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 December 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
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AmeriCredit Corp.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2291093
- ------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Bailey Avenue, Fort Worth, Texas 76107
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(Address of principal executive offices)
(Zip Code)
(817) 332-7000
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(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 29,993,188 shares of common stock, $.01 par value outstanding as of
January 31, 1998.
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
December 31, 1997 and June 30, 1997. . . . . . . . . . . 3
Consolidated Statements of Income -
Three Months and Six Months Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Six Months Ended December 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
Item 3. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . . . . 29
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . 30
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 30
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
December 31, June 30,
ASSETS 1997 1997
------------ --------
Cash and cash equivalents $ 2,267 $ 6,027
Investment securities 6,500 6,500
Finance receivables, net 257,791 266,657
Excess servicing receivable 179,788 114,376
Restricted cash 76,170 67,895
Property and equipment, net 17,232 13,884
Goodwill 7,112 7,260
Other assets 15,435 10,854
-------- --------
Total assets $562,295 $493,453
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ 2,100 $ 71,700
Commercial paper warehouse facility 95,989
Mortgage warehouse facility 7,281 345
Automobile receivables-backed notes 14,138 23,689
9 1/4% Senior Notes 125,000 125,000
Notes payable 4,458 3,517
Accrued taxes and expenses 38,619 39,362
Deferred income taxes 19,764 13,304
-------- --------
Total liabilities 307,349 276,917
-------- --------
Shareholders' equity:
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 33,841,815 and
33,255,173 shares issued 338 333
Additional paid-in capital 213,890 203,544
Unrealized gain on excess servicing
receivable, net of income taxes 3,410 2,954
Retained earnings 60,841 33,466
-------- --------
278,479 240,297
Treasury stock, at cost
(3,921,028 and 3,959,071 shares) (23,533) (23,761)
-------- --------
Total shareholders' equity 254,946 216,536
-------- --------
Total liabilities and shareholders'
equity $562,295 $493,453
-------- --------
-------- --------
The accompanying notes are an integral part
of these consolidated financial statements
3
AMERICREDIT CORP.
Consolidated Statements of Income
(Unaudited, Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Revenue:
Finance charge income $13,129 $10,739 $ 26,190 $21,503
Gain on sale of receivables 27,733 15,561 53,775 28,151
Servicing fee income 10,478 4,599 19,191 8,242
Investment income 1,290 684 2,570 1,152
Other income 308 292 502 622
---------- ---------- ---------- ----------
52,938 31,875 102,228 59,670
---------- ---------- ---------- ----------
Costs and expenses:
Operating expenses 21,825 11,920 41,916 21,747
Provision for losses 1,849 1,614 3,755 3,231
Interest expense 6,206 3,386 12,045 6,612
---------- ---------- ---------- ----------
29,880 16,920 57,716 31,590
---------- ---------- ---------- ----------
Income before income taxes 23,058 14,955 44,512 28,080
Income tax provision 8,877 5,757 17,137 10,810
---------- ---------- ---------- ----------
Net income $14,181 $ 9,198 $ 27,375 $17,270
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share:
Basic $ .47 $ .32 $ .92 $ .61
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted $ .44 $ .30 $ .85 $ .57
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding 29,890,355 28,653,775 29,684,960 28,513,145
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
and assumed incremental
shares 32,406,559 30,678,189 32,199,267 30,398,569
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The accompanying notes are an integral part
of these consolidated financial statements
4
AMERICREDIT CORP.
Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
Six Months Ended
December 31,
-------------------------
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 27,375 $ 17,270
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,914 904
Provision for losses 3,755 3,231
Deferred income taxes 9,643 10,682
Gain on sale of auto receivables (51,531) (27,851)
Amortization of excess servicing receivable 23,118 12,117
Changes in assets and liabilities:
Other assets (4,581) (2,134)
Accrued taxes and expenses (743) 9,195
--------- ---------
Net cash provided by operating activities 8,950 23,414
--------- ---------
Cash flows from investing activities:
Purchases of auto receivables (686,543) (354,448)
Originations of mortgage receivables (51,572) (7,748)
Principal collections and recoveries on
receivables 14,862 36,147
Net proceeds from sale of auto receivables 644,022 332,982
Net proceeds from sale of mortgage receivables 48,129 4,839
Purchases of property and equipment (3,571) (1,624)
Proceeds from maturities of investment
securities 55
Increase in restricted cash (8,275) (31,023)
--------- ---------
Net cash used by investing activities (42,948) (20,820)
--------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 514,500 304,400
Payments on bank line of credit (584,100) (275,500)
Net increase in commercial paper warehouse
facility 95,989
Net increase in mortgage warehouse facility 6,936 264
Payments on automobile receivables-backed notes (9,551) (27,304)
Payments on notes payable (602) (221)
Proceeds from issuance of common stock 7,066 3,100
Purchase of treasury stock (4,387)
--------- ---------
Net cash provided by financing activities 30,238 352
--------- ---------
Net increase (decrease) in cash and cash
equivalents (3,760) 2,946
Cash and cash equivalents at beginning of period 6,027 2,145
--------- ---------
Cash and cash equivalents at end of period $ 2,267 $ 5,091
--------- ---------
--------- ---------
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 December 31, 1997 and for the
periods ended December 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 1997 Annual Report to Shareholders.
