CORPORATE PROFILE
AmeriCredit Corp. is a national consumer finance company specializing in
purchasing, securitizing and servicing automobile loans and originating and
selling home equity loans. The Company is headquartered in Fort Worth,
Texas, and its common shares are traded on the New York Stock Exchange.
Through its AmeriCredit Financial Services branch network, the Company
purchases loans made by franchised and select independent dealers to
consumers buying late model used, and to a lesser extent, new automobiles.
The Company targets borrowers who are typically unable to obtain financing
from traditional sources. Funding for the Company's auto lending activities
is obtained primarily through the sale of loans in securitization
transactions. The Company services its automobile loan portfolio at regional
centers, using automated loan servicing and collection systems. The
Company's AmeriCredit Mortgage Services operation originates home equity
loans and sells the loans and related servicing rights in the wholesale
markets.
1
LETTER TO SHAREHOLDERS
AmeriCredit Corp. posted record operating results and strong receivables
growth, while maintaining stable credit quality in the fiscal year ended June
30, 1997. Our successful performance in fiscal 1997 was the cumulative result
of the disciplines and strategies we adopted and have adhered to over the
last five years. Development of empirical models, such as credit scorecards,
application of leading edge technology and maintenance of a solid
infrastructure staffed by skilled people have differentiated AmeriCredit and
allowed us to prosper in a very competitive environment. With further plans
to strengthen these core competencies, AmeriCredit remains well positioned to
capture an increasing share of the growing sub-prime auto finance market.
FISCAL 1997 RESULTS
AmeriCredit earned a record $38.7 million in fiscal 1997, an increase of 79%
over net income of $21.6 million for fiscal 1996. On a per share basis, the
Company earned $1.26 for fiscal 1997, up 77% over earnings per share of $0.71
last year. These record operating results were driven by strong portfolio
growth and our risk management efforts.
RECEIVABLES GROWTH
AmeriCredit attained growth of 117% in managed auto receivables for fiscal
1997, increasing the portfolio to $1,138.3 million at June 30, 1997 from
$524.0 million at June 30, 1996. We purchased $906.8 million of new loans in
fiscal 1997, up 110% compared to loan originations of $432.4 million for
fiscal 1996. Our loan volumes benefited from new branch openings in fiscal
1997 as well as higher average new loan production from existing branch
locations.
We recently concluded our annual dealer marketing survey which is conducted
by an independent marketing research firm. The current survey indicates that
automobile dealers continue to place the highest values on price, service and
consistency when selecting a sub-prime finance source. Our ratings in each
of these crucial categories improved from the last round of research with
dealers increasingly citing AmeriCredit as one of the best in consistency of
approvals and declines, immediate response times and competitive programs.
Our ability to increase our dealer base supports these findings as
AmeriCredit purchased loans from 5,657 dealers in fiscal 1997, up 73% from
3,262 dealers last year. Most importantly, 85% of the automobile dealers
surveyed expect to increase their volume of sub-prime finance activity over
the next two years and over half expect to do more business with AmeriCredit.
2
BRANCH EXPANSION
AmeriCredit opened 34 branches in fiscal 1997, and at June 30, 1997, had a
total of 85 auto lending offices located in 30 states. We were doing
business in 45 states at fiscal year end.
We are comfortable opening 40 new branches in fiscal 1998 based on the
success of our previous expansion efforts and demonstrated ability to
attract, develop and retain quality personnel. Our largest source of new
branch managers is now promotions from within AmeriCredit, attesting to the
effectiveness of our training programs.
Additionally, our infrastructure has again been augmented to accommodate
growth. We recently relocated our Fort Worth customer service center to a
larger site and opened a third facility in Charlotte. These customer service
centers, along with our Tempe location, provide adequate capacity to handle
our expected portfolio growth through fiscal 1998.
RISK MANAGEMENT AND PORTFOLIO PERFORMANCE
New account credit scoring used in conjunction with risk based pricing models
are key components of our credit origination process. While these tools have
proven to be very effective, it is the development and integration of a
comprehensive risk management effort that makes AmeriCredit unique in the
sub-prime auto finance sector. Detailed information reporting, proprietary
data bases, behavioral scorecards, residual value monitoring and static pool
analysis are among the wide array of risk management techniques we employ.
It is the execution of all of these strategies that have enabled AmeriCredit
to report favorable portfolio performance.
Net charge-offs represented 5.5% of average managed auto receivables for
fiscal 1997, down from net charge-offs of 5.6% of the average portfolio for
fiscal 1996. In fact, our annualized net charge-off rate for each quarter of
fiscal 1997 was 5.5%. Accounts more than sixty days past due were 3.2% of
the portfolio at June 30, 1997, compared to 3.1% at June 30, 1996.
Even with the success of our current risk management platform, we are
constantly striving to improve our tools. During fiscal 1997, we implemented
an additional scorecard for accounts with limited credit bureau history in
order to minimize risk associated with that segment of the applicant
population. Additionally, we recently completed another scorecard aimed at
identifying accounts with high bankruptcy potential. As the size and
diversity of our portfolio increases, we plan to develop further enhancements
in our credit scoring models.
3
TECHNOLOGY AND EFFICIENCY
Our extensive use of technology and scale of operations have enabled
AmeriCredit to be a low cost provider in our markets. AmeriCredit's ratio of
operating expenses to average managed auto receivables decreased to 6.2% for
fiscal 1997 from 7.2% for fiscal 1996. We expect this ratio to decrease
further as we benefit from continued portfolio growth and new systems
developments planned for fiscal 1998.
We are midway through a two year project to implement Fair Isaac & Co.,
Inc.'s Triad Account Management System. Once integrated into our automated
collection system, Triad will facilitate multiple collection strategies based
on behavioral assessment at the account level. In addition, vendor selection
is currently being finalized for a new automated application processing
system to replace our existing version. AmeriCredit is committed to
remaining at the forefront of consumer finance technology.
DIVERSIFICATION
In November 1996, AmeriCredit acquired a small home equity lender in exchange
for 400,000 shares of our common stock. This acquisition provides us an
entry into another lending business similar in market size and potential
returns to auto finance. Our current focus is on building infrastructure and
risk management capabilities, a process which could take the better part of
fiscal 1998. We do not plan to expand this business until the appropriate
people, processes and systems are in place.
FINANCE ACTIVITY
AmeriCredit's growth creates the need for additional capital from both
existing and new sources. We continued to access the securitization market
as our primary source of capital in fiscal 1997, raising $850 million in four
transactions. Investor recognition of AmeriCredit as a quality issuer of
asset-backed securities and larger transaction sizes have resulted in reduced
overall funding costs for the Company.
Early in fiscal 1997, we expanded our bank line of credit, which we use to
warehouse auto receivables pending securitization, to $240 million. We plan
to renew this facility in fiscal 1998 and implement additional warehouse
capacity through participation in the asset-backed commercial paper market.
Finally, we issued $125 million of senior unsecured notes in February 1997 to
supplement our strong equity capitalization. These notes, which are rated by
three of the major credit rating agencies, bear interest at 9 1/4% per year
and are due in 2004.
4
OUTLOOK
AmeriCredit's prospects for fiscal 1998 and beyond are bright. The auto
finance sector in which we compete is still large and highly fragmented and
offers attractive fundamentals. Several factors are driving strong growth in
our industry. Used car demand is being positively influenced by better
product quality and availability and the inability of many consumers to
afford a new car. In addition, more Americans are becoming sub-prime credit
applicants as overall consumer delinquencies and bankruptcies rise. The
competitive environment for sub-prime auto finance has also improved. Many
of our competitors have been weakened by deteriorating credit quality and
finances, encouraging dealers to seek consistent, stable lenders.
AmeriCredit has the ability to capitalize on these dynamics and become the
dominant player in sub-prime auto finance.
We are grateful for the interest, support and loyalty of all of our
employees, customers and shareholders.
Sincerely,
Clifton H. Morris, Jr.
Chairman of the Board and
Chief Executive Officer
September 12, 1997
5
AMERICREDIT CORP.
