<PAGE>
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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission file number 1-10667
----------------------------------------------------
AmeriCredit Corp.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2291093
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Bailey Avenue, Fort Worth, Texas 76107
- --------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(817) 332-7000
- --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 29,889,673 shares of common stock, $.01 par value outstanding as of
October 31, 1997.
<PAGE>
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Consolidated Balance Sheets -
September 30, 1997 and June 30, 1997. . . . . . . . . . . . . . . 3
Consolidated Statements of Income -
Three Months Ended September 30, 1997 and 1996. . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Three Months Ended September 30, 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 . . . . . . . . . . . . . . . . . . . . . . . . . 25
Part II. OTHER INFORMATION
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2
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PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
September 30, June 30,
ASSETS 1997 1997
---- ----
Cash and cash equivalents $ 2,165 $ 6,027
Investment securities 6,500 6,500
Finance receivables, net 276,170 266,657
Excess servicing receivable 148,009 114,376
Restricted cash 79,890 67,895
Property and equipment, net 15,901 13,884
Goodwill 7,186 7,260
Other assets 12,745 10,854
-------- --------
Total assets $548,566 $493,453
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ 97,000 $ 71,700
Mortgage warehouse facility 6,295 345
Automobile receivables-backed notes 18,407 23,689
9 1/4% Senior Notes 125,000 125,000
Notes payable 4,000 3,517
Accrued taxes and expenses 40,112 39,362
Deferred income taxes 20,114 13,304
-------- --------
Total liabilities 310,928 276,917
-------- --------
Shareholders' equity:
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 33,695,603 and
33,255,173 shares issued 337 333
Additional paid-in capital 210,465 203,544
Unrealized gain on excess servicing
receivable, net of income taxes 3,709 2,954
Retained earnings 46,660 33,466
-------- --------
261,171 240,297
Treasury stock, at cost
(3,921,028 and 3,959,071 shares) (23,533) (23,761)
-------- --------
Total shareholders' equity 237,638 216,536
-------- --------
Total liabilities and shareholders'
equity $548,566 $493,453
-------- --------
-------- --------
The accompanying notes are an integral part
of these consolidated financial statements
3
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AMERICREDIT CORP.
Consolidated Statements of Income
(Unaudited, Dollars in Thousands, Except Per Share Data)
Three Months Ended
September 30,
---------------------
1997 1996
---- ----
Revenue:
Finance charge income $ 13,061 $ 10,764
Gain on sale of receivables 26,042 12,590
Servicing fee income 8,713 3,643
Investment income 1,280 468
Other income 194 330
----------- -----------
49,290 27,795
----------- -----------
Costs and expenses:
Operating expenses 20,091 9,827
Provision for losses 1,906 1,617
Interest expense 5,839 3,226
----------- -----------
27,836 14,670
----------- -----------
Income before income taxes 21,454 13,125
Income tax provision 8,260 5,053
----------- -----------
Net income $ 13,194 $ 8,072
----------- -----------
----------- -----------
Earnings per share $ .41 $ .27
----------- -----------
----------- -----------
Weighted average shares
and share equivalents 31,991,958 30,118,939
----------- -----------
----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements
4
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
Three Months Ended
September 30,
------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 13,194 $ 8,072
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 853 433
Provision for losses 1,906 1,617
Deferred income taxes 8,121 4,501
Gain on sale of auto receivables (24,852) (12,590)
Amortization of excess servicing receivable 9,655 5,493
Changes in assets and liabilities:
Other assets (1,891) (180)
Accrued taxes and expenses 750 7,361
--------- ---------
Net cash provided by operating activities 7,736 14,707
--------- ---------
Cash flows from investing activities:
Purchases of auto receivables (350,359) (172,549)
Originations of mortgage receivables (27,393)
Principal collections and recoveries on
receivables 10,118 18,727
Net proceeds from sale of auto receivables 314,075 151,953
Net proceeds from sale of mortgage receivables 24,969
Purchases of property and equipment (2,028) (1,120)
Proceeds from maturities of investment
securities 55
Increase in restricted cash (11,995) (15,864)
--------- ---------
Net cash used by investing activities (42,613) (18,798)
--------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 264,000 142,800
Payments on bank line of credit (238,700) (119,000)
Net increase in mortgage warehouse facility 5,950
Payments on automobile receivables-backed notes (5,282) (13,416)
Payments on notes payable (285) (92)
Proceeds from issuance of common stock 5,332 1,962
Purchase of treasury stock (4,387)
--------- ---------
Net cash provided by financing activities 31,015 7,867
--------- ---------
Net increase (decrease) in cash and cash
equivalents (3,862) 3,776
Cash and cash equivalents at beginning of period 6,027 2,145
--------- ---------
Cash and cash equivalents at end of period $ 2,165 $ 5,921
--------- ---------
--------- ---------
The accompanying notes are an integral part
of these consolidated financial statements
5
<PAGE>
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 September 30, 1997 and for the
periods ended September 30, 1997 and 1996 are unaudited, but in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such
interim periods. The results for interim periods are not necessarily
indicative of results for a full year.