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") effective for the
periods ended December 31, 1997. SFAS 128 establishes new standards for
computing and presenting earnings per share, replacing existing accounting
standards. All prior period earnings per share and related weighted average
share amounts have been restated to conform to the requirements of SFAS 128.
NOTE 2 - FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
December 31, June 30,
1997 1997
---- ----
Auto receivables $261,333 $275,249
Less allowance for losses (11,350) (12,946)
-------- --------
Auto receivables, net 249,983 262,303
Mortgage receivables 7,808 4,354
-------- --------
Finance receivables, net $257,791 $266,657
-------- --------
-------- --------
6
A summary of the allowance for losses is as follows (in thousands):
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -------------------
1997 1996 1997 1996
-------- ------- -------- -------
Balance at beginning of period $ 13,549 $12,598 $ 12,946 $13,602
Provision for losses 1,849 1,614 3,755 3,231
Acquisition fees 10,681 6,237 22,046 12,809
Allowance related to auto
receivables sold to Trusts (12,007) (3,962) (21,773) (8,404)
Net charge-offs (2,722) (4,314) (5,624) (9,065)
-------- ------- -------- -------
Balance at end of period $ 11,350 $12,173 $ 11,350 $12,173
-------- ------- -------- -------
-------- ------- -------- -------
NOTE 3 - EXCESS SERVICING RECEIVABLE
As of December 31, 1997 and June 30, 1997, the Company was servicing $1,337.9
million and $863.0 million, respectively, of auto receivables which have been
sold to certain special purpose financing trusts (the "Trusts").
The components of excess servicing receivable are as follows(in thousands):
December 31, June 30,
1997 1997
------------ --------
Interest-only strips $101,357 $ 59,933
Subordinated interests:
Retained asset-backed securities 10,424 12,589
Excess of auto receivables in Trusts
over asset-backed securities outstanding 68,007 41,854
-------- --------
$179,788 $114,376
-------- --------
-------- --------
7
Excess servicing receivable consists of the following (in thousands):
December 31, June 30,
1997 1997
------------ --------
Estimated future excess cash flows before
allowance for credit losses $ 311,354 $200,869
Allowance for credit losses (112,294) (74,925)
--------- --------
Estimated future excess cash flows 199,060 125,944
Discount to present value (19,272) (11,568)
--------- --------
$ 179,788 $114,376
--------- --------
--------- --------
A summary of excess servicing receivable is as follows (in thousands):
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
1997 1996 1997 1996
-------- ------- -------- --------
Balance at beginning of period $148,009 $42,656 $114,376 $ 33,093
Additions 45,730 23,748 87,789 38,804
Net change in unrealized gain (488) 741
Amortization (13,463) (6,624) (23,118) (12,117)
-------- ------- -------- --------
Balance at end of period $179,788 $59,780 $179,788 $ 59,780
-------- ------- -------- --------
-------- ------- -------- --------
NOTE 4 - DEBT
In October 1997, the Company entered into a restated revolving credit
agreement with a group of banks under which the Company may borrow up to $310
million, subject to a defined borrowing base. Aggregate borrowings of $2.1
million and $71.7 million were outstanding as of December 31, 1997 and June
30, 1997, respectively. Borrowings under the credit agreement are
collateralized by certain auto receivables and bear interest at various
market London Interbank Offered Rates ("LIBOR") plus 1.25%. The Company is
also required to pay an annual commitment fee equal to 1/4% of the unused
portion of the credit agreement. The credit agreement, which expires in
October 1998, contains various restrictive covenants requiring certain
minimum financial ratios and results and placing certain limitations on
payment of cash dividends and repurchase of common stock.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse
financing is available to the Company. Aggregate borrowings of $96.0 million
were outstanding as of December 31, 1997. Under the funding agreement, the
Company transfers auto receivables to CP Funding Corp. ("CPFC"), a special
purpose
8
finance subsidiary of the Company, and CPFC in turn issues a note,
collateralized by such auto receivables, to the funding agent. The funding
agent provides funding under the note to CPFC pursuant to an advance formula
and CPFC forwards the funds to the Company in consideration for the transfer
of auto receivables. While CPFC is a consolidated subsidiary of the Company,
CPFC is a separate legal entity and the auto receivables transferred to CPFC
and the other assets of CPFC are legally owned by CPFC and not available to
creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the
note bear interest at commercial paper, LIBOR or prime rates plus specified
fees depending upon the source of funds provided by the funding agent to
CPFC. The funding agreement, which expires in October 1998, contains various
covenants requiring certain minimum financial ratios and results.
The Company also has a mortgage warehouse facility with a bank under which
the Company may borrow up to $75 million, subject to a defined borrowing
base. Aggregate borrowings of $7.3 million and $.3 million were outstanding
as of December 31, 1997 and June 30, 1997, respectively. Borrowings under
the facility are collateralized by certain mortgage receivables and bear
interest at LIBOR plus 1%. The Company is also required to pay an annual
commitment fee equal to 1/8% of the unused portion of the facility. In
February 1998, the Company extended the maturity of the facility to February
1999.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following
(in thousands):
Six Months Ended
December 31,
----------------------
1997 1996
------- -------
Interest costs (none capitalized) $12,661 $ 6,456
Income taxes 7,412 228
During the six months ended December 31, 1997 and 1996, the Company entered
into capital lease obligations of $1,543,000 and $1,258,000 respectively, for
the purchase of certain equipment.
