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, 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
-------------------------------------------------
AmeriCredit Corp.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2291093
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Bailey Avenue, Fort Worth, Texas 76107
--------------------------------------------
(Address of principal executive offices)
(Zip Code)
(817) 332-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
There were 29,208,361 shares of common stock, $.01 par value outstanding as
of April 30, 1997.
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
March 31, 1997 and June 30, 1996....................... 3
Consolidated Income Statements -
Three Months and Nine Months Ended
March 31, 1997 and 1996................................ 4
Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1997 and 1996.............. 5
Notes to Consolidated Financial
Statements............................................. 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......................... 17
Part II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K................... 30
SIGNATURE ................................................... 31
2
PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
March 31, June 30,
ASSETS 1997 1996
---- ----
Cash and cash equivalents $ 4,320 $ 2,145
Investment securities 6,500 6,558
Finance receivables, net 245,141 250,484
Excess servicing receivable 85,299 33,093
Restricted cash 60,292 15,304
Property and equipment, net 11,607 7,670
Goodwill 7,232
Other assets 11,577 4,910
Deferred income taxes 9,995
------- -------
Total assets $431,968 $330,159
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ 29,200 $ 86,000
Mortgage warehouse facility 2,702
Automobile receivables-backed notes 34,892 67,847
9 1/4% Senior Notes due 2004 125,000
Notes payable 2,164 418
Accrued taxes and expenses 30,611 12,669
Deferred income taxes 5,902
------- -------
Total liabilities 230,471 166,934
------- -------
Shareholders' equity:
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 33,561,282 and
32,640,963 shares issued 336 326
Additional paid-in capital 203,614 190,005
Unrealized gain on excess servicing
receivable 1,644
Retained earnings (deficit) 22,163 (5,233)
------- -------
227,757 185,098
Treasury stock, at cost
(4,435,683 and 4,120,483 shares) (26,260) (21,873)
------- -------
Total shareholders' equity 201,497 163,225
------- -------
Total liabilities and shareholders'
equity $431,968 $330,159
======= =======
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,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Finance charge income $12,101 $12,650 $33,604 $39,879
Gain on sale of receivables 17,757 7,725 45,908 13,346
Servicing fee income 5,644 1,105 13,886 1,320
Investment income 799 280 1,951 836
Other income 431 588 1,053 1,151
------- ------ ------ ------
36,732 22,348 96,402 56,532
------- ------- ------ ------
Costs and expenses:
Operating expenses 13,848 6,915 35,595 17,357
Provision for losses 1,809 1,999 5,040 6,111
Interest expense 4,611 3,315 11,223 10,177
------- ------- ------ ------
20,268 12,229 51,858 33,645
------- ------- ------ ------
Income before income taxes 16,464 10,119 44,544 22,887
Provision for income taxes 6,338 3,807 17,148 8,469
------- ------- ------ ------
Net income $ 10,126 $ 6,312 $27,396 $14,418
======= ======= ====== ======
Earnings per share $ .33 $ .21 $ .90 $ .48
======= ======= ====== ======
Weighted average shares
and share equivalents 31,033,230 30,082,193 30,605,841 30,175,398
========== ========== ========== ==========
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,
-------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $27,396 $14,418
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,512 1,154
Provision for losses 5,040 6,111
Deferred income taxes 16,845 7,245
Gain on sale of receivables (44,308) (13,346)
Amortization of excess servicing receivable 21,914 1,887
Changes in assets and liabilities:
Other assets (2,634) 544
Accrued taxes and expenses 17,742 945
------- --------
Net cash provided by operating
activities
43,507 18,958
------- --------
Cash flows from investing activities:
Purchases and originations of auto
receivables (593,360) (271,626)
Purchases and originations of
mortgage receivables (31,822)
Principal collections and recoveries on
finance receivables 49,996 73,162
Net proceeds from sale of auto receivables 524,197 153,277
Net proceeds from sale of mortgage receivables 27,424
Purchases of property and equipment (3,138) (2,113)
Proceeds from disposition of property and
equipment 17 4
Proceeds from maturities of investment
securities 58 3,425
Increase in restricted cash (44,988) (4,705)
------- --------
Net cash used by investing activities (71,616) (48,576)
------- --------
Cash flows from financing activities:
Borrowings on bank line of credit 494,700 219,400
Payments on bank line of credit (551,500) (147,600)
Net decrease in mortgage warehouse facility (607)
Proceeds from 9 1/4% Senior Notes 120,894
Payments on automobile
receivables-backed notes (32,955) (51,484)
Payments on notes payable (404) (230)
Purchase of treasury stock (4,387) (9,057)
Proceeds from issuance of common stock 4,543 1,859
------- --------
Net cash provided by financing activities 30,284 12,888
------- --------
Net increase (decrease) in cash and cash
equivalents 2,175 (16,730)
Cash and cash equivalents at beginning of period 2,145 18,314
------- --------
Cash and cash equivalents at end of period $ 4,320 $ 1,584
======= ========
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, 1997 and for the periods
ended March 31, 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 1996 Annual Report to Shareholders.
