience factors, collections information, 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 provision 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 finance receivables portfolio.
Net finance receivables represented 79.9% of the Company's total assets at March
31, 1996. The following table presents certain data related to the finance
receivables portfolio (dollars in thousands):
17
March 31,
1996
------------------------------------------------------------
Total
Indirect Owned Indirect Total
Owned Other Portfolio Serviced Portfolio
-------- ----- --------- -------- ---------
Gross finance receivables $320,888 $ 68 $320,956 $187,202 $508,158
Unearned finance charges
and fees (53,357) (2) (53,359) (32,222) (85,581)
-------- ----- -------- -------- --------
Finance receivables 267,531 66 267,597 $154,980 $422,577
-------- --------
-------- --------
Allowance for losses (16,061) ( 66) (16,127) $ 14,846 (1)
-------- ----- -------- --------
--------
Finance receivables, net $251,470 $ 0 $251,470
-------- ----- --------
-------- ----- --------
Number of outstanding contracts 31,915 18,726
-------- -------
-------- -------
Average amount of outstanding
contract (principal amount) $ 8,383 $ 8,276
(in dollars) -------- -------
-------- -------
Allowance for losses as a
percentage of finance receivables
(principal amount) 6.0% 9.6%
--- ---
--- ---
(1) The allowance for losses related to indirect-serviced finance receivables
is netted against excess servicing receivable in the Company's consolidated
balance sheets.
The following is a summary of total net indirect owned and serviced finance
receivables which are more than 60 days delinquent (dollars in thousands):
March 31,
--------------------
1996 1995
---- ----
Principal amount of delinquent contracts $13,593 $ 3,454
------- -------
------- -------
Principal amount of delinquent contracts
as a percentage of total net indirect
owned and serviced finance receivables
outstanding 3.2% 1.9%
----- -----
----- -----
18
The following table presents charge-off data with respect to the Company's total
net owned and serviced indirect finance receivables portfolio (dollars in
thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Net charge-offs:
Indirect-owned $4,958 $1,776 $13,139 $4,009
Indirect-serviced 285 319
------ ------ ------- ------
$5,243 $1,776 $13,458 $4,009
------ ------ ------- ------
------ ------ ------- ------
Net charge-offs as a percentage
of average net owned and
serviced indirect finance
receivables outstanding 5.6% 4.7% 5.6% 4.5%
--- --- --- ---
--- --- --- ---
The Company recorded periodic provisions for losses as charges to operations of
$1,999,000 and $6,111,000 for the three and nine month periods ended March 31,
1996, respectively. The provisions for losses were $1,129,000 and $2,579,000
for the three and nine month periods ended March 31, 1995, respectively.
(Provisions for losses of $23,000 and $110,000 for the three and nine months
periods ended March 31, 1995 were recorded with respect to other finance
receivables). The increased loss provisions are a result of higher average net
indirect-owned finance receivables outstanding.
The Company began its indirect automobile finance business in September 1992 and
has grown its total net owned and serviced finance receivables portfolio to
$422.5 million as of March 31, 1996. The Company expects that its delinquency
and charge-offs will increase over time as the portfolio matures. Accordingly,
the delinquency and charge-off data above is not necessarily indicative of
delinquency and charge-off experience that could be expected for a more seasoned
portfolio.
19
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
Nine Months Ended
March 31,
1996 1995
---- ----
Operating activities $18,958 $ 9,960
Investing activities (48,576) (92,222)
Financing activities 12,888 66,527
------- -------
Net decrease in
cash and cash equivalents ($16,730) $(15,735)
------- -------
------- -------
In addition to the net decrease in cash and cash equivalents shown above, the
Company also had net decreases in investment securities of $3.4 million and
$15.1 million for the nine months ended March 31, 1996 and 1995, respectively.
Such amounts are included as investing activities in the above table.
The Company's primary sources of cash have been collections and recoveries on
its finance receivables portfolio, borrowings under its bank line of credit and
the issuance of automobile receivables-backed securities.
In January 1996, the Company expanded the available borrowings under its bank
credit agreement by $25 million to $150 million and extended the maturity date
of the facility to October 31, 1996. The Company utilized the line of credit to
fund its lending activities during the nine months ended March 31, 1996. A
total of $71.8 million was outstanding under the line of credit as of March 31,
1996.
In December 1995 and March 1996, the Company completed the issuances of $65.0
and $89.4 million, respectively, of automobile receivables-backed certificates
through the 1995-B and 1996-A Trusts, respectively. The certificates have pass
through interest rates of 6.10% and 5.70%, respectively, and are rated "Aaa" by
Moody's Investors Service, Inc. and "AAA" by Standard & Poor's Rating Services.
Financial Security Assurance Inc. issued financial guaranty insurance policies
for the benefit of the investors. The proceeds from the issuances of the
certificates were used in each case to repay a portion of the borrowings then
outstanding under the Company's bank line of credit.
20
The Company's primary use of cash has been purchases and originations of finance
receivables. The Company purchased $284.0 million of finance contracts during
the nine months ended March 31, 1996 requiring cash of $271.6 million, net of
acquisition fees and other factors. The Company operated 48 branch offices and
had a number of marketing representatives as of March 31, 1996. The Company
plans to open two additional branches through the remainder of fiscal 1996 and
20 new branches in fiscal 1997. The Company may also expand loan production
capacity at existing offices where appropriate. While the Company has been able
to establish and grow its indirect automobile 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 4,164,500 shares at
an aggregate purchase price of $21,212,000 had been purchased pursuant to this
program through March 31, 1996.
As of March 31, 1996, the Company had $8.4 million in cash and cash equivalents
and investment securities. The Company also had available borrowing capacity of
$78.2 million under its bank line of credit. The Company estimates that it will
require additional external capital for the remainder of fiscal 1996 and fiscal
1997 in addition to these existing capital resources and collections and
recoveries on its finance receivables portfolio in order to fund expansion of
its indirect automobile lending business, capital expenditures, additional
common stock repurchases and other costs and expenses.
The Company anticipates that such funding will be in the form of additional
issuances of automobile receivables-backed securities. There can be no
assurance that funding will be available to the Company through the issuance of
automobile receivables-backed securities, or if available, that it will be on
terms acceptable to the Company.
21
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:
10.1 - Pooling and Servicing Agreement Relating to
AmeriCredit Automobile Receivables Trust 1996-A,
dated February 12, 1996, among AmeriCredit
Financial Services, Inc., AmeriCredit Receivables
Corp. and LaSalle National Bank.
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, 1996.
22
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, 1996 By: /s/ Daniel E. Berce
-------------------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
23