NOTE 6 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's 9 1/4%
Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are
wholly-owned consolidated subsidiaries of the Company and are jointly,
severally and unconditionally liable for the obligations represented by the 9
1/4% Senior Notes. The Company believes that the condensed consolidating
financial information for the Company, the combined Subsidiary Guarantors and
the combined Non-Guarantor Subsidiaries provide information that is more
9
meaningful in understanding the financial position of the Subsidiary
Guarantors than separate financial statements of the Subsidiary Guarantors.
Therefore, the separate financial statements of the Subsidiary Guarantors are
not deemed material.
The following supplemental schedules present consolidating financial
information for (i) AmeriCredit Corp. (on a parent only basis), (ii) the
combined Subsidiary Guarantors, (iii) the combined Non-Guarantor
Subsidiaries, (iv) an elimination column for adjustments to arrive at the
information for the Company and its subsidiaries on a consolidated basis and
(v) the Company and its subsidiaries on a consolidated basis.
Investments in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment
accounts and earnings. The principal elimination entries set forth below
eliminate investments in subsidiaries and intercompany balances and
transactions.
10
AmeriCredit Corp.
Consolidating Balance Sheet
December 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash equivalents $ $ (1,025) $ 3,292 $ $ 2,267
Investment securities 6,500 6,500
Finance receivables, net 125,421 132,370 257,791
Excess servicing receivable (1,560) 10,670 170,678 179,788
Restricted cash 76,170 76,170
Property and equipment, net 137 17,095 17,232
Goodwill 7,112 7,112
Other assets 5,409 6,915 3,111 15,435
Due (to) from affiliates 267,917 (161,635) (106,282)
Investment in affiliates 95,361 13,921 2 (109,284)
-------- --------- -------- --------- --------
Total assets $373,764 $ 18,474 $ 279,341 $(109,284) $562,295
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ $ 2,100 $ $ $ 2,100
Mortgage warehouse facility 7,281 7,281
Commercial paper warehouse facility 95,989 95,989
Automobile receivables-backed
notes 14,138 14,138
9 1/4% Senior Notes 125,000 125,000
Notes payable 4,429 29 4,458
Accrued taxes and expenses 9,341 27,398 1,880 38,619
Deferred income taxes (19,952) (11,034) 50,750 19,764
-------- --------- -------- --------- --------
Total liabilities 118,818 25,774 162,757 307,349
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock 338 203 3 (206) 338
Additional paid-in capital 213,890 108,336 13,921 (122,257) 213,890
Unrealized gain on excess
servicing receivable 3,410 3,410 (3,410) 3,410
Retained earnings 60,841 (115,839) 99,250 16,589 60,841
-------- --------- -------- --------- --------
278,479 (7,300) 116,584 (109,284) 278,479
Treasury stock (23,533) (23,533)
-------- --------- -------- --------- --------
Total shareholders' equity 254,946 (7,300) 116,584 (109,284) 254,946
-------- --------- -------- --------- --------
Total liabilities and
shareholders' equity $373,764 $ 18,474 $279,341 $(109,284) $562,295
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
11
AmeriCredit Corp.
Consolidating Balance Sheet
June 30, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash equivalents $ $ 3,988 $ 2,039 $ $ 6,027
Investment securities 6,500 6,500
Finance receivables, net 240,912 25,745 266,657
Excess servicing receivable (777) 12,096 103,057 114,376
Restricted cash 67,895 67,895
Property and equipment, net 136 13,748 13,884
Goodwill 7,260 7,260
Other assets 4,447 5,304 1,103 10,854
Due (to) from affiliates 277,369 (197,656) (79,713)
Investment in affiliates 56,764 (56,764)
-------- --------- -------- --------- --------
Total assets $344,439 $ 85,652 $120,126 $ (56,764) $493,453
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ $ 71,700 $ $ $ 71,700
Mortgage warehouse facility 345 345
Automobile receivables-backed
notes 23,689 23,689
9 1/4% Senior Notes 125,000 125,000
Notes payable 3,484 33 3,517
Deferred income taxes (8,669) (5,547) 27,520 13,304
Accrued taxes and expenses 8,088 27,987 3,287 39,362
-------- --------- -------- --------- --------
Total liabilities 127,903 94,518 54,496 276,917
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock 333 203 3 (206) 333
Additional paid-in capital 203,544 98,336 (98,336) 203,544
Unrealized gain on excess
servicing receivable 2,954 2,954 (2,954) 2,954
Retained earnings 33,466 (107,405) 62,673 44,732 33,466
-------- --------- -------- --------- --------
240,297 (8,866) 65,630 (56,764) 240,297
Treasury stock (23,761) (23,761)
-------- --------- -------- --------- --------
Total shareholders' equity 216,536 (8,866) 65,630 (56,764) 216,536
-------- --------- -------- --------- --------
Total liabilities and
shareholders' equity $344,439 $ 85,652 $120,126 $ (56,764) $493,453
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
12
AmeriCredit Corp.