The interim period financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. Such interim period financial statements should be
read in conjunction with the Company's consolidated financial statements
which were included in the Company's 1997 Annual Report to Shareholders.
NOTE 2 - FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
September 30, June 30,
1997 1997
---- ----
Auto receivables $282,939 $275,249
Less allowance for losses (13,549) (12,946)
-------- --------
Auto receivables, net 269,390 262,303
Mortgage receivables 6,780 4,354
-------- --------
Finance receivables, net $276,170 $266,657
-------- --------
-------- --------
6
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A summary of the allowance for losses is as follows (in thousands):
Three Months Ended
September 30,
----------------------
1997 1996
------- -------
Balance at beginning of period $12,946 $13,602
Provision for losses 1,906 1,617
Acquisition fees 11,365 6,572
Allowance related to auto receivables
sold to Trusts (9,766) (4,442)
Net charge-offs (2,902) (4,751)
------- -------
Balance at end of period $13,549 $12,598
------- -------
------- -------
NOTE 3 - EXCESS SERVICING RECEIVABLE
As of September 30, 1997 and June 30, 1997, the Company was servicing
$1,101,312,000 and $863,006,000, 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):
September 30, June 30,
1997 1997
------------- --------
Interest-only strips $ 77,503 $ 59,933
Subordinated interests:
Retained asset-backed securities 11,278 12,589
Excess of auto receivables in Trusts
over asset-backed securities outstanding 59,228 41,854
-------- --------
$148,009 $114,376
-------- --------
-------- --------
7
<PAGE>
Excess servicing receivable consists of the following (in thousands):
September 30, June 30,
1997 1997
------------- --------
Estimated future excess cash flows before
allowance for credit losses $257,812 $200,869
Allowance for credit losses (94,549) (74,925)
-------- --------
Estimated future excess cash flows 163,263 125,944
Discount to present value (15,254) (11,568)
-------- --------
$148,009 $114,376
-------- --------
-------- --------
A summary of excess servicing receivable is as follows (in thousands):
Three Months Ended
September 30,
----------------------
1997 1996
-------- -------
Balance at beginning of period $114,376 $33,093
Additions 42,059 15,056
Increase in unrealized gain 1,229
Amortization (9,655) (5,493)
-------- -------
Balance at end of period $148,009 $42,656
-------- -------
-------- -------
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
$97,000,000 and $71,700,000 were outstanding as of September 30, 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. Under the funding agreement, the
Company transfers auto receivables to CP Funding Corp. ("CPFC"), a special
purpose finance subsidiary of the Company, and CPFC in turn issues a note,
8
<PAGE>
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 $6,295,000 and $345,000 were outstanding as of
September 30, 1997 and June 30, 1997, respectively. Borrowings under the
facility are collateralized by certain mortgage receivables and bear interest
at 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.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
Three Months Ended
September 30,
------------------
1997 1996
------ ------
Interest costs (none capitalized) $8,630 $2,995
Income taxes 29 4
During the three months ended September 30, 1997, the Company entered into
capital lease obligations of $768,000 for the purchase of certain equipment.