NOTE 2 - FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
March 31, June 30,
1997 1996
---- ----
Auto receivables $250,764 $264,086
Less allowance for losses (13,233) (13,602)
------- -------
Auto receivables, net 237,531 250,484
Mortgage receivables 7,610
------- --------
Finance receivables, net $245,141 $250,484
======= =======
6
A summary of the allowance for losses is as follows (in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Balance at beginning of period $12,173 $18,972 $13,602 $19,951
Provision for losses 1,809 1,999 5,040 6,111
Acquisition fees 8,193 4,797 21,002 12,352
Allowance related to auto receivables
sold (5,113) (4,517) (13,517) (8,742)
Net charge-offs-auto receivables (3,829) (4,958) (12,894) (13,139)
Net charge-offs-other (166) (406)
------ ------ ------ ------
Balance at end of period $13,233 $16,127 $13,233 $16,127
====== ====== ====== ======
NOTE 3 - EXCESS SERVICING RECEIVABLE
As of March 31, 1997 and June 30, 1996, the Company was servicing $676,891,000
and $259,895,000, 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(in thousands):
March 31, June 30,
1997 1996
------------ ------
Retained interests $ 14,376 $ 21,274
Interest only strips 49,222 11,819
Excess of auto receivables in Trusts
over asset-backed securities outstanding 21,701
------ ------
$ 85,299 $ 33,093
====== ======
7
Excess servicing receivable consists of the following (in thousands):
March 31, June 30,
1997 1996
---- ----
Estimated future net cash flows before
allowance for credit losses $154,799 $63,457
Allowance for credit losses (61,217) (25,616)
------- -------
Estimated future net cash flows 93,582 37,841
Unamortized discount at 12% (8,283) ( 4,748)
------- -------
$ 85,299 $ 33,093
======= =======
A summary of excess servicing receivable is as follows (in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Balance at beginning of period $59,780 $ 9,243 $33,093 $ 0
Additions 35,316 13,597 74,120 22,840
Amortization (9,797) (1,887) (21,914) (1,887)
------ ------ ------ ------
Balance at end of period $85,299 $20,953 $85,299 $20,953
====== ====== ====== ======
NOTE 4 - ACQUISITION
In November 1996, the Company acquired Rancho Vista Mortgage Corporation
("RVMC"), 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 a revolving credit agreement with a group of banks under which
the Company may borrow up to $240 million, subject to a defined borrowing base.
Aggregate borrowings of $29,200,000 and $86,000,000 were outstanding as of March
31, 1997 and June 30, 1996, 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, 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.
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, 1997, the Company entered into 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 were outstanding as
of March 31, 1997. 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")
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 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
Nine Months Ended
March 31,
------------------
1997 1996
---- ----
Interest costs (none capitalized) $13,526 $9,551
Income taxes 570 1,229
During the nine months ended March 31, 1997, the Company entered into capital
lease obligations of $2,332,000 for the purchase of certain equipment.
NOTE 8 - 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. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the Combined
Non-Guarantor Subsidiaries provide information that is more meaningful in
understanding the financial position of the Subsidiary Guarantors than separate
financial statements of the Subsidiary Guarantors. Therefore, the separate
financial statements of the Subsidiary Guarantors are not deemed material.