SUMMARY FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Years Ended
------------------------------------------------------------------------
June 30, June 30, June 30, June 30, June 30,
1997 1996 1995 (a) 1994 1993 (b)
---- ---- ---- ---- ----
OPERATING DATA:
Finance charge income $ 44,910 $ 51,706 $ 30,249 $ 12,788 $ 13,904
Gain on sale of receivables 67,256 22,873
Servicing fee income 21,024 3,712
Income (loss) before
income taxes 62,925 34,256 10,018 5,065 (19,366)
Net income (loss) 38,699 21,591 28,893 5,065 (19,366)
Earnings (loss) per
share 1.26 .71 .95 .16 (.66)
Weighted average shares
and share equivalents 30,782,471 30,203,298 30,380,749 31,818,083 29,267,419
June 30, June 30, June 30, June 30, June 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Cash and cash equivalents
and investment
securities $ 80,422 $ 24,007 $ 33,586 $ 42,262 $ 68,425
Finance receivables,
net 266,657 250,484 221,888 72,150 43,889
Excess servicing
receivable 114,376 33,093
Total assets 493,453 330,159 285,725 122,215 131,127
Total liabilities 276,917 166,934 138,499 2,714 8,343
Shareholders' equity 216,536 163,225 147,226 119,501 122,784
Managed auto receivables 1,138,255 523,981 240,491 67,636 15,964
(a) As further described in the Financial Review, the Company recognized an
income tax benefit in fiscal 1995 equal to the expected future tax savings
from using its net operating loss carryforward and other future tax
benefits.
(b) The Company withdrew from the retail used car sales business effective
December 31, 1992.
6
AMERICREDIT LOCATIONS (as of June 30, 1997)
State City
- ----- ----
AUTOMOBILE FINANCE BRANCHES:
Arizona Phoenix, Tucson
California San Francisco, Los Angeles, Concord, Sacramento, Pasadena,
Irvine, San Diego, Encino, Stockton, Riverside, San Jose,
Fresno
Colorado Colorado Springs, Denver
Florida Fort Lauderdale, Orlando, Jacksonville, Tampa
Georgia Atlanta (3)
Illinois Chicago (4), Springfield
Indiana Indianapolis
Kentucky Louisville
Maryland Baltimore (2)
Massachusetts Boston
Michigan Detroit (2), Grand Rapids
Minnesota Minneapolis
Missouri Kansas City, St. Louis (2)
Nevada Las Vegas
New Jersey Somerset, Tinton Falls, Marlton, Paramus
New Mexico Albuquerque
New York Albany, White Plains, Rochester, Buffalo, Syracuse
North Carolina Raleigh, Winston-Salem, Charlotte
Ohio Cleveland, Akron, Dayton, Cincinnati, Columbus
Oklahoma Oklahoma City
Oregon Portland
Pennsylvania Pittsburgh, Allentown, Harrisburg, Philadelphia
Rhode Island Providence
South Carolina Columbia, Charleston
Tennessee Nashville, Memphis
Texas Austin, Houston (2), San Antonio, Dallas, Fort Worth
Utah Salt Lake City
Virginia Norfolk, Fredericksburg, Richmond, Arlington, Newport News
Washington Seattle, Tacoma
Wisconsin Milwaukee
AUTOMOBILE LOAN SERVICING CENTERS:
Arizona Tempe
Texas Fort Worth
HOME EQUITY LENDING:
California Orange
7
FINANCIAL REVIEW
GENERAL
The Company generates earnings and cash flow primarily through the purchase,
securitization and servicing of auto receivables. The Company purchases auto
finance contracts from franchised and select independent automobile
dealerships. To fund the acquisition of receivables prior to securitization,
the Company utilizes borrowings under its bank line of credit. The Company
generates finance charge income on its receivables pending securitization
("owned receivables") and pays interest expense on borrowings under the 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 its receivables, the Company is able to lock in
the gross interest rate spread between the yield on such receivables and the
interest rate payable on the asset-backed securities. The Company recognizes
a gain on the sale of receivables to the Trusts which represents the
difference between the sale proceeds to the Company, net of transaction
costs, and the Company's net carrying value of the receivables, plus the
present value of the estimated future excess cash flows to be received by the
Company over the life of the securitization. Excess cash flows result from
the difference between the interest received from the obligors on the
receivables and the interest paid to investors in the asset-backed
securities, net of credit losses and expenses.
The Company typically begins to receive excess cash flow distributions
approximately seven to nine 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 monthly servicing fee
income of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized ("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS",
formerly Rancho Vista Mortgage Company), which originates and sells home
equity loans. The acquisition was accounted for as a purchase and the
results of operations for AMS have been included in the consolidated
financial statements since the acquisition date. Receivables originated in
this business are referred to as mortgage receivables. Such receivables are
generally packaged
8
and sold 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
formerly 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
YEAR ENDED JUNE 30, 1997 AS COMPARED TO
YEAR ENDED JUNE 30, 1996
REVENUE:
The Company's average managed receivables outstanding consisted of the
following (in thousands):
Years Ended
June 30,
-----------------------------
1997 1996
---- ----
Auto:
Owned $223,351 $261,776
Serviced 568,804 96,190
-------- --------
792,155 357,966
Mortgage 8,187
Other 443
-------- --------
$800,342 $358,409
-------- --------
-------- --------
Average managed receivables outstanding increased by 123% as a result of
higher loan purchase volume. The Company purchased $906.8 million of auto
loans during fiscal 1997, compared to purchases of $432.4 million during
fiscal 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 85 auto lending branch offices as of June 30,
1997, compared to 51 as of June 30, 1996.
The Company purchased $53.8 million of mortgage loans from the date of
acquisition of AMS through June 30, 1997.
9
Finance charge income consisted of the following (in thousands):
Years Ended
June 30,
---------------------------
1997 1996
---- ----
Auto $ 44,417 $ 51,679
Mortgage 493
Other 27
-------- --------
$ 44,910 $ 51,706
-------- --------
-------- --------
The decrease in finance charge income is due to a reduction of 15% in average
owned auto receivables outstanding for fiscal 1997 versus fiscal 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 receivables increased to
19.9% for fiscal 1997 from 19.7% for fiscal 1996.
The gain on sale of receivables consisted of the following (in thousands):
Years Ended
June 30,
---------------------------
1997 1996
---- ----
Auto $ 64,338 $ 22,873
Mortgage 2,918
-------- --------
$ 67,256 $ 22,873
-------- --------
-------- --------
The increase in gain on sale of auto receivables resulted from the sale of
$817.5 million of receivables in fiscal 1997 as compared to $270.4 million of
receivables sold in fiscal 1996. The gains amounted to 7.9% and 8.5% of the
sales proceeds for fiscal 1997 and 1996, respectively.
The gain on sale of mortgage receivables resulted from the sale of $52.5
million of mortgage receivables.
Servicing fee income increased to $21.0 million or 3.7% of average serviced
auto receivables, for fiscal 1997, as compared to $3.7 million or 3.9% of
average serviced auto receivables, for fiscal 1996. Servicing fee income
10
represents accretion of the present value discount on estimated future excess
cash flows from the Trusts, base servicing fees and other fees earned by the
Company as servicer of the auto receivables sold to the Trusts. The growth
in servicing fee income is primarily due to the increase in average serviced
auto receivables outstanding for fiscal 1997 compared to fiscal 1996.
Investment income rose to $2.9 million for fiscal 1997 from $1.1 million for
fiscal 1996 primarily as a result of higher restricted cash balances.
Restricted cash is used as credit enhancement for the Trusts and increases as
greater amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES:
Operating expenses as a percentage of average managed receivables outstanding
decreased to 6.6% (6.2% excluding operating expenses of $2.6 million related
to the mortgage business) for fiscal 1997 as compared to 7.2% for fiscal
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 $26.2 million, or 102%, 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 $6.6 million for fiscal 1997 from $7.9
million for fiscal 1996 due to lower average owned auto receivables
outstanding.
Interest expense increased to $16.3 million for fiscal 1997 from $13.1
million for fiscal 1996 due to higher debt levels and effective interest
rates. Average debt outstanding was $187.6 million and $156.4 million for
fiscal 1997 and 1996, respectively. The Company's effective rate of interest
paid on its debt increased to 8.7% from 8.4% 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 fiscal 1997
from 37.0% for fiscal 1996 due to a larger portion of the Company's income
being generated in states which have higher tax rates.
11
YEAR ENDED JUNE 30, 1996 AS COMPARED TO
YEAR ENDED JUNE 30, 1995
REVENUE:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
Years Ended
June 30,
------------------------------
1996 1995
-------- --------
Auto:
Owned $261,776 $141,526
Serviced 96,190
-------- --------
357,966 141,526
Other 443 6,918
-------- --------
$358,409 $148,444
-------- --------
-------- --------
Average managed receivables outstanding increased by 141% as a result of higher
loan purchase volume. The Company purchased $432.4 million of auto loans during
fiscal 1996, compared to purchases of $230.2 million during fiscal 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 51 auto lending branch offices as of June 30, 1996, compared to 31 as
of June 30, 1995.