NOTE 6 - RECENT ACCOUNTING DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share, replacing existing accounting standards. The new
standard requires dual presentation of basic and diluted earnings per share
and a reconciliation between the two amounts. Basic earnings per share
excludes dilution, and diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised and converted into common stock. SFAS 128 is effective
for financial statements issued for periods ending after December 15, 1997.
The Company's basic earnings per share computed pursuant to the new standard
would have been
9
<PAGE>
.45 and .28 for the three months ended September 30, 1997 and 1996,
respectively. Diluted earnings per share computed pursuant to the new
standard would not be materially different from earnings per share presented
in the consolidated statements of income.
NOTE 7 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's 9
1/4% Senior Notes 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
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
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
September 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ $ 488 $ 1,677 $ $ 2,165
Investment securities 6,500 6,500
Finance receivables, net 255,329 20,841 276,170
Excess servicing receivable (1,351) 11,383 137,977 148,009
Restricted cash 79,890 79,890
Property and equipment, net 152 15,749 15,901
Goodwill 7,186 7,186
Other assets 6,231 5,316 1,198 12,745
Due (to) from affiliates 264,389 (165,641) (98,748)
Investment in affiliates 85,022 1 2 (85,025)
-------- --------- -------- --------- --------
Total assets $360,943 $ 129,811 $142,837 $(85,025) $548,566
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit $ $ 97,000 $ $ $ 97,000
Mortgage warehouse facility 6,295 6,295
Automobile receivables-backed
notes 18,407 18,407
9 1/4% Senior Notes 125,000 125,000
Notes payable 3,969 31 4,000
Accrued taxes and expenses 5,451 32,701 1,960 40,112
Deferred income taxes (11,115) (6,483) 37,712 20,114
-------- --------- -------- --------- --------
Total liabilities 123,305 129,544 58,079 310,928
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock 337 203 3 (206) 337
Additional paid-in capital 210,465 108,336 (108,336) 210,465
Unrealized gain on excess
servicing receivable 3,709 3,709 (3,709) 3,709
Retained earnings 46,660 (108,272) 81,046 27,226 46,660
-------- --------- -------- --------- --------
261,171 267 84,758 (85,025) 261,171
Treasury stock (23,533) (23,533)
-------- --------- -------- --------- --------
Total shareholders' equity 237,638 267 84,758 (85,025) 237,638
-------- --------- -------- --------- --------
Total liabilities and
shareholders' equity $360,943 $ 129,811 $142,837 $ (85,025) $548,566
-------- --------- -------- --------- --------
-------- --------- -------- --------- --------
</TABLE>
11
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
June 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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
-------- --------- -------- -------- --------
-------- --------- -------- -------- --------
</TABLE>
12
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income $ $12,084 $ 977 $ $13,061
Gain on sale of receivables (1,737) 2,070 25,709 26,042
Servicing fee income 11,380 1,760 (4,427) 8,713
Investment income 2,609 28 1,101 (2,458) 1,280
Other income 118 76 194
Equity in income of
affiliates 17,502 (17,502)
------- ------- ------- -------- -------
18,374 25,680 29,623 (24,387) 49,290
------- ------- ------- -------- -------
Costs and expenses:
Operating expenses 2,630 21,908 (20) (4,427) 20,091
Provision for losses 1,906 1,906
Interest expense 3,174 3,567 1,556 (2,458) 5,839
------- ------- ------- -------- -------
5,804 27,381 1,536 (6,885) 27,836
------- ------- ------- -------- -------
Income before income taxes 12,570 (1,701) 28,087 (17,502) 21,454
Provision for income taxes (624) (794) 9,678 8,260
------- ------- ------- -------- -------
Net income $13,194 $ (907) $18,409 $(17,502) $13,194
------- ------- ------- -------- -------
------- ------- ------- -------- -------
</TABLE>
13
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1996