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 is 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.
11
AmeriCredit Corp.
Consolidating Balance Sheet
As of March 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash equivalents $ $ (4,188) $ 8,508 $ $ 4,320
Investment securities 6,500 6,500
Finance receivables, net 209,193 35,948 245,141
Excess servicing receivable 12,695 72,604 85,299
Restricted cash 60,292 60,292
Property and equipment, net 108 11,499 11,607
Goodwill 7,232 7,232
Other assets 4,811 4,624 2,142 11,577
Due (to) from affiliates 257,205 (179,514) (77,691)
Investment in affiliates 62,699 (62,699)
-------- --------- -------- -------- --------
Total assets $331,323 $ 61,541 $101,803 $(62,699) $431,968
======== ========= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ $ 29,200 $ $ $ 29,200
Mortgage warehouse facility 2,702 2,702
Automobile receivables-backed
notes 34,892 34,892
9 1/4% Senior Notes due 2004 125,000 125,000
Notes payable 2,130 34 2,164
Accrued taxes and expenses 3,547 24,564 2,500 30,611
Deferred income taxes 793 (6,812) 11,921 5,902
-------- --------- -------- -------- --------
Total liabilities 131,470 49,688 49,313 230,471
-------- --------- -------- -------- --------
Shareholders' equity:
Common stock 336 202 3 (205) 336
Additional paid-in capital 203,614 118,243 (118,243) 203,614
Unrealized gain on excess
servicing receivable 1,644 1,644
Retained earnings (deficit) 22,163 (106,592) 50,843 55,749 22,163
-------- --------- -------- -------- --------
226,113 11,853 52,490 (62,699) 227,757
Treasury stock, at cost (26,260) (26,260)
-------- --------- -------- -------- --------
Total shareholders' equity 199,853 11,853 52,490 (62,699) 201,497
-------- --------- -------- -------- --------
Total liabilities and
shareholders' equity $331,323 $ 61,541 $101,803 $(62,699) $431,968
======== ========= ======== ======== ========
12
AmeriCredit Corp.
Consolidating Income Statement
Nine Months Ended March 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $ 26,571 $ 7,033 $ $ 33,604
Gain on sale of receivables 1,600 44,308 45,908
Servicing fee income 39,483 2,671 (28,268) 13,886
Investment income 11,352 117 1,569 (11,087) 1,951
Other income 72 857 124 1,053
Equity in income of
affiliates 24,221 (24,221)
-------- --------- -------- -------- --------
35,645 68,628 55,705 (63,576) 96,402
-------- --------- -------- -------- --------
Costs and expenses:
Operating expenses 5,349 57,041 1,473 (28,268) 35,595
Provision for losses 5,040 5,040
Interest expense 1,960 11,160 9,190 (11,087) 11,223
-------- --------- -------- -------- --------
7,309 73,241 10,663 (39,355) 51,858
-------- --------- -------- -------- --------
Income (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)
------- ------- -------- -------- -------
25,718 53,678 18,105 (40,969) 56,532
------- ------- -------- -------- -------
Costs and expenses:
Operating expenses 2,410 27,008 2,620 (14,681) 17,357
Provision for losses 6,111 6,111
Interest expense 421 11,101 7,055 (8,400) 10,177
------- ------- -------- -------- -------
2,831 44,220 9,675 (23,081) 33,645
------- ------- -------- -------- -------
Income (loss) before
income taxes 22,887 9,458 8,430 (17,888) 22,887
Provision for income taxes 8,469 8,469
------- ------- -------- -------- -------
Net income (loss) $14,418 $ 9,458 $ 8,430 $(17,888) $14,418
======= ======= ======== ======== =======
14
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Nine Months Ended March 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Cash flow from operating activities:
Net income $ 27,396 $ (4,845) $ 29,066 $ (24,221) $ 27,396
--------- --------- --------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 23 1,489 1,512
Provision for losses 5,040 5,040
Deferred income taxes 8,101 (3,177) 11,921 16,845
Gain on sale of receivables (44,308) (44,308)
Amortization of excess servicing
receivable 4,161 17,753 21,914
Equity in income of affilities (24,221) 24,221
Changes in assets and liabilities:
Other assets 983 (2,403) (1,214) (2,634)
Accrued taxes and expenses 294 14,855 2,593 17,742
--------- --------- --------- --------- ---------
Net cash provided (used) by operating
activities 12,576 15,120 15,811 43,507
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases and originations of auto
receivables (593,360) (553,832) 553,832 (593,360)
Purchases and originations of
mortgage receivables (31,822) (31,822)