Finance charge income consisted of the following (in thousands):
Years Ended
June 30,
-----------------------------
1996 1995
------- -------
Auto $51,679 $29,039
Other 27 1,210
------- -------
$51,706 $30,249
------- -------
------- -------
The rise in finance charge income is due to an increase of 85% in average owned
auto receivables outstanding for fiscal 1996 versus fiscal 1995. The Company's
effective yield on its owned auto receivables decreased to 19.7% from 20.5%.
The gain on sale of receivables of $22.9 million in fiscal 1996 resulted from
the sale of $270.4 million of auto receivables to the Trusts. The gain amounted
to 8.5% of the sales proceeds. The Company's asset-backed securities
transactions in fiscal 1995 were structured as debt issuances by subsidiaries of
the Company and thus were accounted for as borrowings on the Company's
consolidated balance sheets rather than as sales of receivables.
12
Servicing fee income of $3.7 million in fiscal 1996 represents accretion of the
present value discount on estimated future excess cash flows from the Trusts,
base servicing fees and other fees earned by the Company as servicer of the auto
receivables sold to the Trusts.
COSTS AND EXPENSES:
Operating expenses as a percentage of average managed receivables outstanding
decreased to 7.2% for fiscal 1996 as compared to 10.0% for fiscal 1995. The
ratio improved as a result of economies of scale realized from a growing
receivables portfolio and automation of loan origination, processing and
servicing functions. The dollar amount of operating expenses increased by $10.9
million, or 74%, primarily due to the addition of auto lending branch offices
and management and auto loan processing and servicing staff.
The provision for losses increased to $7.9 million for fiscal 1996 from $4.3
million for fiscal 1995 due to higher average owned auto receivables
outstanding.
Interest expense increased to $13.1 million for fiscal 1996 from $4.0 million
for fiscal 1995 due to the higher debt levels necessary to fund the Company's
increased loan origination volume.
The provision for income taxes in fiscal 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 an
income tax benefit and a corresponding deferred tax asset equal to the expected
future tax savings from using its net operating loss carryforward and other
future tax benefits. The deferred tax asset is 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. 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 fiscal 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 sheets as a reserve against estimated future losses in the
owned auto receivables portfolio. The Company typically purchases individual
finance contracts for a non-refundable acquisition fee on a non-recourse basis.
Such acquisition fees are also recorded in the consolidated balance sheets as an
allowance for losses. When the Company sells auto receivables to the Trusts,
the calculation of the gain on sale of receivables is reduced by an
13
estimate of future credit losses over the expected life of the auto
receivables sold.
The Company sells mortgage receivables for cash on a servicing released, whole-
loan basis. Such receivables are generally held by the Company for less than 90
days. Accordingly, no allowance for losses has been provided by the Company for
the mortgage receivables.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports, estimates
of the value of the underlying collateral, economic conditions and trends and
other information in order to make the necessary judgments as to the
appropriateness of the provisions for losses and the allowance for losses.
Although the Company uses many resources to assess the adequacy of the allowance
for losses, there is no precise method for accurately estimating the ultimate
losses in the receivables portfolio.
14
The following table presents certain data related to the receivables portfolio
(dollars in thousands):
June 30,
1997
--------------------------------------------------------
Balance
Auto Sheet Auto Managed
Owned Mortgage Total Serviced Portfolio
-------- -------- -------- -------- ----------
Principal amount of receivables $275,249 $ 4,354 $279,603 $863,006 $1,138,255 (2)
-------- ----------
-------- ----------
Allowance for losses (12,946) (12,946) $(74,925)(1) $ (87,871)(2)
-------- ------- -------- -------- ----------
-------- ----------
Finance receivables, net $262,303 $ 4,354 $266,657
-------- ------- --------
-------- ------- --------
Number of outstanding contracts 25,757 48 87,090 112,847 (2)
-------- ------- -------- ----------
-------- ------- -------- ----------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 10,686 $90,708 $ 9,909 $ 10,087 (2)
-------- ------- -------- ----------
-------- ------- -------- ----------
Allowance for losses as a
percentage of receivables 4.7% 8.7% 7.7%(2)
-------- -------- ----------
-------- -------- ----------
June 30,
1996
-----------------------------------
Auto Auto Managed
Owned Serviced Portfolio
-------- -------- ---------
Principal amount of receivables $264,086 $259,895 $523,981
-------- --------
-------- --------
Allowance for losses (13,602) $(25,616)(1) $(39,218)
-------- -------- --------
-------- --------
Finance receivables, net $250,484
--------
--------
Number of outstanding contracts 30,366 29,547 59,913
-------- -------- --------
-------- -------- --------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 8,697 $ 8,796 $ 8,746
-------- -------- --------
-------- -------- --------
Allowance for losses as a
percentage of receivables
5.2% 9.9% 7.5%
-------- -------- --------
-------- -------- --------
(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.
15
The following is a summary of managed auto receivables which are (i) more than
60 days delinquent, but not yet in repossession, and (ii) in repossession
(dollars in thousands):
June 30, June 30,
1997 1996
-------- -------
Delinquent contracts $ 36,421 $16,207
Delinquent contracts as a
percentage of managed auto
receivables 3.2% 3.1%
Contracts in repossession $ 14,471 $ 6,751
Contracts in repossession as a percentage
of managed auto receivables 1.3% 1.3%
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
Years Ended
June 30,
----------------------------
1997 1996 1995
------- ------- ------
Net charge-offs:
Owned $16,965 $18,322 $6,409
Serviced 26,266 1,652
------- ------- ------
$43,231 $19,974 $6,409
------- ------- ------
------- ------- ------
Net charge-offs as a percentage
of average managed auto
receivables outstanding 5.5% 5.6% 4.5%
------- ------- ------
------- ------- ------
The Company began its indirect automobile finance business in September 1992 and
has grown its managed auto receivables portfolio to $1.1 billion as of June 30,
1997. The Company expects that its delinquency and charge-offs will increase
over time as the portfolio matures and its portfolio growth rate moderates.
Accordingly, the delinquency and charge-off data above is not necessarily
indicative of delinquency and charge-off experience that could be expected for a
more seasoned portfolio.
16
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
Years Ended
June 30,
----------------------------------
1997 1996 1995
--------- -------- ---------
Operating activities $ 66,132 $ 34,897 $ 14,637
Investing activities (123,076) (63,116) (144,512)
Financing activities 60,826 12,050 132,433
--------- -------- ---------
Net increase (decrease) in
cash and cash equivalents $ 3,882 $(16,169) $ 2,558
--------- -------- ---------
--------- -------- ---------
The Company's primary sources of cash have been collections and recoveries on
its receivables portfolio, borrowings under its bank line of credit, sales of
auto receivables to Trusts in securitization transactions, excess cash flow
distributions from the Trusts and the issuance of its 9 1/4% Senior Notes.
The Company's line of credit arrangement with a group of banks provides for
borrowings up to $240 million, subject to a defined borrowing base. The Company
utilizes the line of credit to fund its auto lending activities and daily
operations. The facility matures in October 1997. A total of $71.7 million was
outstanding under the line of credit as of June 30, 1997.
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, to
fund home equity loan originations. The facility expires in February 1998. A
total of $345,000 was outstanding under the mortgage warehouse facility as of
June 30, 1997.
The Company has completed nine auto receivables securitization transactions
through June 30, 1997. The proceeds from the transactions were used in each
case to repay a portion of the borrowings then outstanding under the Company's
bank line of credit.
17
A summary of these transactions is as follows:
Original Balance at
Amount June 30, 1997 Accounting
Transaction Date (in millions) (in millions) Treatment
- ----------- ---- ------------ ------------- ----------
1994-A December 1994 $ 51.0 $ 0 Borrowing
1995-A June 1995 99.2 23.7 Borrowing
1995-B December 1995 65.0 25.0 Sale
1996-A March 1996 89.4 44.7 Sale
1996-B May 1996 115.9 72.7 Sale
1996-C August 1996 175.0 116.3 Sale
1996-D November 1996 200.0 159.0 Sale
1997-A March 1997 225.0 208.2 Sale
1997-B May 1997 250.0 245.5 Sale
-------- ------
$1,270.5 $895.1
-------- ------
-------- ------
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes which
are due in February 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 Company's primary use of cash has been purchases and originations of
receivables. The Company purchased $906.8 million of auto finance contracts
during fiscal 1997 requiring cash of $896.7 million, net of acquisition fees and
other items. The Company operated 85 auto lending branch offices as of June 30,
1997 and plans to open forty additional 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 auto finance business
thus far, there can be no assurance that future expansion will be successful due
to competitive, regulatory, market, economic or other factors.
The Company's Board of Directors has authorized the repurchase of up to
6,000,000 shares of the Company's common stock. A total 4,594,700
shares at an aggregate purchase price of $27.4 million had been purchased
pursuant to this program through June 30, 1997. Certain restrictions contained
in the Indenture pursuant to which the 9 1/4% Senior Notes were issued limit the
amount of common stock which may be repurchased.