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income $ $ 7,909 $ 2,855 $ $10,764
Gain on sale of receivables 12,590 12,590
Servicing fee income 11,848 124 (8,329) 3,643
Investment income 3,317 102 299 (3,250) 468
Other income 28 120 182 330
Equity in income of
affiliates 6,384 (6,384)
------- ------- ------- -------- -------
9,729 19,979 16,050 (17,963) 27,795
------- ------- ------- -------- -------
Costs and expenses:
Operating expenses 948 17,235 (27) (8,329) 9,827
Provision for losses 1,617 1,617
Interest expense 15 2,777 3,684 (3,250) 3,226
------- ------- ------- -------- -------
963 21,629 3,657 (11,579) 14,670
------- ------- ------- -------- -------
Income before income taxes 8,766 (1,650) 12,393 (6,384) 13,125
Provision for income taxes 694 42 4,317 5,053
------- ------- ------- -------- -------
Net income (loss) $ 8,072 $(1,692) $ 8,076 $ (6,384) $ 8,072
------- ------- ------- -------- -------
------- ------- ------- -------- -------
</TABLE>
14
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income $ 13,194 $ (907) $ 18,409 $ (17,502) $ 13,194
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 6 847 853
Provision for losses 1,906 1,906
Deferred income taxes (625) (1,446) 10,192 8,121
Gain on sale of auto receivables 1,737 (880) (25,709) (24,852)
Amortization of excess servicing
receivable (1,163) 2,783 8,035 9,655
Equity in income of affiliates (17,502) 17,502
Changes in assets and liabilities:
Other assets (1,784) (12) (95) (1,891)
Accrued taxes and expenses (2,637) 4,714 (1,327) 750
-------- --------- --------- --------- ---------
Net cash provided by operating
activities (8,774) 7,005 9,505 7,736
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of auto receivables (350,359) (331,246) 331,246 (350,359)
Originations of mortgage receivables (27,393) (27,393)
Principal collections and recoveries on
receivables 5,214 4,904 10,118
Net proceeds from sale of auto receivables 331,246 314,075 (331,246) 314,075
Net proceeds from sale of mortgage receivables 24,969 24,969
Purchases of property and equipment (22) (2,006) (2,028)
Increase in restricted cash (11,995) (11,995)
Net change in investment in affiliates (10,000) 10,000
-------- --------- --------- --------- ---------
Net cash used by investing
activities (10,022) (8,329) (24,262) (42,613)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 264,000 264,000
Payments on bank line of credit (238,700) (238,700)
Net increase in mortgage warehouse facility 5,950 5,950
Payments on automobile receivables-backed notes (5,282) (5,282)
Payments on notes payable (283) (2) (285)
Net change in due (to) from affiliates 13,747 (33,424) 19,677
Proceeds from issuance of common stock 5,332 5,332
-------- --------- --------- --------- ---------
Net cash provided by financing
activities 18,796 (2,176) 14,395 31,015
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (3,500) (362) (3,862)
Cash and cash equivalents at beginning of
period 3,988 2,039 6,027
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ $ 488 $ 1,677 $ $ 2,165
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
</TABLE>
15
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 1996
(Unaudited, Dollars in Thousands)
<TABLE>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income $ 8,072 $ (1,692) $ 8,076 $ (6,384) $ 8,072
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 6 427 433
Provision for losses 1,617 1,617
Deferred income taxes (372) 134 4,739 4,501
Gain on sale of auto receivables (12,590) (12,590)
Amortization of excess servicing
receivable 4,361 1,132 5,493
Equity in income of affilities (6,384) 6,384
Changes in assets and liabilities:
Other assets (349) 9 160 (180)
Accrued taxes and expenses (2,429) 9,746 44 7,361
-------- --------- --------- --------- ---------
Net cash provided by operating
activities (1,456) 14,602 1,561 14,707
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of auto receivables (172,549) (154,419) 154,419 (172,549)
Principal collections and recoveries on
receivables 6,012 12,715 18,727
Net proceeds from sale of auto receivables 154,419 151,953 (154,419) 151,953