Principal collections and recoveries on
finance receivables 17,016 32,980 49,996
Net proceeds from sale of auto receivables 553,832 524,197 (553,832) 524,197
Net proceeds from sale of mortgage receivables 27,424 27,424
Purchases of property and equipment (48) (3,090) (3,138)
Proceeds from disposition of property
and equipment 17 17
Proceeds from maturities of investment
securities 58 58
Increase in restricted cash (44,988) (44,988)
Net change in investment in affiliates 4,359 (4,359)
--------- --------- --------- --------- ---------
Net cash used by investing
activities 4,369 (34,342) (41,643) (71,616)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 494,700 494,700
Payments on bank line of credit (551,500) (551,500)
Net increase in mortgage warehouse facility (607) (607)
Proceeds from 9 1/4% Senior Notes 120,894 120,894
Payments on automobile receivables-
backed notes (32,955) (32,955)
Payments on notes payable (404) (404)
Net change in due (to) from affiliates (132,678) 72,528 60,150
Proceeds from issuance of common stock 4,543 4,543
Purchase of treasury stock (4,387) (4,387)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities (12,032) 15,121 27,195 30,284
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 4,913 (4,101) 1,363 2,175
Cash and cash equivalents at beginning of
period (4,913) (87) 7,145 2,145
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ $ (4,188) $ 8,508 $ $ 4,320
========= ========= ========= ========= =========
15
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Nine Months Ended March 31, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Cash flow from operating activities:
Net income $ 14,418 $ 9,458 $ 8,430 $ (17,888) $ 14,418
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 114 1,040 1,154
Provision for losses 6,111 6,111
Deferred income taxes 7,245 7,245
Gain on sale of receivables (13,346) (13,346)
Amortization of excess servicing
receivable 1,887 1,887
Equity in income of affilities (17,888) 17,888
Changes in assets and liabilities:
Other assets 803 (546) 287 544
Accrued taxes and expenses (396) 1,735 (394) 945
--------- --------- --------- --------- ---------
Net cash provided by operating
activities 4,296 6,339 8,323 18,958
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases and originations of auto
receivables (271,626) (153,277) 153,277 (271,626)
Principal collections and recoveries on
finance receivables 24,602 48,560 73,162
Net proceeds from sale of auto receivables 153,277 153,277 (153,277) 153,277
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
Proceeds from maturities of investment
securities 3,425 3,425
Increase in restricted cash (4,705) (4,705)
Net change in investment in affiliates (13,221) 13,218 3
--------- --------- --------- --------- ---------
Net cash used by investing
activities (7,362) (85,072) 43,858 (48,576)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 219,400 219,400
Payments on bank line of credit (147,600) (147,600)
Payments on automobile receivables-
backed notes (51,484) (51,484)
Payments on notes payable (230) (230)
Net change in due (to) from affiliates (10,290) 11,869 (1,579)
Proceeds from issuance of common stock 1,859 1,859
Purchase of treasury stock (9,057) (9,057)
--------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities (17,718) 83,669 (53,063) 12,888
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (20,784) 4,936 (882) (16,730)
Cash and cash equivalents at beginning of
period 17,187 (6,394) 7,521 18,314
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ (3,597) $ (1,458) $ 6,639 $ $ 1,584
========= ========= ========= ========= =========
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 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. The Company generates
finance charge income on its owned receivables pending securitization and pays
interest expense on borrowings under its bank line of credit.
The Company sells receivables to securitization trusts ("Trusts") or special
purpose finance subsidiaries that, in turn sell asset-backed securities to
investors. By securitizing these receivables, the Company is able to lock in the
gross interest rate spread between the yield on such receivables and the
interest rate paid 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 excess cash flow distributions are received from
the Trusts resulting 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 losses and expenses.