As of June 30, 1997, the Company had $12.5 million in cash and cash equivalents
and investment securities. The Company also had available borrowing capacity of
$110.7 million under its bank line of credit pursuant to the borrowing base
requirement of such credit agreement. The Company estimates that it will
require additional external capital for fiscal 1998 in addition to these
existing capital resources and collections and recoveries on its receivables
18
portfolio and excess cash flow distributions from the Trusts in order to fund
expansion of its lending activities, capital expenditures, and other costs and
expenses.
The Company anticipates that such funding will be in the form of additional
securitization transactions, renewal of its bank line of credit, the
implementation of other warehouse financing facilities and the incurrence of
other debt. There can be no assurance that funding will be available to the
Company through these sources, or if available, that it will be on terms
acceptable to the Company.
Since the Company's funding strategy is dependent upon the issuance of interest-
bearing securities and the incurrence of debt, fluctuations in interest rates
impact the Company's profitability. The Company utilizes several strategies to
minimize the risk of interest rate fluctuations including the use of hedging
instruments, the regular sale of auto receivables to the Trusts and pre-funding
securitizations, whereby the amount of asset-backed securities issued in a
securitization exceeds the amount of receivables initially sold to a Trust. The
proceeds from the pre-funded portion are held in an escrow account until the
Company sells additional receivables to the Trust in amounts up to the balance
of the pre-funded escrow account. In pre-funded securitizations, the Company
locks in the borrowing costs with respect to the loans it subsequently delivers
to the Trust. However, the Company incurs an expense in pre-funded
securitizations equal to the difference between the money market yields earned
on the proceeds held in escrow prior to subsequent delivery of receivables and
the interest rate paid on the asset-backed securities outstanding. There can be
no assurance that these strategies will be effective in minimizing interest rate
risk or that increases in interest rates will not have an adverse effect on the
Company's profitability.
19
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
June 30, June 30,
1997 1996
--------- ---------
Cash and cash equivalents $ 6,027 $ 2,145
Investment securities 6,500 6,558
Finance receivables, net 266,657 250,484
Excess servicing receivable 114,376 33,093
Restricted cash 67,895 15,304
Property and equipment, net 13,884 7,670
Goodwill 7,260
Other assets 10,854 4,910
Deferred income taxes 9,995
-------- --------
Total assets $493,453 $330,159
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ 71,700 $ 86,000
Mortgage warehouse facility 345
Automobile receivables-backed notes 23,689 67,847
9 1/4% Senior Notes 125,000
Notes payable 3,517 418
Accrued taxes and expenses 39,362 12,669
Deferred income taxes 13,304
-------- --------
Total liabilities 276,917 166,934
-------- --------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.01 par value per share,
20,000,000 shares authorized; none issued
Common stock, $.01 par value per share,
120,000,000 shares authorized;
33,255,173 and 32,640,963 shares issued 333 326
Additional paid-in capital 203,544 190,005
Unrealized gain on excess servicing
receivable, net of income taxes 2,954
Retained earnings (deficit) 33,466 (5,233)
-------- --------
240,297 185,098
Treasury stock, at cost (3,959,071 and
4,120,483 shares) (23,761) (21,873)
-------- --------
Total shareholders' equity 216,536 163,225
-------- --------
Total liabilities and shareholders'
equity $493,453 $330,159
-------- --------
-------- --------
The accompanying notes are an integral part
of these consolidated financial statements
20
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Years Ended
----------------------------------
June 30, June 30, June 30,
1997 1996 1995
--------- --------- --------
Revenue:
Finance charge income $ 44,910 $ 51,706 $ 30,249
Gain on sale of receivables 67,256 22,873
Servicing fee income 21,024 3,712
Investment income 2,909 1,075 1,284
Other income 1,648 1,612 1,551
-------- -------- --------
137,747 80,978 33,084
-------- -------- --------
Costs and expenses:
Operating expenses 51,915 25,681 14,773
Provision for losses 6,595 7,912 4,278
Interest expense 16,312 13,129 4,015
-------- -------- --------
74,822 46,722 23,066
-------- -------- --------
Income before income taxes 62,925 34,256 10,018
Income tax provision (benefit) 24,226 12,665 (18,875)
-------- -------- --------
Net income $ 38,699 $ 21,591 $ 28,893
-------- -------- --------
-------- -------- --------
Earnings per share $ 1.26 $ .71 $ .95
-------- -------- --------
-------- -------- --------
Weighted average shares and
share equivalents 30,782,471 30,203,298 30,380,749
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part
of these consolidated financial statements
21
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
Common Stock Additional Retained Treasury Stock
------------------ Paid-in Unrealized Earnings --------------
Shares Amount Capital Gain (Deficit) Shares Amount
------ ------ --------- -------- --------- ------ ------
Balance at July 1, 1994 31,757,333 $ 318 $ 183,588 $(55,717) 3,008,360 $ (8,688)
Common stock issued on
exercise of options 359,868 3 1,302
Income tax benefit from
exercise of options 683
Purchase of treasury stock 433,200 (3,412)
Common stock issued for
employee benefit plans (41,521) 256
Net income 28,893
---------- ------ --------- ------ -------- --------- ---------
Balance at June 30, 1995 32,117,201 321 185,573 (26,824) 3,400,039 (11,844)
Common stock issued on
exercise of options 523,762 5 3,045
Income tax benefit from
exercise of options
1,387
Purchase of treasury stock 829,000 (10,710)
Common stock issued for
employee benefit plans (108,556) 681
Net income 21,591
---------- ------ --------- ------ -------- --------- ---------
Balance at June 30, 1996 32,640,963 326 190,005 (5,233) 4,120,483 (21,873)
Common stock issued on
exercise of options 614,210 7 5,646
Common stock issued for
acquisition 4,700 (400,000) 2,400
Income tax benefit from
exercise of options 2,652
Unrealized gain on excess
servicing receivable, net
of income taxes of $1,848 $2,954
Purchase of treasury stock 315,200 (4,387)
Common stock issued for
employee benefit plans 541 (76,612) 99
Net income 38,699
---------- ------ --------- ------ -------- --------- ---------
Balance at June 30, 1997 33,255,173 $ 333 $ 203,544 $2,954 $ 33,466 3,959,071 $(23,761)
---------- ------ --------- ------ -------- --------- ---------
---------- ------ --------- ------ -------- --------- ---------
The accompanying notes are an integral part
of these consolidated financial statements
22
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Years Ended
----------------------------------------
June 30, June 30, June 30,
1997 1996 1995
--------- --------- ----------
Cash flows from operating activities:
Net income $ 38,699 $ 21,591 $ 28,893
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,203 1,528 1,317
Provision for losses 6,595 7,912 4,278
Deferred income taxes 24,428 11,681 (18,954)
Gain on sale of auto receivables (64,338) (22,873)
Amortization of excess servicing receivable 34,393 6,636
Changes in assets and liabilities:
Other assets (2,341) (984) (1,834)
Accrued taxes and expenses 26,493 9,406 937
--------- --------- ---------
Net cash provided by operating
activities 66,132 34,897 14,637
--------- --------- ---------
Cash flows from investing activities:
Purchases of auto receivables (896,711) (417,235) (225,350)
Originations of mortgage receivables (53,770)
Principal collections and recoveries on receivables 64,389 94,948 71,334
Net proceeds from sale of auto receivables 767,571 268,923
Net proceeds from sale of mortgage receivables 52,489
Purchases of property and equipment (4,511) (3,162) (1,730)
Proceeds from sales and maturities of
investment securities 58 3,707 16,241
Increase in restricted cash (52,591) (10,297) (5,007)
--------- --------- ---------
Net cash used by investing activities (123,076) (63,116) (144,512)
--------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 745,500 342,600 83,900
Payments on bank line of credit (759,800) (256,600) (83,900)
Net increase in mortgage warehouse facility (2,964)
Proceeds from issuance of 9 1/4% Senior Notes 120,894
Proceeds from issuance of automobile
receivables-backed notes 150,170
Payments on automobile receivables-backed notes (44,158) (66,673) (15,650)
Payments on notes payable (552) (298) (236)
Proceeds from issuance of common stock 6,293 3,731 1,561
Purchase of treasury stock (4,387) (10,710) (3,412)
--------- --------- ---------
Net cash provided by financing activities 60,826 12,050 132,433
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 3,882 (16,169) 2,558
Cash and cash equivalents at beginning of year 2,145 18,314 15,756
--------- --------- ---------
Cash and cash equivalents at end of year $ 6,027 $ 2,145 $ 18,314
--------- --------- ---------
--------- --------- ---------
The accompanying notes are an integral part
of these consolidated financial statements
23
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY AND OPERATIONS
AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since
September 1992, has been in the business of purchasing, securitizing and
servicing automobile sales finance contracts. The Company operated 85 auto
lending branch offices in 30 states as of June 30, 1997. The Company also
acquired a subsidiary in November 1996 which originates and sells home equity
loans.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities as of the date of the
financial statements and the amount of revenue and costs and expenses during
the reporting periods. Actual results could differ from those estimates.
