<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, 1998
------------------
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 62,652,874 shares of common stock, $.01 par value outstanding as of
October 31, 1998.
<PAGE>
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements PAGE
----
Consolidated Balance Sheets -
September 30, 1998 and June 30, 1998...................... 3
Consolidated Statements of Income and Comprehensive
Income - Three Months Ended September 30, 1998 and
1997...................................................... 4
Consolidated Statements of Cash Flows -
Three Months Ended September 30, 1998 and 1997............ 5
Notes to Consolidated Financial
Statements................................................ 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations............................... 18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 28
Part II. OTHER INFORMATION
SIGNATURE ................................................................. 30
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 28,218 $ 33,087
Receivables held for sale, net 386,476 342,853
Interest-only receivables from Trusts 154,486 137,803
Investments in Trust receivables 129,576 117,990
Restricted cash 84,754 68,258
Property and equipment, net 27,337 23,385
Other assets 28,274 25,185
--------- ---------
Total assets $ 839,121 $ 748,561
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ 208,185 $ 165,608
Senior notes 175,000 175,000
Other notes payable 8,285 6,410
Accrued taxes and expenses 60,873 52,241
Deferred income taxes 51,622 43,141
--------- ---------
Total liabilities 503,965 442,400
--------- ---------
Shareholders' equity:
Preferred Stock, $.01 par value
per share; 20,000,000 shares
authorized, none issued
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 70,163,714 and
69,272,948 shares issued 702 693
Additional paid-in capital 238,225 230,295
Accumulated other comprehensive income 6,098 4,431
Retained earnings 113,249 93,860
--------- ---------
358,274 329,279
Treasury stock, at cost
(7,667,318 shares) (23,118) (23,118)
--------- ---------
Total shareholders' equity 335,156 306,161
--------- ---------
Total liabilities and shareholders' equity $ 839,121 $ 748,561
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
3
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Income and Comprehensive Income
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Revenue:
Finance charge income $ 16,917 $ 13,061
Gain on sale of receivables 42,043 26,042
Servicing fee income 15,391 8,713
Investment income 1,302 1,280
Other income 466 194
------------ ------------
76,119 49,290
------------ ------------
Costs and expenses:
Operating expenses 34,059 20,091
Provision for losses 2,188 1,906
Interest expense 8,345 5,839
------------ ------------
44,592 27,836
------------ ------------
Income before income taxes 31,527 21,454
Income tax provision 12,138 8,260
------------ ------------
Net income 19,389 13,194
------------ ------------
Other comprehensive income:
Unrealized gain on interest-
only receivables 2,712 1,265
Less related income tax provision (1,045) (510)
------------ ------------
1,667 755
------------ ------------
Comprehensive income $ 21,056 $ 13,949
------------ ------------
------------ ------------
Earnings per share:
Basic $ .31 $ .22
------------ ------------
------------ ------------
Diluted $ .29 $ .21
------------ ------------
------------ ------------
Weighted average shares 62,339,479 58,959,096
------------ ------------
------------ ------------
Weighted average shares and
assumed incremental shares 66,968,691 63,983,916
------------ ------------
------------ ------------
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,389 $ 13,194
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,820 853
Provision for losses 2,188 1,906
Deferred income taxes 12,289 8,121
Non-cash gain on sale of auto receivables (35,219) (24,769)
Changes in assets and liabilities:
Interest-only receivables from Trusts 21,248 8,464
Other assets (3,163) (1,891)
Accrued taxes and expenses 8,632 750
--------- ---------
Net cash provided by operating activities 27,184 6,628
--------- ---------
Cash flows from investing activities:
Purchases of auto receivables (622,212) (350,798)
Originations of mortgage receivables (38,901) (27,393)
Principal collections and recoveries on receivables 5,464 12,160
Net proceeds from sale of auto receivables 562,296 329,643
Net proceeds from sale of mortgage receivables 47,542 24,969
Increase in investments in Trust receivables (11,586) (16,063)
Increase in restricted cash (16,496) (11,995)
Purchases of property and equipment (3,262) (2,028)
--------- ---------
Net cash used by investing activities (77,155) (41,505)
--------- ---------
Cash flows from financing activities:
Net change in warehouse credit facilities 42,577 31,250
Payments on other notes payable (561) (5,567)
Proceeds from issuance of common stock 3,086 5,332
--------- ---------
Net cash provided by financing activities 45,102 31,015
--------- ---------
Net decrease in cash and cash equivalents (4,869) (3,862)
Cash and cash equivalents at beginning of period 33,087 6,027
--------- ---------
Cash and cash equivalents at end of period $ 28,218 $ 2,165
--------- ---------
--------- ---------
</TABLE>
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, 1998 and for the
periods ended September 30, 1998 and 1997 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. Certain prior year amounts have been reclassified to conform
to the current period presentation. 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. These interim period financial statements should be
read in conjunction with the Company's consolidated financial statements
which are included in the Company's 1998 Annual Report to Shareholders.