Consolidating Income Statement
Six Months Ended December 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $ 20,213 $ 5,977 $ $ 26,190
Gain on sale of receivables (4,903) 3,321 55,357 53,775
Servicing fee income 42,256 3,721 (26,786) 19,191
Investment income 14,920 127 2,211 (14,688) 2,570
Other income 344 158 502
Equity in income of
affiliates 28,143 (28,143)
------- -------- ------- -------- --------
38,160 66,261 67,424 (69,617) 102,228
------- -------- ------- -------- --------
Costs and expenses:
Operating expenses 4,948 63,758 (4) (26,786) 41,916
Provision for losses 3,755 3,755
Interest expense 6,318 12,462 7,953 (14,688) 12,045
------- -------- ------- -------- --------
11,266 79,975 7,949 (41,474) 57,716
------- -------- ------- -------- --------
Income before income taxes 26,894 (13,714) 59,475 (28,143) 44,512
Provision for income taxes (481) (5,280) 22,898 17,137
------- -------- ------- -------- --------
Net income $27,375 $ (8,434) $36,577 $(28,143) $ 27,375
------- -------- ------- -------- --------
------- -------- ------- -------- --------
13
AmeriCredit Corp.
Consolidating Income Statement
Six Months Ended December 31, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ $16,339 $ 5,164 $ $21,503
Gain on sale of receivables 300 27,851 28,151
Servicing fee income 24,032 1,625 (17,415) 8,242
Investment income 6,775 89 904 (6,616) 1,152
Other income 28 260 334 622
Equity in income of
affiliates 13,593 (13,593)
------- ------- ------- -------- -------
20,396 41,020 35,878 (37,624) 59,670
------- ------- ------- -------- -------
Costs and expenses:
Operating expenses 2,144 35,885 1,133 (17,415) 21,747
Provision for losses 3,231 3,231
Interest expense 26 7,839 5,363 (6,616) 6,612
------- ------- ------- -------- -------
2,170 46,955 6,496 (24,031) 31,590
------- ------- ------- -------- -------
Income before income taxes 18,226 (5,935) 29,382 (13,593) 28,080
Income tax provision 956 139 9,715 10,810
------- ------- ------- -------- -------
Net income $17,270 $(6,074) $19,667 $(13,593) $17,270
------- ------- ------- -------- -------
------- ------- ------- -------- -------
14
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Six Months Ended December 31, 1997
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
---------- ---------- -------------- ------------ ------------
Cash flows from operating activities:
Net income $ 27,375 $ (8,434) $ 36,577 $ (28,143) $ 27,375
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 22 1,892 1,914
Provision for losses 3,755 3,755
Deferred income taxes (7,771) (5,487) 22,901 9,643
Gain on sale of auto receivables 4,903 (1,077) (55,357) (51,531)
Amortization of excess servicing
receivable (4,120) 2,503 24,735 23,118
Equity in income of affiliates (28,143) 28,143
Changes in assets and liabilities:
Other assets (962) (1,611) (2,008) (4,581)
Accrued taxes and expenses 1,253 (589) (1,407) (743)
-------- --------- --------- --------- ---------
Net cash provided (used) by operating
activities (7,443) (9,048) 25,441 8,950
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of auto receivables (686,543) (795,637) 795,637 (686,543)
Originations of mortgage receivables (51,572) (51,572)
Principal collections and recoveries on
receivables 6,085 8,777 14,862
Net proceeds from sale of auto receivables 795,637 644,022 (795,637) 644,022
Net proceeds from sale of mortgage receivables 48,129 48,129
Purchases of property and equipment (23) (3,548) (3,571)
Increase in restricted cash (8,275) (8,275)
Net change in investment in affiliates (9,998) (3,921) (2) 13,921
-------- --------- --------- --------- ---------
Net cash provided (used) by investing
activities (10,021) 104,267 (151,115) 13,921 (42,948)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 514,500 514,500
Payments on bank line of credit (584,100) (584,100)
Net increase in commercial paper warehouse
facility 95,989 95,989
Net increase in mortgage warehouse facility 6,936 6,936
Payments on automobile receivables-
backed notes (9,551) (9,551)
Payments on notes payable (598) (4) (602)
Net change in due (to) from affiliates 10,996 (37,564) 26,568
Proceeds from issuance of common stock 7,066 13,921 (13,921) 7,066
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities 17,464 (100,232) 126,927 (13,921) 30,238
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (5,013) 1,253 (3,760)
Cash and cash equivalents at beginning of
period 3,988 2,039 6,027
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ $ (1,025) $ 3,292 $ $ 2,267
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
15
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Six Months Ended December 31, 1996
(Unaudited, Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
---------- ---------- -------------- ------------ ------------
Cash flows from operating activities:
Net income $ 17,270 $ (6,074) $ 19,667 $ (13,593) $ 17,270
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 16 888 904
Provision for losses 3,231 3,231
Deferred income taxes 3,718 (3,174) 10,138 10,682
Gain on sale of auto receivables (27,851) (27,851)
Amortization of excess servicing
receivable 2,943 9,174 12,117
Equity in income of affiliates (13,593) 13,593
Changes in assets and liabilities:
Other assets (487) (119) (1,528) (2,134)
Accrued taxes and expenses (1,974) 11,037 132 9,195
-------- --------- --------- --------- ---------
Net cash provided by operating
activities 4,950 8,732 9,732 23,414
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of auto receivables (354,448) (343,935) 343,935 (354,448)
Originations of mortgage receivables (7,748) (7,748)
Principal collections and recoveries on
receivables 13,484 22,663 36,147
Net proceeds from sale of auto receivables 343,935 332,982 (343,935) 332,982
Net proceeds from sale of mortgage
receivables 4,839 4,839
Purchases of property and equipment 1,273 (2,897) (1,624)
Proceeds from maturities of investment
securities 55 55
Increase in restricted cash (31,023) (31,023)
Net change in investment in affiliates 942 (942)
-------- --------- --------- --------- ---------
Net cash provided (used) by investing
activities 2,270 (3,777) (19,313) (20,820)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 304,400 304,400
Payments on bank line of credit (275,500) (275,500)
Net increase in mortgage warehouse facility 264 264
Payments on automobile receivables-
backed notes (27,304) (27,304)
Payments on notes payable (221) (221)
Net change in due (to) from affiliates (9,178) (25,570) 34,748
Proceeds from issuance of common stock 3,100 3,100
Purchase of treasury stock (4,387) (4,387)
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities (10,686) 3,594 7,444 352
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (3,466) 8,549 (2,137) 2,946
Cash and cash equivalents at beginning of
period (4,913) (87) 7,145 2,145
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ (8,379) $ 8,462 $ 5,008 $ $ 5,091
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates earnings and cash flow primarily through the purchase,
securitization and servicing of auto receivables. The Company purchases auto
finance contracts from franchised and select independent automobile dealerships.