These estimates include, among other things, anticipated prepayments and
credit losses on finance receivables sold in securitization transactions and
the determination of the allowance for losses on finance receivables.
CASH EQUIVALENTS
Investments in highly liquid securities with original maturities of 90 days
or less are included in cash and cash equivalents.
INVESTMENT SECURITIES
Investment securities are classified as held-to-maturity and are carried at
amortized cost.
24
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCE RECEIVABLES
Finance charge income related to finance receivables is recognized using the
interest method. Accrual of finance charge income is suspended on finance
contracts which are more than 60 days delinquent. Fees and commissions
received and direct costs of originating loans are deferred and amortized
over the term of the related finance contracts using the interest method.
Provisions for losses are charged to operations in amounts sufficient to
maintain the allowance for losses at a level considered adequate to cover
estimated losses in the finance receivables portfolio owned by the Company.
Automobile finance sales contracts are typically purchased by the Company for
a non-refundable acquisition fee on a non-recourse basis, and such
acquisition fees are also added to the allowance for losses. The Company
reviews historical origination and charge-off relationships, charge-off
experience factors, collection data, delinquency reports, estimates of the
value of the underlying collateral, economic conditions and trends and other
information in order to make the necessary judgments as to the
appropriateness of the provision for losses and the allowance for losses.
Finance contracts are charged-off to the allowance for losses when the
Company repossesses and disposes of the collateral or the account is
otherwise deemed uncollectible.
EXCESS SERVICING RECEIVABLE
The Company periodically sells finance receivables to certain special purpose
financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed
securities to investors. The Company retains an interest in the finance
receivables sold in the form of a residual or interest-only strip and may
also retain other subordinated interests in the Trusts. The residual or
interest-only strips represent the present value of future excess cash flows
resulting from the difference between the finance charge income received from
the obligors on the finance receivables and the interest paid to the
investors in the asset-backed securities, net of credit losses, servicing
fees and other expenses.
Upon the transfer of finance receivables to the Trusts, the Company removes
the net book value of the finance receivables sold from its consolidated
balance sheets and allocates such carrying value between the assets
transferred and the interests retained, based upon their relative fair values
at the settlement date. The difference between the sales proceeds, net of
transaction costs, and the allocated basis of the assets transferred is
recognized as a gain on sale of receivables.
25
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EXCESS SERVICING RECEIVABLE (CONT.)
The allocated basis of the interests retained, including the residual or
interest-only strip is recognized as excess servicing receivable in the
Company's consolidated balance sheets. Since such asset can be contractually
prepaid or otherwise settled in such a way that the holder would not recover
all of its recorded investment, excess servicing receivable is classified as
available for-sale and is measured at fair value. Unrealized holding gains
or temporary holding losses are reported net of income tax effects as a
separate component of shareholders' equity until realized. If a decline in
fair value were deemed other than temporary, excess servicing receivable
would be written down through a charge to operations.
The fair value of excess servicing receivable is estimated by calculating the
present value of the future excess cash flows related to such interests using
a discount rate commensurate with the risks involved. Such calculations
include estimates of future credit losses and prepayment rates for the
remaining term of the finance receivables transferred to the Trusts since
these factors impact the amount and timing of future excess cash flows. If
future credit losses and prepayment rates exceed the Company's original
estimates, excess servicing receivable would be written down through a charge
to operations. Favorable credit loss and prepayment experience compared to
the Company's original estimates would result in additional earnings when
realized.
RESTRICTED CASH
A financial guaranty insurance company (the "Insurer") has provided a
financial guaranty insurance policy for the benefit of the investors in each
series of asset-backed securities issued by the Trusts or special purpose
financing subsidiaries of the Company. In connection with the issuance of
the policies, the Company was required to establish a separate cash account
with a trustee for the benefit of the Insurer for each series of securities
and related finance receivables pools. Monthly collections and recoveries
from the pools of finance receivables in excess of required principal and
interest payments on the securities and servicing fees and other expenses are
either added to the restricted cash accounts or used to repay the outstanding
securities on an accelerated basis, thus creating additional credit
enhancement for the Insurer. When the credit enhancement levels reach
specified percentages of the pools of finance receivables, excess cash flows
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
fees and other expenses, any shortfall would be drawn from the restricted
cash accounts.
26
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRICTED CASH (CONT.)
Certain agreements with the Insurer provide that if delinquency, default and
net loss ratios in the pools of finance receivables supporting the
asset-backed securities exceed certain amounts, the specified levels of
credit enhancement would be increased and, in certain cases, the Company
would be removed as servicer of the finance receivables.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is generally
provided on a straight-line basis over the estimated useful lives of the
assets.
The cost of assets sold or retired and the related accumulated depreciation
are removed from the accounts at the time of disposition, and any resulting
gain or loss is included in operations. Maintenance, repairs, and minor
replacements are charged to operations as incurred; major replacements and
betterments are capitalized.
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
The Company periodically enters into hedging arrangements to manage the gross
interest rate spread on its securitization transactions. The Company's
hedging strategies include the use of Forward U.S. Treasury Rate Lock and
Interest Rate Swap Agreements. The face amount and terms of the Forward U.S.
Treasury Rate Lock Agreements generally correspond to the principal amount
and average maturities of finance receivables expected to be sold to the
Trusts and the related securities to be issued by the Trusts. Gains or
losses on these agreements are deferred and recognized as a component of the
gain on sale of receivables at the time that finance receivables are
transferred to the Trusts. The Interest Rate Swap Agreements are used to
convert the interest rates on floating rate securities issued by the Trusts
in securitization transactions to a fixed rate. The notional amount of these
agreements approximates the outstanding balance of the floating rate
securities. The estimated differential payments required under these
agreements are recognized as a component of the gain on sale of receivables
at the time that finance receivables are transferred to the Trusts.
INCOME TAXES
Deferred income taxes are provided in accordance with the asset and liability
method of accounting for income taxes to recognize the tax effects of
temporary differences between financial statement and income tax accounting.
27
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE
Earnings per share is based upon the weighted average number of shares
outstanding during each year, adjusted for any dilutive effect of options
using the treasury stock method.
RECENT ACCOUNTING DEVELOPMENTS
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 finance receivables to
the Trusts. Adoption of SFAS 125, which was applied prospectively to
transactions occurring subsequent to December 1996, resulted in increases of
$4,802,000 in excess servicing receivable, $1,848,000 in deferred income
taxes and $2,954,000 in shareholders' equity. There was no material effect
on the Company's results of operations.
Effective July 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 123 establishes financial accounting and reporting standards for
stock-based compensation plans such as stock purchase plans and stock
options. The new standard allows companies either to continue to account for
stock based employee compensation plans under existing accounting standards
or adopt a fair value-based method of accounting for stock-based awards as
compensation expense over the service period, which is usually the vesting
period. SFAS 123 requires that if a company continues to account for stock
options under existing accounting standards, pro forma net income and
earnings per share information must be provided as if the new fair value
approach had been adopted. The Company has elected to continue to account
for stock-based employee compensation under existing accounting standards.
Accordingly, no compensation expense has been recognized for options granted
under stock based employee compensation plans. Had compensation expense for
the Company's plans been determined using the fair value-based method under
SFAS 123, pro forma net income would have been $33,217,000 and $15,224,000,
and pro forma earnings per share would have been $1.08 and $0.50, for the
years ended June 30, 1997 and 1996, respectively.
28
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECENT ACCOUNTING DEVELOPMENTS (CONT.)
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 $1.34, $0.76 and $1.01 for the years ended June 30, 1997,
1996 and 1995, 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.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting comprehensive income and its components in a full set
of financial statements. The new standard requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income, including an amount representing total comprehensive
income, be reported in a financial statement that is displayed with the same
prominence as other financial statements. Pursuant to SFAS 130, the Company
will be required to display total comprehensive income, including net income
and changes in the unrealized gain on excess servicing receivable, in its
consolidated financial statements for the year ended June 30, 1999 and
thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way companies report
information about operating segments in annual financial statements and
requires that enterprises report selected information about operating
segments in interim financial reports. The new pronouncement also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The statement is effective for
financial statements for periods beginning after December 15, 1997. The
disclosures required by SFAS 131 would generally not be applicable since the
Company currently operates in only one reportable segment.