The Company's Board of Directors approved a two for one stock split on August 6,
1998 which was effected in the form of a 100% stock dividend for
shareholders of record on September 11, 1998 and paid on September 30, 1998.
In connection with the stock split, $347,000 was transferred from retained
earnings to common stock representing the par value of the additional shares
issued. All share data for the periods presented, except shares authorized,
have been adjusted to reflect the stock split on a retroactive basis.
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), effective
July 1, 1998. SFAS 130 establishes standards for reporting comprehensive
income and its components in a full set of financial statements. The new
standard requires that all items that are required to be recognized under
accounting standards as components of comprehensive income, including an
amount representing total comprehensive income, be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Pursuant to SFAS 130, the Company has reported comprehensive
income in the accompanying Consolidated Statements of Income and
Comprehensive Income. All prior periods presented have been restated to
conform to the requirements of SFAS 130.
6
<PAGE>
NOTE 2 - RECEIVABLES HELD FOR SALE
Receivables held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
Auto receivables $ 384,664 $ 334,110
Less allowance for losses (10,657) (12,756)
--------- ---------
Auto receivables, net 374,007 321,354
Mortgage receivables 12,469 21,499
--------- ---------
$ 386,476 $ 342,853
--------- ---------
--------- ---------
</TABLE>
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------
1998 1997
---- ----
<S> <C> <C>
Balance at beginning of period $12,756 $12,946
Provision for losses 2,188 1,906
Acquisition fees 14,046 11,365
Allowance related to auto receivables
sold to Trusts (16,475) (9,766)
Net charge-offs (1,858) (2,902)
------ ------
Balance at end of period $10,657 $13,549
------ ------
------ ------
</TABLE>
NOTE 3 - INTEREST-ONLY RECEIVABLES FROM TRUSTS
As of September 30, 1998 and June 30, 1998, the Company was servicing $2,332.2
million and $1,968.4 million, respectively, of auto receivables which have been
sold to certain special purpose financing trusts (the "Trusts"). The Company has
retained an interest in these receivables in the form of interest-only strips.
7
<PAGE>
A summary of interest-only receivables is as follows(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Balance at beginning of period $137,803 $ 59,933
Non-cash gain on sale of auto receivables 35,219 24,769
Accretion of present value discount 4,371 1,950
Change in unrealized gain 2,712 1,265
Excess cash flows in the Trusts (22,119) (10,414)
Permanent impairment write-down (3,500)
------- ------
Balance at end of period $154,486 $ 77,503
------- ------
------- ------
</TABLE>
A summary of the allowance for losses included as a component of the
interest-only receivables is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------
1998 1997
---- ----
<S> <C> <C>
Balance at beginning of period $ 176,759 $ 74,925
Assumptions for cumulative credit losses 62,593 34,166
Permanent impairment write-down 3,500
Net charge-offs (28,861) (14,542)
------- -------
Balance at end of period $ 213,991 $ 94,549
------- -------
------- -------
</TABLE>
NOTE 4 - WAREHOUSE CREDIT FACILITIES
Warehouse credit facilities consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
Commercial paper facility $196,703 $140,708
Mortgage facility 11,482 24,900
------ -------
$208,185 $165,608
------ -------
------ -------
</TABLE>
In September 1998, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks and increased the amount of structured warehouse
financing available under the agreement from $245 million to $505 million.