Purchases of property and equipment (5) (1,115) (1,120)
Proceeds from maturities of investment
securities 55 55
Increase in restricted cash (15,864) (15,864)
Net change in investment in affiliates 1,201 (1,201)
-------- --------- --------- --------- ---------
Net cash used by investing activities 1,251 (14,434) (5,615) (18,798)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on bank line of credit 142,800 142,800
Payments on bank line of credit (119,000) (119,000)
Payments on automobile receivables-
backed notes (13,416) (13,416)
Payments on notes payable (92) (92)
Net change in due (to) from affiliates 782 (17,686) 16,904
Proceeds from issuance of common stock 1,962 1,962
Purchase of treasury stock (4,387) (4,387)
-------- --------- --------- --------- ---------
Net cash provided by financing
activities (1,735) 6,114 3,488 7,867
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (1,940) 6,282 (566) 3,776
Cash and cash equivalents at beginning of
period (4,913) (87) 7,145 2,145
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ (6,853) $ 6,195 $ 6,579 $ $ 5,921
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
</TABLE>
16
<PAGE>
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",
formerly Rancho Vista Mortgage Company"), 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
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
REVENUE:
The Company's average managed receivables outstanding consisted of the
following (in thousands):
Three Months Ended
September 30,
------------------
1997 1996
---- ----
Auto:
Owned $ 245,988 $218,667
Serviced 1,013,034 362,748
---------- --------
1,259,022 581,415
Mortgage 8,502
---------- --------
$1,267,524 $581,415
---------- --------
---------- --------
Average managed receivables outstanding increased by 118% as a result of
higher loan purchase volume. The Company purchased $355.1 million of auto
loans during the three months ended September 30, 1997, compared to purchases
of $175.9 million during the three months ended September 30, 1996. This
growth resulted from loan production at branches open during both periods as
well as expansion of the Company's loan production capacity. The Company
operated 99 auto lending branch offices as of September 30, 1997, compared to
60 as of September 30, 1996.
The Company purchased $27.4 million of mortgage loans during the three months
ended September 30, 1997.
Finance charge income consisted of the following (in thousands):
Three Months Ended
September 30,
------------------
1997 1996
---- ----
Auto $ 12,859 $ 10,764
Mortgage 202
-------- --------
$ 13,061 $ 10,764
-------- --------
-------- --------
The increase in finance charge income is due primarily to an increase of 12%
in average owned auto receivables outstanding for the three months ended
September 30, 1997 versus the three months ended September 30, 1996.
18
<PAGE>
The Company's effective yield on its owned auto receivables increased to
20.7% for the three months ended September 30, 1997 from 19.5% for the three
months ended September 30, 1996.
The gain on sale of receivables consists of the following (in thousands):
Three Months Ended
September 30,
------------------
1997 1996
---- ----
Auto $24,852 $12,590
Mortgage 1,190
------- -------
$26,042 $12,590
------- -------
------- -------
The increase in gain on sale of auto receivables resulted from the sale of
$332.5 million of receivables in the three months ended September 30, 1997 as
compared to $155.2 million of receivables sold in the three months ended
September 30, 1996. The gains amounted to 7.5% and 8.1% of the sales
proceeds for the three months ended September 30, 1997 and 1996,
respectively.
The gain on sale of mortgage receivables resulted from the sale of $25.0
million of mortgage receivables.
Servicing fee income increased to $8.7 million, or 3.4% of average serviced
auto receivables, for the three months ended September 30, 1997, as compared
to $3.6 million, or 4.0% of average serviced auto receivables, for the three
months ended September 30, 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 September 30, 1997 compared to the
three months ended September 30, 1996.