The Company typically begins to receive excess cash flow distributions
approximately five to seven 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 base servicing fees of between 2.25% and
2.50% per annum of the outstanding principal balance of receivables securitized.
In November 1996, the Company acquired Rancho Vista Mortgage Company ("RVMC"),
which originates and sells home equity mortgage loans. The name of RVMC has been
changed to Americredit Corporation of California. The acquisition has
17
been accounted for as a purchase and the results of operations for RVMC
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.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 as compared to
Three Months Ended March 31, 1996
Revenue:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
Three Months Ended
March 31,
-------------------
1997 1996
---- ----
Auto:
Owned $247,091 $264,695
Serviced 593,973 112,387
------- -------
841,064 377,082
Mortgage 9,020
Other 141
------- -------
$850,084 $377,223
======= =======
Average managed receivables outstanding increased by 125% as a result of higher
loan purchase volume. The Company purchased $244.5 million of auto loans during
the three months ended March 31, 1997, compared to purchases of $122.7 million
during the three 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.
18
The Company purchased $24.1 million of mortgage loans during the three months
ended March 31, 1997.
The Company's finance charge income consisted of the following (in thousands):
Three Months Ended
March 31,
------------------
1997 1996
---- ----
Auto $ 11,844 $ 12,647
Mortgage 257
Other 3
------- -------
$ 12,101 $ 12,650
======= =======
The decrease in finance charge income is due to a reduction of 7% in average
owned auto receivables outstanding for the three months ended March 31, 1997
versus the three months ended March 31, 1996.
The Company's effective yield on its owned auto receivables increased to 19.4%
from 19.2%.
The gain on sale of receivables consists of the following (in thousands):
Three Months Ended
March 31,
------------------
1997 1996
---- ----
Auto $16,457 $ 7,725
Mortgage 1,300
------- -------
$17,757 $ 7,725
======= =======
The increase in gain on sale of auto receivables resulted from the sale of
$208.3 million of receivables in the three months ended March 31, 1997 as
compared to $89.4 million of receivables sold in the three months ended March
31, 1996. The gains amounted to 7.9% and 8.6% of the sales proceeds for the
three months ended March 31, 1997 and 1996, respectively.
The gain on sale of mortgage receivables resulted from the sale of $22.6 million
of mortgage receivables.
19
Servicing fee income increased to $5.6 million or 3.9% of average serviced auto
receivables, for the three months ended March 31, 1997, as compared to $1.1
million or 3.9% of average serviced auto receivables, for the three 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 three months ended March 31, 1997 compared to the three
months ended March 31, 1996.
Investment income increased to $799,000 for the three months ended March 31,
1997 from $280,000 for the three 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% (6.2% excluding operating expenses of $1,053,000
related to the mortgage business) for the three months ended March 31, 1997 as
compared to 7.3% for the three 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 $6.9 million, or 100%,
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 $1.8 million for the three months ended
March 31, 1997 as compared to $2.0 million for the three months ended March 31,
1996. Further discussion concerning the provision for losses is included under
the caption, "Finance Receivables".
Interest expense increased to $4.6 million for the three months ended March 31,
1997 from $3.3 million for the three months ended March 31, 1996 due to higher
debt levels and effective rates of interest. Average debt outstanding was $208.2
million and $166.3 million for the three months ended March 31, 1997 and 1996,
respectively. The Company's effective rate of interest paid on its debt
increased to 9.0% from 7.9% as a result of the issuance of the 9 1/4% Senior
Notes in February 1997.
The Company's effective income tax rate increased to 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, 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. The calculation of excess servicing receivable includes an
allowance for estimated future losses over the remaining term of the auto
receivables sold to the Trusts and serviced by the Company.
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, 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 receivables portfolio.