To fund the acquisition of receivables prior to securitization, the Company
utilizes borrowings under its warehouse credit facilities. The Company generates
finance charge income on its receivables pending securitization ("owned
receivables") and pays interest expense on borrowings under its warehouse credit
facilities.
The Company sells receivables to securitization trusts ("Trusts") or special
purpose finance subsidiaries that, in turn, sell asset-backed securities to
investors. By securitizing its receivables, the Company is able to lock in the
gross interest rate spread between the yield on such receivables and the
interest rate payable on the asset-backed securities. The Company recognizes a
gain on the sale of receivables to the Trusts, which represents the difference
between the sale proceeds to the Company, net of transaction costs, and the
Company's net carrying value of the receivables, plus the present value of the
estimated future excess cash flows to be received by the Company over the life
of the securitization. Excess cash flows result from the difference between the
interest received from the obligors on the receivables and the interest paid to
investors in the asset-backed securities, net of credit losses and expenses.
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"),
which originates and sells home equity mortgage loans. The acquisition was
accounted for as a purchase, and the results of operations for AMS have been
included in the consolidated financial statements since the acquisition date.
Receivables originated in this business are referred to as mortgage receivables.
Such receivables are generally packaged and sold for cash on a servicing
released, whole-loan basis. The Company recognizes a gain at the time of sale.
17
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AS COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1996
REVENUE:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
Three Months Ended
December 31,
-------------------------
1997 1996
---- ----
Auto:
Owned $ 244,597 $215,644
Serviced 1,248,876 486,087
---------- --------
1,493,473 701,731
Mortgage 14,565 4,753
---------- --------
$1,508,038 $706,484
---------- --------
---------- --------
Average managed receivables outstanding increased by 113% as a result of higher
loan purchase volume. The Company purchased $341.2 million of auto loans during
the three months ended December 31, 1997, compared to purchases of $183.5
million during the three months ended December 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 108 auto
lending branch offices as of December 31, 1997, compared to 66 as of December
31, 1996.
The Company purchased $24.2 million of mortgage loans during the three months
ended December 31, 1997 as compared to $7.7 million from the date of acquisition
of AMS through December 31, 1996.
Finance charge income consisted of the following (in thousands):
Three Months Ended
December 31,
-----------------------
1997 1996
---- ----
Auto $ 12,786 $ 10,708
Mortgage 343 31
-------- --------
$ 13,129 $ 10,739
-------- --------
-------- --------
The increase in finance charge income is due primarily to a 13% increase in
average owned auto receivables outstanding for the three months ended
December 31, 1997 versus the three months ended December 31, 1996.
18
The Company's effective yield on its owned auto receivables increased to 20.7%
for the three months ended December 31, 1997 from 19.7% for the three months
ended December 31, 1996.
The gain on sale of receivables consists of the following (in thousands):
Three Months Ended
December 31,
---------------------
1997 1996
---- ----
Auto $26,679 $15,261
Mortgage 1,054 300
------- -------
$27,733 $15,561
------- -------
------- -------
The increase in gain on sale of auto receivables resulted from the sale of
$350.0 million of receivables in the three months ended December 31, 1997 as
compared to $190.4 million of receivables sold in the three months ended
December 31, 1996. The gains amounted to 7.6% and 8.0% of the sales proceeds
for the three months ended December 31, 1997 and 1996, respectively.
The gain on sale of mortgage receivables resulted from the sale of $23.2 million
of mortgage receivables in the three months ended December 31, 1997 as compared
to $4.8 million of mortgage receivables sold from the date of acquisition of AMS
through December 31, 1996.
Servicing fee income increased to $10.5 million, or 3.3% of average serviced
auto receivables, for the three months ended December 31, 1997, as compared
to $4.6 million, or 3.8% of average serviced auto receivables, for the three
months ended December 31, 1996. Servicing fee income represents accretion of
the present value discount on estimated future excess cash flows from the
Trusts, base servicing fees and other fees earned by the Company as servicer
of the auto receivables sold to the Trusts. The growth in servicing fee
income is primarily due to the increase in average serviced auto receivables
outstanding for the three months ended December 31, 1997 compared to the
three months ended December 31, 1996.