Investment income increased to $1,280,000 for the three months ended
September 30, 1997 from $468,000 for the three months ended September 30,
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 an annualized percentage of average managed receivables
outstanding decreased to 6.3% (5.9% excluding operating expenses of $1.3
million related to the mortgage business) for the three months ended
September 30, 1997 as compared to 6.7% for the three months ended September
30, 1996. The ratio improved as a result of economies of scale realized from
a growing receivables portfolio and automation of loan origination,
processing and
19
<PAGE>
servicing functions. The dollar amount of operating expenses increased by
$10.3 million, or 104%, primarily due to the addition of auto lending branch
offices and management, auto loan processing and servicing staff and the
recently acquired mortgage business.
The provision for losses increased to $1.9 million for the three months ended
September 30, 1997 as compared to $1.6 million for the three months ended
September 30, 1996 due to higher average owned auto receivables outstanding.
Interest expense increased to $5.8 million for the three months ended
September 30, 1997 from $3.2 million for the three months ended September 30,
1996 due to higher debt levels and effective interest rates. Average debt
outstanding was $243.4 million and $163.3 million for the three months ended
September 30, 1997 and 1996, respectively. The Company's effective rate of
interest paid on its debt increased to 9.5% from 7.8% as a result of the
issuance of the 9 1/4% Senior Notes in February 1997.
The Company's effective income tax rate was 38.5% for the three months ended
September 30, 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 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, collections 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.
20
<PAGE>
The following table presents certain data related to the receivables
portfolio (dollars in thousands):
<TABLE>
September 30,
1997
----------------------------------------------------------
Balance
Auto Sheet Auto Managed
Owned Mortgage Total Serviced Portfolio
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables $282,939 $ 6,780 $289,719 $1,101,312 $1,384,251 (2)
---------- ----------
---------- ----------
Allowance for losses (13,549) (13,549) $ (94,549)(1) $ (108,098)(2)
-------- -------- -------- ---------- ----------
---------- ----------
Finance receivables, net $269,390 $ 6,780 $276,170
-------- -------- --------
-------- -------- --------
Number of outstanding contracts 25,594 55 108,294 133,888 (2)
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 11,055 $123,272 $ 10,170 $ 10,339 (2)
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Allowance for losses as a percentage
of receivables 4.8% 8.6% 7.8%(2)
---- ---- ----
---- ---- ----
</TABLE>
(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):
September 30,
--------------------
1997 1996
------- -------
Delinquent contracts $46,531 $22,446
Delinquent contracts as a percentage
of managed auto receivables 3.4% 3.5%
Contracts in repossession $18,571 $8,963
Contracts in repossession as a percentage
of managed auto receivables 1.3% 1.4%
21
<PAGE>
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
Three Months Ended
September 30,
--------------------
1997 1996
------- ------
Net charge-offs:
Owned $ 2,902 $4,751
Serviced 14,542 3,287
------- ------
$17,444 $8,038
------- ------
------- ------
Net charge-offs as an
annualized percentage of
average managed auto
receivables outstanding 5.5% 5.5%
--- ---
--- ---
The Company began its indirect automobile finance business in September 1992
and has grown its managed auto receivables portfolio to $1.4 billion as of
September 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.
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
Three Months Ended
September 30,
------------------
1997 1996
---- ----
Operating activities $ 7,736 $ 14,707
Investing activities (42,613) (18,798)
Financing activities 31,015 7,867
-------- --------
Net(decrease)increase in
cash and cash equivalents $ (3,862) $ 3,776
-------- --------
-------- --------
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.
In October 1997, the Company expanded its line of credit arrangement with a
group of banks to provide for borrowings up to $310 million and extended the
maturity of the facility to October 1998. The Company utilizes the line of
credit to fund its auto lending activities and daily operations. A total of
$97.0 million was outstanding under the line of credit as of September 30,
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.