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, collateralized by such auto receivables, to
the
8
<PAGE>
agent. The 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,
London Interbank Offered Rates ("LIBOR") or prime rates plus specified fees
depending upon the source of funds provided by the agent to CPFC. The funding
agreement, which expires in September 1999, contains various covenants
requiring certain minimum financial ratios and results.
The Company has a revolving credit agreement with a group of banks under
which the Company may borrow up to $235 million, subject to a defined
borrowing base. Borrowings under the credit agreement are collateralized by
certain auto receivables and bear interest, based upon the Company's option,
at either the prime rate or 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 April 1999, contains
various restrictive covenants requiring certain minimum financial ratios and
results and placing certain limitations on the incurrence of additional debt,
capital expenditures, cash dividends and repurchase of common stock. There
were no outstanding balances under the credit agreement as of September 30,
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. Borrowings under the facility are collateralized by certain mortgage
receivables and bear interest, based upon the Company's option, at either the
prime rate or LIBOR plus 1%. 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 1999.
NOTE 5 - SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Interest costs (none capitalized) $12,552 $ 8,630
Income taxes 3,502 29
</TABLE>
During the three months ended September 30, 1998 and 1997, the Company entered
into lease agreements for property and equipment of $2,436,000 and $768,000,
respectively.
9
<PAGE>
NOTE 6 - RECENT ACCOUNTING DEVELOPMENTS
On October 22, 1998, the Financial Accounting Standards Board ("FASB") staff
issued a draft of a proposed FASB Special Report, "A Guide to Implementation
of Statement 125 on Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, Second Edition" (the "Proposed
Guide"). The Proposed Guide indicates that two methods have arisen in
practice for measuring and accounting for credit enhancements such as the
restricted cash, investments in Trust receivables and interest-only
receivables from Trusts on the Company's consolidated balance sheets. These
methods are referred to as the cash-in method and the cash-out method,
although variations of the two methods exist. Under the cash-in method, the
assumed discount period for measuring the present value of excess cash flows
ends when the Trusts are expected to collect such amounts. Under the cash-out
method, the assumed discount period ends when the credit enhancement assets
become available to the seller of the receivables on an unrestricted basis.
While the total amount of revenue recognized over time from a securitization
transaction would be the same under either method, the initial gain on sale
of receivables would generally be higher under the cash-in method, offset by
less servicing fee income over time. The Proposed Guide indicates that only
the cash-out method should be used to measure the fair value of credit
enhancements. The Proposed Guide remains subject to a comment period and
further amendments may occur prior to becoming effective.
The Company has historically used a variation of the cash-in method to
account for its credit enhancement assets. Pending further guidance on which
variation of the cash-out method would be required, the Company has not yet
determined the effects of adopting the Proposed Guide on its consolidated
financial position and results of operations. Adoption of the Proposed Guide
will have no effect on the Company's cash flows.
NOTE 7 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's
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
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
10
<PAGE>
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.