Investment income increased to $1.3 million for the three months ended
December 31, 1997 from $.7 million for the three months ended December 31,
1996 primarily as a result of higher restricted cash balances. Restricted
cash is used as credit enhancement for the Trusts and generally increases as
greater amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed auto
receivables outstanding decreased to 5.8% (5.5% excluding operating expenses
of $1.3 million related to the mortgage business) for the three months ended
December 31, 1997 as compared to 6.7% (6.5% excluding operating expenses of
$.4
19
million related to the mortgage business) for the three months ended December
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 $9.9 million, or 83%, 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 increased to $1.8 million for the three months ended
December 31, 1997 as compared to $1.6 million for the three months ended
December 31, 1996 due to higher average owned auto receivables outstanding.
Interest expense increased to $6.2 million for the three months ended
December 31, 1997 from $3.4 million for the three months ended December 31,
1996 due to higher debt levels and effective interest rates. Average debt
outstanding was $271.7 million and $169.3 million for the three months ended
December 31, 1997 and 1996, respectively. The Company's effective rate of
interest paid on its debt increased to 9.1% 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 was 38.5% for the three months ended
December 31, 1997 and 1996, respectively.
SIX MONTHS ENDED DECEMBER 31, 1997 AS COMPARED TO
SIX MONTHS ENDED DECEMBER 31, 1996
REVENUE:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
Six Months Ended
December 31,
-------------------------
1997 1996
---- ----
Auto:
Owned $ 245,296 $217,156
Serviced 1,130,318 424,366
---------- ---------
1,375,614 641,522
Mortgage 11,534 4,753
---------- ---------
$1,387,148 $646,275
---------- ---------
---------- ---------
Average managed receivables outstanding increased by 115% as a result of
higher loan purchase volume. The Company purchased $696.3 million of auto
loans during the six months ended December 31, 1997, compared to purchases of
$359.4 million during the six months ended December 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
108 auto lending branch offices as of December 31, 1997, compared to 66 as of
December 31, 1996.
20
The Company purchased $51.6 million of mortgage loans during the six months
ended December 31, 1997 as compared to $7.7 million from the date of acquisition
of AMS through December 31, 1996.
Finance charge income consisted of the following (in thousands):
Six Months Ended
December 31,
-------------------------
1997 1996
---- ----
Auto $ 25,645 $ 21,472
Mortgage 545 31
-------- --------
$ 26,190 $ 21,503
-------- --------
-------- --------
The increase in finance charge income is due primarily to an increase of 13% in
average owned auto receivables outstanding for the six months ended December 31,
1997 versus the six months ended December 31, 1996.
The Company's effective yield on its owned auto receivables increased to 20.7%
for the six months ended December 31, 1997 from 19.6% for the six months ended
December 31, 1996.
The gain on sale of receivables consists of the following (in thousands):
Six Months Ended
December 31,
--------------------
1997 1996
----- ----
Auto $51,531 $27,851
Mortgage 2,244 300
------- -------
$53,775 $28,151
------- -------
------- -------
The increase in gain on sale of auto receivables resulted from the sale of
$682.5 million of receivables in the six months ended December 31, 1997 as
compared to $345.6 million of receivables sold in the six months ended December
31, 1996. The gains amounted to 7.6% and 8.1% of the sales proceeds for the six
months ended December 31, 1997 and 1996, respectively.
The gain on sale of mortgage receivables resulted from the sale of $48.1 million
of mortgage receivables in the six months ended December 31, 1997 as compared to
$4.8 million of mortgage receivables sold from the date of acquisition of AMS
through December 31, 1996.
Servicing fee income increased to $19.2 million, or 3.4% of average serviced
auto receivables, for the six months ended December 31, 1997, as compared to
$8.2 million, or 3.9% of average serviced auto receivables, for the six months
21
ended December 31, 1996. Servicing fee income represents accretion of the
present value discount on estimated future excess cash flows from the Trusts,
base servicing fees and other fees earned by the Company as servicer of the auto
receivables sold to the Trusts. The growth in servicing fee income is primarily
due to the increase in average serviced auto receivables outstanding for the six
months ended December 31, 1997 compared to the six months ended December 31,
1996.
Investment income increased to $2.6 million for the six months ended December
31, 1997 from $1.2 million for the six months ended December 31, 1996 primarily
as a result of higher restricted cash balances. Restricted cash is used as
credit enhancement for the Trusts and generally increases as greater amounts of
receivables are sold to the Trusts.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 6.0% (5.7% excluding operating expenses of $2.6 million
related to the mortgage business) for the six months ended December 31, 1997 as
compared to 6.7% (6.6% excluding operating expenses of $.4 million related to
the mortgage business) for the six months ended December 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 $20.2 million,
or 93%, 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 increased to $3.8 million for the six months ended
December 31, 1997 as compared to $3.2 million for the six months ended December
31, 1996 due to higher average owned auto receivables outstanding.
Interest expense increased to $12.0 million for the six months ended December
31, 1997 from $6.6 million for the six months ended December 31, 1996 due to
higher debt levels and effective interest rates. Average debt outstanding
was $257.6 million and $165.7 million for the six months ended December 31,
1997 and 1996, respectively. The Company's effective rate of interest paid
on its debt increased to 9.3% 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 was 38.5% for the six months ended
December 31, 1997 and 1996, respectively.
FINANCE RECEIVABLES
The Company provides financing in relatively high-risk markets, and therefore,
charge-offs are anticipated. The Company records a periodic provision for
losses as a charge to operations and a related allowance for losses in the
consolidated balance sheets as a reserve against estimated future losses in the
owned auto receivables portfolio. The Company typically purchases individual
22
finance contracts for a non-refundable acquisition fee on a non-recourse basis.