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 $6.3 million was outstanding under the mortgage
warehouse facility as of September 30, 1997.
In August 1997, the Company completed its tenth securitization transaction
with the issuance of $325 million of asset-backed securities through the
AmeriCredit Automobile Receivables Trust 1997-C. The proceeds from the
transaction were used to repay the borrowings then outstanding under the
Company's bank line of credit.
The Company's primary use of cash has been purchases and originations of
receivables. The Company purchased $355.1 million of auto finance contracts
during the three months ended September 30, 1997 requiring cash of $350.4
million, net of acquisition fees and other items. The Company operated 99
auto lending branch offices as of September 30, 1997 and plans to open 26
additional
23
<PAGE>
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 $27.4 million had been purchased pursuant
to this program through September 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 by the Company.
As of September 30, 1997, the Company had $8.7 million in cash and cash
equivalents and investment securities. The Company also had available
borrowing capacity of $75.6 million under its bank line of credit pursuant to
the borrowing base requirement of such credit agreement. The Company
estimates that it will require additional external capital for the remainder
of fiscal 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 and the issuance of debt or equity securities.
There can be no assurance that funding will be available to the Company
through these sources, or if available, that it will be on terms acceptable
to the Company.
Since the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of 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 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.
24
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures required pursuant to Item 305 of Regulation S-K are not yet
effective for the Company. Such disclosures will be included in the
Company's filings commencing with its Annual Report on Form 10-K for the year
ending June 30, 1998.
25
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Statement Re Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarterly period ended September 30, 1997.
Certain subsidiaries and affiliates of the Company filed reports
on Form 8-K during the quarterly period ended September 30, 1997
reporting monthly information related to securitization trusts.
26
<PAGE>
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: November 12, 1997 By: /s/ Daniel E. Berce
-----------------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
27
<PAGE>
EXHIBIT 11.1
AMERICREDIT CORP.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands, except per share amounts)
Three Months Ended
September 30,
------------------
1997 1996
---- ----
PRIMARY:
Average common shares
outstanding 29,479,547 28,372,506
Common share equivalents
resulting from assumed
exercise of stock options 2,512,411 1,746,433
---------- ----------
Average common shares and
share equivalents
outstanding 31,991,958 30,118,939
---------- ----------
---------- ----------
FULLY DILUTED:
Average common shares
outstanding 29,479,547 28,372,506
Common share equivalents
resulting from assumed
exercise of stock options 2,729,403 2,006,421
---------- ----------
Average common shares and share
equivalents outstanding 32,208,950 30,378,927
---------- ----------
---------- ----------
NET INCOME $13,194 $8,072
------- ------
------- ------
EARNINGS PER SHARE:
Primary $ .41 $ .27
------- ------
------- ------
Fully diluted $ .41 $ .27
------- ------
------- ------
Primary earnings per share has been computed by dividing net income by the
average common shares and share equivalents outstanding. Common share
equivalents were computed using the treasury stock method. The average
common stock market price for the period was used to determine the number of
common share equivalents.
Fully diluted earnings per share has been computed in the same manner as
primary earnings per share except that the higher of the average or end of
28
<PAGE>
period common stock market price was used to determine the number of common
share equivalents.
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCLUDED IN ITS QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 82,055
<SECURITIES> 6,500
<RECEIVABLES> 289,719
<ALLOWANCES> (13,549)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,510
<DEPRECIATION> (4,609)
<TOTAL-ASSETS> 548,566
<CURRENT-LIABILITIES> 0
<BONDS> 250,702
0
0
<COMMON> 337
<OTHER-SE> 237,301
<TOTAL-LIABILITY-AND-EQUITY> 548,566
<SALES> 0
<TOTAL-REVENUES> 49,290
<CGS> 0
<TOTAL-COSTS> 20,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,906
<INTEREST-EXPENSE> 5,839
<INCOME-PRETAX> 21,454
<INCOME-TAX> 8,260
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,194
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