29
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by issuer type, are as follows (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ----------- ---------- ---------
U.S. Government
obligations $5,000 $ $ 75 $4,925
Mortgage-backed
securities 1,500 62 1,438
------ ------ ------- ------
$6,500 $ $ 137 $6,363
------ ------ ------- ------
------ ------ ------- ------
The amortized cost and estimated fair value of investment securities as of
June 30, 1996, by issuer type, are as follows (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ----------- ---------- ---------
U.S. Government
obligations $5,000 $ $ 304 $4,696
Mortgage-backed
securities 1,558 1,558
------ ------ ------- ------
$6,558 $ $ 304 $6,254
------ ------ ------- ------
------ ------ ------- ------
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized Fair
Cost Value
--------- ----------
Due within one year $5,000 $4,925
Mortgage-backed securities 1,500 1,438
------ ------
$6,500 $6,363
------ ------
------ ------
30
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
June 30, June 30,
1997 1996
---- ----
Auto receivables $275,249 $264,086
Less allowance for losses (12,946) (13,602)
-------- --------
Auto receivables, net 262,303 250,484
Mortgage receivables 4,354
-------- --------
Finance receivables, net $266,657 $250,484
-------- --------
-------- --------
Auto receivables are collateralized by vehicle titles and the Company has the
right to repossess the vehicle in the event that the consumer defaults on the
payment terms of the contract. Mortgage receivables are collateralized by
liens on real property and the Company has the right to foreclose in the
event that the consumer defaults on the payment terms of the contract.
The accrual of finance charge income has been suspended on $12,704,000 and
$17,339,000 of delinquent auto receivables as of June 30, 1997 and 1996,
respectively.
31
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. FINANCE RECEIVABLES (CONT.)
A summary of the allowance for losses is as follows (in thousands):
Years Ended
------------------------------------
June 30, June 30, June 30,
1997 1996 1995
-------- -------- -------
Balance at beginning of year $ 13,602 $ 19,951 $ 9,330
Provision for losses 6,595 7,912 4,278
Acquisition fees 30,688 18,097 13,908
Allowance related to receivables
sold to Trusts (20,974) (13,461)
Net charge-offs-auto receivables (16,965) (18,322) (6,409)
Net charge-offs-other (575) (1,156)
-------- -------- -------
Balance at end of year $ 12,946 $ 13,602 $19,951
-------- -------- -------
-------- -------- -------
4. EXCESS SERVICING RECEIVABLE
As of June 30, 1997 and 1996, the Company was servicing $863,006,000
and $259,895,000, respectively, of auto receivables which have been sold to the
Trusts.
The components of excess servicing receivable are as follows (in thousands):
June 30, June 30,
1997 1996
-------- --------
Interest only strips $ 59,933 $ 11,819
Subordinated interests:
Retained asset-backed securities 12,589 21,274
Excess of auto receivables in Trusts
over asset-backed securities outstanding 41,854
-------- --------
$114,376 $ 33,093
-------- --------
-------- --------
32
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. EXCESS SERVICING RECEIVABLE (CONT.)
Excess servicing receivable consists of the following (in thousands):
June 30, June 30,
1997 1996
-------- --------
Estimated future excess cash flows before
allowance for credit losses $200,869 $ 63,457
Allowance for credit losses (74,925) (25,616)
-------- --------
Estimated future excess cash flows 125,944 37,841
Discount to present value (11,568) (4,748)
-------- --------
$114,376 $ 33,093
-------- --------
-------- --------
A summary of excess servicing receivable is as follows (in thousands):
Years Ended
-----------------------
June 30, June 30,
1997 1996
-------- --------
Balance at beginning of year $ 33,093
Additions 110,874 $39,729
Increase in unrealized gain 4,802
Amortization (34,393) (6,636)
-------- -------
Balance at end of year $114,376 $33,093
-------- -------
-------- -------
5. ACQUISITION
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS",
formerly Rancho Vista Mortgage Corporation), which originates and sells home
equity loans. The purchase price of $7,434,000 consisted of 400,000 shares of
the Company's common stock and assumption of certain liabilities. The
acquisition has been accounted for as a purchase and the excess of the purchase
price over net assets acquired was assigned to goodwill. Goodwill is being
amortized over a 25 year period. The results of operations of AMS have been
included in the consolidated financial statements since the acquisition date.
33
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
June 30, June 30,
1997 1996
-------- -------
Land $ 600 $ 600
Buildings and improvements 2,319 1,973
Equipment 12,869 6,994
Furniture and fixtures 1,935 828
-------- -------
17,723 10,395
Less accumulated depreciation
and amortization (3,839) (2,725)
-------- -------
$13,884 $ 7,670
-------- -------
-------- -------
7. 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 $71,700,000 and $86,000,000 were outstanding as of June
30, 1997 and 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 June 30, 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.
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 $345,000 were outstanding as of June 30, 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
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.
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes which
are due in February 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
34
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DEBT (CONT.)
restrictions including limitations on the Company's ability to incur additional
indebtedness other than certain secured indebtedness, pay cash dividends and
repurchase common stock. Original debt issuance costs of $4,106,000 are being
amortized over the term of the 9 1/4% Senior Notes and are included in other
assets in the consolidated balance sheets.
Automobile receivables-backed notes consist of the following (in thousands):
June 30, June 30,
1997 1996
--------- --------
Series 1995-A notes, interest at 6.55%,
collateralized by certain auto
receivables in the principal amount
of $23,589, final maturity
in September 2000 $ 23,689 $ 54,176
Series 1994-A notes, paid in full
in April 1997 13,671
--------- --------
$ 23,689 $ 67,847
--------- --------
--------- --------
Maturities of the automobile receivables-backed notes, based on the contractual
maturities of the underlying auto receivables, for years ending June 30 are as
follows (in thousands):
1998 $ 16,585
1999 6,015
2000 1,089
--------
$ 23,689
--------
--------
35
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES
Branch lending offices are generally leased for terms of up to five years with
certain rights to extend for additional periods. The Company also leases office
space for its loan servicing facilities under leases with terms up to ten years
with renewal options. Lease expense was $2,132,000, $875,000 and $422,000 for
the years ended June 30, 1997, 1996 and 1995, respectively. Lease commitments
for years ending June 30 are as follows (in thousands):
1998 $ 2,935
1999 2,691
2000 2,244
2001 1,897
2002 1,061
Thereafter 3,085
-------
$13,913
-------
-------
As of June 30, 1997, the Company had Forward U.S. Treasury Rate Lock Agreements
to sell $200 million of U.S. Treasury Notes due May 1999 and $200 million of
U.S. Treasury Notes due November 1999. The Agreements expire August 29, 1997
and November 26, 1997, respectively. Any gain or loss on these hedging
positions will be recognized as a component of the gain on sale of receivables
upon transfers of receivables to the Trusts subsequent to June 30, 1997.
As of June 30, 1996, the Company had a Forward U.S. Treasury Rate Lock Agreement
to sell $100 million of U.S. Treasury Notes which was settled in August 1996.
The Company services auto receivables for its own account and for the Trusts.
These contracts are with consumers residing throughout the United States, with
borrowers located in Texas and California accounting for 13% and 12%,
respectively, of the total managed auto receivables portfolio as of June 30,
1997. Borrowers located in Texas accounted for 18% of total managed auto
receivables as of June 30, 1996. No other state accounted for more than 10% of
total managed auto receivables.
In the normal course of its business, the Company is named as defendant in legal
proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. Two unrelated
proceedings in which the Company is a defendant have been brought as putative
class actions and are pending in federal district courts in Connecticut and
Illinois, respectively. Classes have not been certified in either case and the
36
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES (CONT.)
Company has filed motions to dismiss in both cases which are presently pending.
In the opinion of management, the resolution of these proceedings will not have
a material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
9. STOCK OPTIONS
General
- -------
The Company has certain stock-based compensation plans for employees, non-
employee directors and key executive officers.
A total of 6,000,000 shares are authorized for grants of options under the
employee plans, including 2,000,000 shares available for grants of options or
other equity instruments. The exercise price of each option must equal the
market price of the Company's stock on the date of grant and the maximum term of
each option is ten years. The vesting period is typically four years. Option
grants, vesting periods and the term of each option are determined by a
committee of the Company's board of directors.
A total of 2,100,000 shares are authorized for grants of options under the non-
employee director plans. The exercise price of each option must equal the market
price of the Company's stock on the date of grant and the maximum term of each
option is ten years. Option grants, vesting periods and the term of each option
are established by the terms of the plans.