Such acquisition fees are also recorded in the consolidated balance sheets as an
allowance for losses. When the Company sells auto receivables to the Trusts,
the calculation of the gain on sale of receivables is reduced by an estimate of
future credit losses expected over the life of the auto receivables sold.
The Company sells mortgage receivables for cash on a servicing released,
whole-loan basis. Such receivables are generally held by the Company for
less than 90 days. Accordingly, no allowance for losses is provided by the
Company for the mortgage receivables.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports,
estimates of the value of the underlying collateral, economic conditions and
trends and other information in order to make the necessary judgments as to
the appropriateness of the provisions for losses and the allowance for
losses. Although the Company uses many resources to assess the adequacy of
the allowance for losses, there is no precise method for accurately
estimating the ultimate losses in the receivables portfolio.
23
The following table presents certain data related to the receivables portfolio
(dollars in thousands):
December 31,
1997
-------------------------------------------------------------
Balance
Auto Sheet Auto Managed
Owned Mortgage Total Serviced Portfolio
----- -------- ----- -------- ---------
Principal amount of receivables $261,333 $ 7,808 $269,141 $1,337,940 $1,599,273 (2)
---------- ----------
---------- ----------
Allowance for losses (11,350) (11,350) $ (112,294) (1) $ (123,644)(2)
-------- ------- -------- ---------- ----------
---------- ----------
Finance receivables, net $249,983 $ 7,808 $257,791
-------- ------- --------
-------- ------- --------
Number of outstanding contracts 23,538 72 129,420 152,958 (2)
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 11,103 $108,444 $ 10,338 $ 10,456 (2)
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Allowance for losses as a percentage
of receivables 4.3% 8.4% 7.7%(2)
--- --- ---
--- --- ---
(1) The allowance for losses related to serviced auto receivables is netted
against excess servicing receivable in the Company's consolidated
balance sheets.
(2) Includes auto receivables only.
The following is a summary of managed auto receivables which are (i) more than
60 days delinquent, but not in repossession, and (ii) in repossession (dollars
in thousands):
December 31,
--------------------
1997 1996
---- ----
Delinquent contracts $57,186 $28,251
Delinquent contracts as a percentage
of managed auto receivables 3.6% 3.7%
Contracts in repossession $22,012 $12,149
Contracts in repossession as a percentage
of managed auto receivables 1.4% 1.6%
In accordance with its policies and guidelines, the Company at times offers
payment deferrals to customers, whereby the customer is allowed to move a
delinquent payment to the end of the loan by paying a fee (approximately the
interest portion of the payment deferred). Contracts receiving a payment
deferral as a percentage of average managed auto receivables were 4.7% and 4.9%
for the three months ended December 31, 1997 and 1996, respectively, and 9.1%
and 8.9% for the six months ended December 31, 1997 and 1996, respectively.
24
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Net charge-offs:
Owned $ 2,722 $4,314 $ 5,624 $ 9,065
Serviced 17,907 5,397 32,449 8,684
------- ------ ------- -------
$20,629 $9,711 $38,073 $17,749
------- ------ ------- -------
------- ------ ------- -------
Net charge-offs as an
annualized percentage of
average managed auto
receivables outstanding 5.5% 5.5% 5.5% 5.5%
------- ------ ------- -------
------- ------ ------- -------
The Company began its indirect automobile finance business in September 1992 and
has grown its managed auto receivables portfolio to $1.6 billion as of December
31, 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.
25
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
Six Months Ended
December 31,
--------------------------
1997 1996
---- ----
Operating activities $ 8,950 $ 23,414
Investing activities (42,948) (20,820)
Financing activities 30,238 352
-------- --------
Net(decrease)increase in
cash and cash equivalents $ (3,760) $ 2,946
-------- --------
-------- --------
The Company's primary sources of cash have been collections and recoveries on
its receivables portfolio, borrowings under its warehouse credit facilities,
sales of auto receivables to Trusts in securitization transactions, excess cash
flow distributions from the Trusts and the issuance of its 9 1/4% Senior Notes.
The Company's line of credit arrangement with a group of banks provides for
borrowings up to $310 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 1998. A total of $2.1 million was
outstanding under the line of credit as of December 31, 1997.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse financing
is available to the Company. The Company utilizes this facility to fund auto
receivables pending securitization. The facility matures in October 1998. A
total of $96.0 million was outstanding under this facility as of December 31,
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 mortgage loan originations. In February 1998, the Company extended the
maturity of this facility to February 1999. A total of $7.3 million was
outstanding under the mortgage warehouse facility as of December 31, 1997.
In November 1997, the Company completed its eleventh securitization transaction
with the issuance of $400 million of asset-backed securities through the
AmeriCredit Automobile Receivables Trust 1997-D. The proceeds from the
transaction were used to repay the borrowings then outstanding under the
Company's warehouse facilities.
In January 1998, the Company issued an additional $50 million of its 9 1/4%
Senior Notes which are due in February 2004. These additional notes have
substantially the same terms as the Company's original $125 million of 9 1/4%
Senior Notes issued in February 1997.