11
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
September 30, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ $ 27,565 $ 653 $ $ 28,218
Receivables held for sale, net 159,142 227,334 386,476
Interest-only receivables
from Trusts (2,062) 2,812 153,736 154,486
Investments in Trust receivables 2,515 127,061 129,576
Restricted cash 3,300 81,454 84,754
Property and equipment, net 210 27,089 38 27,337
Other assets 8,658 14,535 5,081 28,274
Due (to) from affiliates 343,778 (235,452) (108,326)
Investment in affiliates 151,177 13,921 2 (165,100)
------- ------- ------- -------
Total assets $501,761 $ 15,427 $487,033 $(165,100) $839,121
------- ------- ------- ------- -------
------- ------- ------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ $ 11,482 $196,703 $ $208,185
Senior notes 175,000 175,000
Other notes payable 8,260 25 8,285
Accrued taxes and expenses 5,913 54,062 898 60,873
Deferred income taxes (22,568) (24,357) 98,547 51,622
------- -------- ------ -------- -------
Total liabilities 166,605 41,212 296,148 503,965
------- ------- ------- -------- -------
Shareholders' equity:
Common stock 702 203 3 (206) 702
Additional paid-in capital 238,225 108,336 13,921 (122,257) 238,225
Accumulated other
comprehensive income 6,098 6,098 (6,098) 6,098
Retained earnings 113,249 (134,324) 170,863 (36,539) 113,249
------- ------- ------- --------- --------
358,274 (25,785) 190,885 (165,100) 358,274
Treasury stock (23,118) (23,118)
------- ------- ------- ------- -------
Total shareholders' equity 335,156 (25,785) 190,885 (165,100) 335,156
------- -------- ------- ------- -------
Total liabilities and
shareholders' equity $501,761 $ 15,427 $487,033 $(165,100) $839,121
------- ------- ------- -------- -------
------- ------- ------- -------- -------
</TABLE>
12
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
June 30, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ $ 30,157 $ 2,930 $ $ 33,087
Receivables held for sale, net 178,219 164,634 342,853
Interest-only receivables (2,151) 4,253 135,701 137,803
from Trusts
Investments in Trust receivables 3,181 114,809 117,990
Restricted cash 68,258 68,258
Property and equipment, net 175 23,210 23,385
Other assets 8,911 13,003 3,271 25,185
Due (to) from affiliates 330,924 (227,835) (103,089)
Investment in affiliates 129,765 13,921 2 (143,688)
------- ------- ------- --------
Total assets $467,624 $ 38,109 $386,516 $(143,688) $748,561
------- ------- ------- -------- -------
------- ------- ------- -------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ $24,900 $140,708 $ $165,608
Senior notes 175,000 175,000
Other notes payable 6,384 26 6,410
Accrued taxes and expenses (2,280) 53,950 571 52,241
Deferred income taxes (17,641) (19,961) 80,743 43,141
------- ------- ------- -------- -------
Total liabilities 161,463 58,915 222,022 442,400
------- ------- ------- -------- -------
Shareholders' equity:
Common stock 693 203 3 (206) 693
Additional paid-in capital 230,295 108,336 13,921 (122,257) 230,295
Accumulated other
comprehensive income 4,431 4,431 (4,431) 4,431
Retained earnings 93,860 (129,345) 146,139 (16,794) 93,860
------- ------- ------- ------- -------
329,279 (20,806) 164,494 (143,688) 329,279
Treasury stock (23,118) (23,118)
------- ------- ------- ------- -------
Total shareholders'equity 306,161 (20,806) 164,494 (143,688) 306,161
------- ------- ------- ------- -------
Total liabilities and
shareholders' equity $467,624 $ 38,109 $386,516 $(143,688) $748,561
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
13
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income $ $ 10,133 $ 6,784 $ $ 16,917
Gain on sale of receivables (40) 3,019 39,064 42,043
Servicing fee income 27,511 1,218 (13,338) 15,391
Investment income 7,357 278 1,005 (7,338) 1,302
Other income 455 11 466
Equity in income of
affiliates 19,745 (19,745)
------- ------ ------ ------- ------
27,062 41,396 48,082 (40,421) 76,119
------- ------ ------ ------- ------
Costs and expenses:
Operating expenses 3,434 43,943 20 (13,338) 34,059
Provision for losses 1,069 1,119 2,188
Interest expense 4,463 5,763 5,457 (7,338) 8,345
------- ------ ------ ------- -------
7,897 50,775 6,596 (20,676) 44,592
------- ------ ------ ------- -------
Income before income taxes 19,165 (9,379) 41,486 (19,745) 31,527
Income tax provision (224) (4,400) 16,762 12,138
------ ------ ------ ------- ------
Net income $19,389 $(4,979) $24,724 $(19,745) $19,389
------ ------ ------ ------- ------