A total of 850,000 shares are authorized for grants of options under the key
executive officer plan. The exercise price of each option under this plan is
$16 per share and the term of each option is seven years. These options vest
upon the earlier of seven years from the date of grant or the time that the
Company's common stock trades above certain targeted price levels.
The following tables present information related to the Company's stock-based
compensation plans. The fair value of each option grant was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
Years Ended
---------------------------------
June 30, June 30, June 30,
1997 1996 1995
---- ---- ----
Expected dividends 0 0 0
Expected volatility 20% 20% 20%
Risk-free interest rate 5.87% 5.87% 5.87%
Expected life 5 Years 5 Years 5 Years
37
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS (CONT.)
Employee Plans
- --------------
A summary of stock option activity under the Company's employee plans is as
follows (shares in thousands):
Years Ended
-----------------------------------------------------------
June 30, June 30, June 30,
1997 1996 1995
--------- -------- --------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------- ----------------- ------------------
Outstanding at
beginning of year 3,664 $ 7.22 3,410 $ 5.00 2,681 $ 4.20
Granted 1,251 15.47 672 13.59 1,080 8.20
Exercised (423) 7.91 (373) 5.22 (189) 4.27
Forfeited (116) 11.68 (45) 6.96 (162) 7.76
----- ------ ----- ------ ----- ------
Outstanding at end
of year 4,376 $ 9.35 3,664 $ 7.22 3,410 $ 5.00
----- ------ ----- ------ ----- ------
----- ------ ----- ------ ----- ------
Options exerciseable at
end of year 3,161 $ 7.77 2,811 $ 4.51 2,132 $ 4.50
----- ------ ----- ------ ----- ------
----- ------ ----- ------ ----- ------
Weighted average fair value
of options granted
during year $ 4.21 $ 3.72 $ 2.24
------ ------ ------
------ ------ ------
A summary of options outstanding under employee plans as of June 30, 1997 is as
follows (shares in thousands):
Options Outstanding Options Exerciseable
------------------- ---------------------
Weighted Weighted Weighted
Average Years Average Average
Range of Number of Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Outstanding Price
- --------------- ----------- ---------------- -------- ----------- --------
$2.50 to 4.63 1,183 4.21 $ 3.44 1,113 $ 3.46
$5.50 to 9.13 1,337 7.33 7.24 1,207 7.24
$11.00 to 15.75 1,357 8.55 14.01 697 13.80
$16.38 to 18.38 499 9.49 16.93 144 16.79
----- -----
4,376 3,161
----- -----
----- -----
38
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS (CONT.)
NON-EMPLOYEE DIRECTOR PLANS
A summary of stock option activity under the Company's non-employee director
plans is as follows (shares in thousands):
Years Ended
------------------------------------------------------------
June 30, June 30, June 30,
1997 1996 1995
-------- -------- --------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------- ---------------- -----------------
Outstanding at
beginning of year 913 $ 3.60 946 $ 2.80 1,079 $ 2.80
Granted 40 18.75 40 12.88 30 6.50
Exercised (99) 2.80 (73) 2.80 (163) 2.80
--- ------ --- ------ ----- ------
Outstanding at end
of year 854 $ 4.41 913 $ 3.60 946 $ 2.80
--- ------ --- ------ ----- ------
--- ------ --- ------ ----- ------
Options exerciseable at
end of year 854 $ 4.41 873 $ 3.53 886 $ 2.80
--- ------ --- ------ ----- ------
--- ------ --- ------ ----- ------
Weighted average fair value
of options granted
during year $ 5.14 $ 3.53 $ 1.78
------ ------ ------
------ ------ ------
A summary of options outstanding under non-employee director plans as of June
30, 1997 is as follows (shares in thousands):
Options Outstanding Options Exerciseable
------------------- --------------------
Weighted Weighted Weighted
Average Years Average Average
Range of Number of Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Outstanding Price
- --------------- ----------- ---------------- -------- ----------- --------
$2.80 to 6.50 774 4.07 $ 3.22 774 $ 3.22
$12.88 to 18.75 80 8.90 15.86 80 15.86
--- ---
854 854
--- ---
--- ---
39
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS (CONT.)
Key Executive Officer Plan
- --------------------------
A summary of stock option activity under the Company's key executive officer
plan is as follows (shares in thousands):
Years Ended
------------------------------------------
June 30, June 30,
1997 1996
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ -------- ------ --------
Outstanding at
beginning of year 850 $16.00
Granted 850 $16.00
--- ------ --- ------
Outstanding at end
of year (none
exerciseable) 850 $16.00 850 $16.00
--- ------ --- ------
--- ------ --- ------
Weighted average fair value
of options granted
during year $ 4.38
------
------
A summary of options outstanding under the key executive officer plan at June
30, 1997 is as follows (shares in thousands):
Options Outstanding
-------------------
Weighted Weighted
Average Years Average
Range of Number of Remaining Exercise
Exercise Prices Outstanding Contractual Life Price
- --------------- ----------- ------------------- --------
$16.00 850 5.81 $16.00
10. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution retirement plan covering substantially
all employees. The Company's contributions to the plan, which were made in
Company common stock, were $201,000, $133,000 and $99,000 for the years ended
June 30, 1997, 1996 and 1995, respectively.
The Company also has an employee stock purchase plan that allows
participating employees to purchase, through payroll deductions, shares of
the Company's common stock at 85% of the market value at specified dates. A
total of 500,000 shares have been reserved for issuance under the plan.
Shares purchased under
40
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. EMPLOYEE BENEFIT PLANS (CONT.)
the plan were 104,215, 97,143 and 31,361 for the years ended June 30, 1997,
1996 and 1995, respectively.
11. INCOME TAXES
The income tax provision (benefit) consists of the following (in thousands):
Years Ended
---------------------------------
June 30, June 30, June 30,
1997 1996 1995
------- ------- --------
Current $ (202) $ 984 $ 79
Deferred 24,428 11,681 (18,954)
------- ------- --------
$24,226 $12,665 $(18,875)
------- ------- --------
------- ------- --------
The Company's effective income tax rate on income before income taxes differs
from the U.S. statutory tax rate as follows:
Years Ended
----------------------------------
June 30, June 30, June 30,
1997 1996 1995
---- ---- ----
U.S. statutory tax rate 35% 35% 35%
Change in valuation allowance (226)
Other 3 2 3
---- ---- -----
38% 37% (188%)
---- ---- -----
---- ---- -----
The deferred income tax provision (benefit) consists of the following (in
thousands):
Years Ended
----------------------------------
June 30, June 30, June 30,
1997 1996 1995
---- ---- ----
Net operating loss carryforward $ 5,501 $ 8,387 $ 2,266
Allowance for losses (1,046) 1,556 32
Gain on sale of receivables 14,824
Change in valuation allowance (320) (22,615)
Other 5,149 2,058 1,363
------- ------- --------
$24,428 $11,681 $(18,954)
------- ------- --------
------- ------- --------
41
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES (CONT.)
The tax effects of temporary differences that give rise to deferred tax
liabilities and assets are as follows (in thousands):
June 30, June 30,
1997 1996
---- ----
Deferred tax liabilities:
Gain on sale of receivables $14,824 $
Unrealized gain on excess servicing
receivable 1,848
Allowance for losses 405
Other 2,614 707
------- -------
19,286 1,112
------- -------
Deferred tax assets:
Net operating loss carryforward (3,468) (8,969)
Alternative minimum tax credits (1,873) (1,548)
Allowance for losses (641)
Other (590)
------- -------
(5,982) (11,107)
------- -------
Net deferred tax liability (asset) $13,304 $(9,995)
------- -------
------- -------
As of June 30, 1997, the Company has a net operating loss carryforward of
approximately $3,000,000 for federal income tax reporting purposes which
expires between 2007 and 2009 and an alternative minimum tax credit
carryforward of approximately $1,900,000 with no expiration date.
12. SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following
(in thousands):
Years Ended
-------------------------------
June 30, June 30, June 30,
1997 1996 1995
-------- -------- --------
Interest costs (none capitalized) $15,196 $12,179 $ 5,167
Income taxes 599 1,447 151
42
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair
value information about financial instruments, whether or not recognized in
the Company's consolidated balance sheets. Fair values are based on
estimates using present value or other valuation techniques in cases where
quoted market prices are not available. Those techniques are significantly
affected by the assumptions used, including the discount rate and the
estimated timing and amount of future cash flows. Therefore, the estimates
of fair value may differ substantially from amounts which ultimately may be
realized or paid at settlement or maturity of the financial instruments.