26
The Company's primary use of cash has been purchases and originations of
receivables. The Company purchased $696.3 million of auto finance contracts
during the three months ended December 31, 1997 requiring cash of $686.5
million, net of acquisition fees and other items. The Company operated 108 auto
lending branch offices as of December 31, 1997 and plans to open 17 additional
branches in the remainder of 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 of 4,594,700 shares at
an aggregate purchase price of $27.3 million had been purchased pursuant to this
program through December 31, 1997, although no common stock has been repurchased
since September 1996. Certain restrictions contained in the Indenture pursuant
to which the 9 1/4% Senior Notes were issued limit the amount of common stock
which may be repurchased by the Company.
As of December 31, 1997, the Company had $8.8 million in cash and cash
equivalents and investment securities. The Company also had available borrowing
capacity of $77.5 million under its bank line of credit pursuant to the
borrowing base requirement of such credit agreement and issued an additional $50
million of its 9 1/4% Senior Notes in January 1998. The Company estimates that
it will require additional external capital for the remainder of fiscal 1998 in
addition to these existing capital resources and collections and recoveries on
its receivables portfolio and excess cash flow distributions from the Trusts in
order to fund expansion of its lending activities, capital expenditures, and
other costs and expenses.
The Company anticipates that such funding will be in the form of additional
securitization transactions. There can be no assurance that funding will be
available to the Company through these sources, or if available, that it will be
on terms acceptable to the Company.
Since the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in
interest rates impact the Company's profitability. The Company utilizes
several strategies to minimize the risk of interest rate fluctuations,
including the use of hedging instruments, the regular sale of auto
receivables to the Trusts and pre-funding securitizations, whereby the amount
of asset-backed securities issued in a securitization exceeds the amount of
receivables initially sold to the Trust. The proceeds from the pre-funded
portion are held in an escrow account until the Company sells additional
receivables to the Trust in amounts up to the balance of the pre-funded
escrow account. In pre-funded securitizations, the Company locks in the
borrowing costs with respect to the loans it subsequently delivers to the
Trust. However, the Company incurs an expense in pre-funded securitizations
equal to the difference between the money market yields earned on the
proceeds held in escrow prior to
27
subsequent delivery of receivables and the interest rate paid on the
asset-backed securities outstanding. There can be no assurance that these
strategies will be effective in minimizing interest rate risk or that
increases in interest rates will not have an adverse effect on the Company's
profitability.
YEAR 2000 ISSUE
The Company is in the preliminary stages of investigating the impact of the year
2000 issue and developing a remediation plan. The year 2000 issue is whether the
Company's or its vendors' computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company is in the process of conducting an initial assessment of applicable
computer systems to identify the systems that could be affected by the year 2000
issue and has determined that modification or replacement of portions of
existing software will be required. The Company is utilizing both internal and
external resources to identify, modify or replace and test systems for year 2000
compliance. The Company plans to complete application modifications and
upgrades by December 31, 1998, with testing to take place in the first quarter
of calendar year 1999. While the Company has not yet fully evaluated the cost
of year 2000 compliance, such costs are not expected to be material to the
Company's results of operations and liquidity.
The Company presently believes that with modifications to existing software and
conversion to new software, the year 2000 issue will not pose significant
operational problems for the Company's computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have a material impact on the operations of the Company.
In addition, there can be no assurance that unforeseen problems in the Company's
computer systems, or the systems of third parties on which the Company's
computers rely, would not have an adverse effect on the Company's systems or
operations.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the matters discussed
above are forward looking statements that involve risks and uncertainties
including competitive factors, the management of growth, and other risks
detailed from time to time in the Company's filings and reports with the
Securities and Exchange Commission including the Company's Annual Report on Form
10-K for the year ended June 30, 1997. Such statements are only predictions and
actual events or results may differ materially.
28
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures required pursuant to Item 305 of Regulation S-K are not yet
effective for the Company. Such disclosures will be included in the
Company's filings commencing with its Annual Report on Form 10-K for the year
ending June 30, 1998.
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
On November 5, 1997, the Company held its Annual Meeting of
Shareholders. The shareholders voted upon the election of eight
directors, an amendment to increase the number of shares reserved
under the 1995 Omnibus Stock and Incentive Plan for AmeriCredit
Corp. (the "1995 Plan") and the ratification of the appointment
of the Company's independent auditors. Each of the eight nominees
identified in the Company's proxy statement, filed pursuant to
Rule 14a-6 of the Securities Exchange Act of 1934, were elected
at the meeting to hold office until the next annual meeting or
until their successors are duly elected and qualified. The
shareholders approved the amendment to the 1995 Plan, with
12,362,669 shares voting in favor, 8,620,234 shares voting
against and 91,479 shares withheld. The Company's selection of
independent auditors was also ratified.
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Restated Revolving Credit Agreement, dated as of October
3,1997, between AmeriCredit Corp. and subsidiaries, Wells
Fargo Bank (Texas), National Association, Bank One Texas, N.A.
and other banks named therein.
10.2 Sale and Servicing Agreement, dated as of October 8, 1997,
between CP Funding Corp., AmeriCredit
30
Financial Services, Inc., and The Chase Manhattan Bank.
10.3 Funding Agreement, dated as of October 8, 1997, between CP
Funding Corp., Park Avenue Receivables Corporation, The Chase
Manhattan Bank, and other financial institutions named
therein.
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 December 31, 1997.
Certain subsidiaries and affiliates of the Company filed
reports on Form 8-K during the quarterly period ended December
31, 1997 reporting monthly information related to
securitization trusts.
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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: February 13, 1998 By: /s/ Daniel E. Berce
-----------------------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
32