------ ------ ------ ------- ------
</TABLE>
14
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
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
Income tax provision (624) (794) 9,678 8,260
------ ------ ------ ------- ------
Net income $13,194 $( 907) $18,409 $(17,502) $13,194
------ ------ ------ ------- ------
------ ------ ------ ------- ------
</TABLE>
15
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income $19,389 $ (4,979) $24,724 $(19,745) $19,389
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 18 1,802 1,820
Provision for losses 1,069 1,119 2,188
Deferred income taxes (74) (4,396) 16,759 12,289
Non-cash gain on sale of auto
receivables (35,219) (35,219)
Equity in income of affiliates (19,745) 19,745
Changes in assets and liabilities:
Interest-only receivables from
Trusts (89) 1,441 19,896 21,248
Other assets 253 (1,605) (1,811) (3,163)
Accrued taxes and expenses 8,193 112 327 8,632
------- ------ ------ ------ ------
Net cash provided by operating
activities 7,945 (6,556) 25,795 27,184
------- ------ ------ ------ ------
Cash flows from investing activities:
Purchases of auto receivables (622,212) (632,171) 632,171 (622,212)
Originations of mortgage receivables (38,901) (38,901)
Principal collections and recoveries on
receivables (901) 6,365 5,464
Net proceeds from sale of auto receivables 632,171 562,296 (632,171) 562,296
Net proceeds from sale of mortgage receivables 47,542 47,542
Increase in investments in Trust receivables 666 (12,252) (11,586)
Increase in restricted cash (3,300) (13,196) (16,496)
Purchases of property and equipment (53) (3,171) (38) (3,262)
------- ------ ------ ------ ------
Net cash used by investing activities (53) 11,894 (88,996) (77,155)
------- ------ ------ ------ ------
Cash flows from financing activities:
Net change in warehouse credit facilities (13,418) 55,995 42,577
Payments on other notes payable (560) (1) (561)
Proceeds from issuance of common stock 3,086 3,086
Net change in due (to) from affiliates (10,418) 5,489 4,929
------- ------ ------ ------ ------
Net cash provided by financing
activities (7,892) (7,930) 60,924 45,102
------- ------ ------ ------ ------
Net decrease in cash and cash equivalents (2,592) (2,277) (4,869)
Cash and cash equivalents at beginning of
period 30,157 2,930 33,087
------- ------ ------ ------ ------
Cash and cash equivalents at end of period $ $27,565 $ 653 $ $28,218
------- ------ ------ ------ ------
------- ------ ------ ------ ------
</TABLE>
16
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 1997
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
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
Non-cash gain on sale of auto
receivables (24,769) (24,769)
Equity in income of affiliates (17,502) 17,502
Changes in assets and liabilities:
Interest-only receivables from
Trusts 574 (73) 7,963 8,464
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) 5,029 10,373 6,628
------- ------ ------ ------ -------
Cash flows from investing activities:
Purchases of auto receivables (350,798) (329,643) 329,643 (350,798)
Originations of mortgage receivables (27,393) (27,393)
Principal collections and recoveries on
receivables 7,255 4,905 12,160
Net proceeds from sale of auto receivables 329,643 329,643 (329,643) 329,643
Net proceeds from sale of mortgage receivables 24,969 24,969
Increase in investments in Trust receivables 1,977 (18,040) (16,063)
Increase in restricted cash (11,995) (11,995)
Purchases of property and equipment (22) (2,006) (2,028)
Net change in investment in affiliates (10,000) 10,000
------- ------ ------ ------ -------
Net cash used by investing
activities (10,022) (6,353) (25,130) (41,505)
------- ------ ------ ------ -------
Cash flows from financing activities:
Net change in warehouse credit facilities 31,250 31,250
Payments on other notes payable (283) (2) (5,282) (5,567)
Proceeds from issuance of common stock 5,332 5,332
Net change in due (to) from affiliates 13,747 (33,424) 19,677
------- ------ ------ ------ -------
Net cash provided by financing
activities 18,796 (2,176) 14,395 31,015
------- ------ ------ ------ -------
Net 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>
17
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates earnings and cash flow primarily from 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 ("receivables held for sale") and pays interest expense on
borrowings under its warehouse credit facilities.