SFAS 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments as of June 30, 1997 and
1996 are set forth below (in thousands):
June 30, 1997 June 30, 1996
--------------------------- -----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
Financial assets:
Cash and cash equivalents and
restricted cash (a) $ 73,922 $ 73,922 $ 17,449 $ 17,449
Investment securities (b) 6,500 6,363 6,558 6,254
Finance receivables (c) 266,657 283,386 250,484 283,760
Excess servicing receivable (d) 114,376 114,376 33,093 35,009
Financial liabilities:
Bank line of credit and
mortgage warehouse facility (e) 72,045 72,045 86,000 86,000
Automobile receivables-
backed notes (f) 23,689 24,782 67,847 68,055
9 1/4% Senior Notes (g) 125,000 123,825
Interest rate swaps (h) 735 236
Unrecognized financial instruments:
Forward U.S. Treasury Note
Sales (i) 164 (700)
(a) The carrying value of cash and cash equivalents and restricted cash is
considered to be a reasonable estimate of fair value.
43
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT.)
(b) The fair value of investment securities is estimated based on market
prices for similar securities.
(c) Since the Company periodically sells its finance receivables, fair value
is estimated by discounting future net cash flows expected to be realized
from the finance receivables using interest rate, prepayment and credit
loss assumptions similar to the Company's historical experience.
(d) The fair value of excess servicing receivable is estimated by discounting
the associated future net cash flows using discount rate, prepayment and
credit loss assumptions similar to the Company's historical experience.
(e) The bank line of credit and mortgage warehouse facility have variable
rates of interest and maturities of less than one year. Therefore,
carrying value is considered to be a reasonable estimate of fair value.
(f) The fair value of automobile receivables-backed notes is estimated based
on rates currently available for debt with similar terms and remaining
maturities.
(g) The fair value of the 9 1/4% Senior Notes is based on the quoted market
price.
(h) The fair value of the interest rate swaps is based on the quoted
termination cost.
(i) The fair value of the forward U.S. Treasury Note sales are estimated based
upon market prices for similar financial instruments.
44
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
AmeriCredit Corp.
We have audited the accompanying consolidated balance sheets of AmeriCredit
Corp. as of June 30, 1997 and 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended June 30, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AmeriCredit Corp.
as of June 30, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30, 1997, in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, in 1997,
AmeriCredit Corp. changed its method of accounting for transfers and servicing
of financial assets and extinguishment of liabilities.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
August 6, 1997
45
AMERICREDIT CORP.
COMMON STOCK DATA
The Company's common stock trades on the New York Stock Exchange under the
symbol ACF. There were 29,296,102 shares of common stock outstanding as of
June 30, 1997.
The following table sets forth the range of the high, low and closing sale
prices for the Company's common stock as reported on the Composite Tape of
New York Stock Exchange Listed Issues.
Fiscal year ended June 30, 1996: High Low Close
------ ------ ------
First Quarter $15.00 $ 9.63 $14.88
Second Quarter 16.25 10.75 13.63
Third Quarter 14.25 10.38 13.88
Fourth Quarter 16.50 13.25 15.63
Fiscal year ended June 30, 1997: High Low Close
------ ------ ------
First Quarter $18.63 $12.00 $18.38
Second Quarter 20.50 16.63 20.50
Third Quarter 22.75 15.13 17.38
Fourth Quarter 21.25 11.88 21.00
As of June 30, 1997, there were approximately 350 shareholders of record of
the Company's common stock.
46
AMERICREDIT CORP.
QUARTERLY DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- --------
Fiscal year ended June 30, 1997
Finance charge income $ 10,764 $ 10,739 $ 12,101 $ 11,306
Gain on sale of receivables 12,590 15,561 17,757 21,348
Servicing fee income 3,643 4,599 5,644 7,138
Income before income taxes 13,125 14,955 16,464 18,381
Net income 8,072 9,198 10,126 11,303
Earnings per share .27 .30 .33 .36
Weighted average shares and 30,118,939 30,678,189 31,033,230 31,098,326
share equivalents
Fiscal year ended June 30, 1996
Finance charge income $ 13,377 $ 13,852 $ 12,650 $ 11,827
Gain on sale of receivables 5,621 7,725 9,527
Servicing fee income 215 1,105 2,392
Income before income taxes 3,938 8,830 10,119 11,369
Net income 2,520 5,586 6,312 7,173
Earnings per share .08 .18 .21 .24
Weighted average shares and 30,223,551 31,120,461 30,082,193 30,273,327
share equivalents
47
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS:
200 Bailey Avenue
Fort Worth, Texas 76107
(817) 332-7000
INVESTOR RELATIONS INFORMATION:
For financial/investment data and general information about AmeriCredit Corp.,
write the Investor Relations Department at the above address, or telephone
(817) 882-7009.
SHAREHOLDER SERVICES:
For shareholder account information and other shareholder services, write the
Corporate Secretary at the above address, or telephone (817) 882-7139.
ANNUAL MEETING:
The Annual Meeting of the Company will be held on November 5, 1997 at 10:00 a.m.
at the Fort Worth Club, 306 West Seventh Street, Fort Worth, Texas. All
shareholders are cordially invited to attend.
TRANSFER AGENT AND REGISTRAR:
ChaseMellon Shareholder Services
Stock Transfer Department
85 Challenger Rd., Overpeck Centre
Ridgefield Park, NJ 07660
(800) 635-9270
http://www.chasemellon.com
INDEPENDENT ACCOUNTANTS:
Coopers & Lybrand L.L.P.
301 Commerce Street, Suite 1900
Fort Worth, Texas 76102-4119
FORM 10-K:
SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO
THE INVESTOR RELATIONS DEPARTMENT AT THE CORPORATE HEADQUARTERS ADDRESS.
48
DIRECTORS
Clifton H. Morris, Jr.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
AmeriCredit Corp.
Michael R. Barrington
VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING OFFICER
AmeriCredit Corp.
Daniel E. Berce
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER
AmeriCredit Corp.
Edward H. Esstman
EXECUTIVE VICE PRESIDENT, AUTO FINANCE DIVISION
AmeriCredit Corp.
James H. Greer
CHAIRMAN OF THE BOARD
Shelton W. Greer Co., Inc.
Gerald W. Haddock
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Crescent Real Estate Equities Limited, L.P.
Douglas K. Higgins
OWNER
Higgins & Associates
Kenneth H. Jones, Jr.
VICE CHAIRMAN
KBK Capital Corporation
49
OFFICERS
AMERICREDIT CORP.:
Clifton H. Morris, Jr.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Michael R. Barrington
VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING OFFICER
Daniel E. Berce
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER
Edward H. Esstman
EXECUTIVE VICE PRESIDENT, AUTO FINANCE DIVISION
Randy K. Benefield
SENIOR VICE PRESIDENT, DIRECTOR OF MANAGEMENT INFORMATION SYSTEMS
Chris A. Choate
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Patricia A. Jones
SENIOR VICE PRESIDENT, DIRECTOR OF HUMAN RESOURCES
Michael T. Miller
SENIOR VICE PRESIDENT AND CHIEF CREDIT OFFICER
Preston A. Miller
SENIOR VICE PRESIDENT AND TREASURER
50
AMERICREDIT FINANCIAL SERVICES, INC.:
Clifton H. Morris, Jr.
CHAIRMAN OF THE BOARD
Michael R. Barrington
VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Daniel E. Berce
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER
Edward H. Esstman
PRESIDENT AND CHIEF OPERATING OFFICER
Philip A. Alberti
EXECUTIVE VICE PRESIDENT, DIRECTOR OF CONSUMER FINANCE OPERATIONS
Christopher M. Barry
SENIOR VICE PRESIDENT, BRANCH OPERATIONS
Jan G. Gisburne
SENIOR VICE PRESIDENT, BRANCH OPERATIONS
Cheryl L. Miller
SENIOR VICE PRESIDENT, DIRECTOR OF COLLECTIONS AND CUSTOMER SERVICE
Todd M. Patin
SENIOR VICE PRESIDENT, BRANCH OPERATIONS
Cinde C. Perales
SENIOR VICE PRESIDENT, DIRECTOR OF LOAN SERVICES
Nils L. Wirstrom
SENIOR VICE PRESIDENT, BRANCH OPERATIONS
51
AMERICREDIT MORTGAGE SERVICES:
Clifton H. Morris, Jr.
CHAIRMAN OF THE BOARD
Michael R. Barrington
VICE CHAIRMAN
Daniel E. Berce
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER
Michael G. Hughes
PRESIDENT
Renee L. Jacobs
SENIOR VICE PRESIDENT, REGIONAL MANAGER
Mark L. Kittle
SENIOR VICE PRESIDENT, OPERATIONS
52