24
The following table presents certain data related to the receivables portfolio
(dollars in thousands):
March 31,
1997
---------------------------------------------------------
Balance
Auto Sheet Auto Total
Owned Mortgage Total Serviced Portfolio
----- -------- ----- -------- ---------
Principal amount of receivables $250,764 $ 7,610 $258,374 $676,891 $935,265
======== ========
Allowance for losses (13,233) (13,233) $(61,217)(1) $(74,450)
------- -------- ------- ======== ========
Finance receivables, net $237,531 $ 7,610 $245,141
======== ======= ========
Number of outstanding contracts 25,650 92 69,221 94,871 (2)
======== ======= ======== ========
Average amount of outstanding
contract (principal amount)
(in dollars) $ 9,776 $82,717 $ 9,779 $ 9,778 (2)
======== ======= ======== ========
Allowance for losses as a percentage
of receivables 5.3% 9.0% 8.0%(2)
=== === ===
(1) The allowance for losses related to serviced auto receivables is netted
against excess servicing receivable in the Company's consolidated balance
sheets.
(2) Includes auto receivables only.
The following is a summary of managed auto receivables which are more than 60
days delinquent (dollars in thousands):
March 31,
-------------------
1997 1996
---- ----
Delinquent contracts $29,484 $13,593
Delinquent contracts as a percentage
of managed auto receivables 3.2% 3.2%
25
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Net charge-offs:
Owned $3,829 $4,958 $12,894 $13,139
Serviced 7,506 285 16,190 319
------ ------ ------ ------
$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 automobile finance business in September 1992 and the
Company has grown its managed auto receivables portfolio to $927.7 million as of
March 31, 1997. The Company expects that its delinquency and charge-offs will
increase over time as the portfolio matures and its receivables growth rate
moderates. Accordingly, the delinquency and charge-off data above is not
necessarily indicative of delinquency and charge-off experience that could be
expected for a more seasoned portfolio.
26
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
Nine Months Ended
March 31,
-------------------
1997 1996
---- ----
Operating activities $43,507 $18,958
Investing activities (71,616) (48,576)
Financing activities 30,284 12,888
------- -------
Net 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.
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
mortgage warehouse facility, the issuance of automobile receivables-backed
securities in securitization transactions and excess cash flow distributions
from the Trusts.
The Company's bank line of credit arrangement with a group of banks provides for
borrowings up to $240 million, subject to a defined borrowing base. The facility
matures in October 1997. The Company utilizes the line of credit to fund its
daily auto lending activities and operations. A total of $29.2 million was
outstanding under the line of credit as of March 31, 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, 1997, the Company entered into 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 required to pay an annual
commitment fee equal to 1/8% of the unused portion of the facility. The facility
expires in February 1998. A total of $2.7 million was outstanding under the
mortgage warehouse facility as of March 31, 1997.
In March 1997, the Company completed its eighth securitization transaction with
the issuance of $225 million of automobile receivables-backed securities through
the AmeriCredit Automobile Receivables Trust 1997-A. 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 million of auto finance contracts
during the nine months ended March 31, 1997 requiring cash of $593.4 million,
net of acquisition fees and other factors. The Company operated 79 auto lending
branch offices as of March 31, 1997. The Company plans to open six branches in
the remainder of fiscal 1997 and forty branches in fiscal 1998. The company may
also expand loan production capacity at existing offices where appropriate.
While the Company has been able to establish and grow its 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 4,594,700 shares at
an aggregate purchase price of $27.3 million had been purchased pursuant to this
program through March 31, 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.
As of March 31, 1997, the Company had $10.8 million in cash and cash equivalents
and investment securities. The Company also had available borrowing capacity of
$123.9 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 1997 in addition to
these existing capital resources, 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,
capital expenditures, and other costs and expenses.
28
The Company anticipates that such funding may be in the form of additional
securitization transactions and implemention of other warehouse financing
facilities. There can be no assurance that funding will be available to the
Company through these sources, or if available, that it will be on terms
acceptable to the Company.
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 uses several
strategies to minimize the risk of interest rate fluctuations including the use
of hedging instruments, the regular sale of finance 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 loans 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.
29
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, 1997.
Certain subsidiaries and affiliates of the Company
filed monthly reports on Form 8-K during the
quarterly period ended March 31, 1997 reporting
information related to securitization trusts.
30
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, 1997 By: /s/ Daniel E. Berce
---------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
31