The Company sells receivables to securitization trusts ("Trusts") 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.
Excess cash flows from the Trusts are initially 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 flows can be utilized by the Company
on an unrestricted basis. In addition to excess cash flows, the Company earns
monthly base servicing fee income of 2.25% per annum on the outstanding
principal balance of receivables securitized ("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"),
which originates and sells 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.
18
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
REVENUE:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Auto:
Held for sale $ 290,187 $ 245,988
Serviced 2,216,953 1,013,034
--------- ---------
2,507,140 1,259,022
Mortgage 17,953 8,502
--------- ---------
$2,525,093 $1,267,524
--------- ---------
--------- ---------
</TABLE>
Average managed receivables outstanding increased by 99% as a result of
higher loan purchase volume. The Company purchased $625.0 million of auto
loans during the three months ended September 30, 1998, compared to purchases
of $355.1 million during the three months ended September 30, 1997. 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 149 auto lending branch offices as of September 30, 1998, compared
to 99 as of September 30, 1997.
The Company originated $38.9 million of mortgage loans during the three
months ended September 30, 1998, compared to $27.4 million during the three
months ended September 30, 1997.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
Auto $ 16,494 $ 12,859
Mortgage 423 202
------ ------
$ 16,917 $ 13,061
------ ------
------ ------
</TABLE>
The increase in finance charge income is due primarily to an increase of 18%
in average auto receivables held for sale in the three months ended September
30, 1998 versus the three months ended September 30, 1997. In addition, the
Company's effective yield on its auto receivables held for sale increased to
22.6% for the three months ended September 30, 1998 from 20.7% for the three
months ended September 30, 1997. The effective yield is higher than the
19
<PAGE>
contractual rates of the Company's auto finance contracts as a result of finance
charge income earned between the date the auto finance contract is originated by
the automobile dealership and the date the auto finance contract is funded by
the Company.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Auto $40,693 $24,852
Mortgage 1,350 1,190
------ ------
$42,043 $26,042
------ ------
------ ------
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$570.0 million of receivables in the three months ended September 30, 1998 as
compared to $332.5 million of receivables sold in the three months ended
September 30, 1997. The gains amounted to 7.1% and 7.5% of the sales proceeds
for the three months ended September 30, 1998 and 1997, respectively.
Significant assumptions used in determining the gain on sale of auto
receivables were as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Cumulative credit losses 11.0% 10.3%
Discount rate used to estimate
present value of future excess
cash flows in the Trusts 12.0% 12.0%
</TABLE>
The increase in the gain on sale of mortgage receivables resulted from the
sale of $47.5 million of receivables in the three months ended September 30,
1998, compared to $25.0 million of receivables sold in the three months ended
September 30, 1997. The average premium received on sales decreased to 2.8%
for the three months ended September 30, 1998 from 4.8% for the three months
ended September 30, 1997.
Servicing fee income increased to $15.4 million, or 2.8% of average serviced
auto receivables, for the three months ended September 30, 1998, as compared
to $8.7 million, or 3.4% of average serviced auto receivables, for the three
months ended September 30, 1997. 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. Servicing fee income for the
three months ended September 30, 1998 also includes a $3.5 million charge to
increase credit loss reserves related to certain of the Company's fiscal 1997
and 1996
20
<PAGE>
securitization transactions since the Company's current estimates of
cumulative credit losses for these transactions exceed the original
estimates. The Company has raised the assumptions for cumulative credit
losses for securitization transactions completed subsequent to fiscal 1997
compared to assumptions used for transactions completed in fiscal 1997 and
1996. The growth in servicing fee income exclusive of the aforementioned
charge is attributable to the increase in average serviced auto receivables
outstanding for the three months ended September 30, 1998 compared to the
three months ended September 30, 1997.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 5.4% (5.1% excluding operating expenses of $1.9
million related to the mortgage business) for the three months ended
September 30, 1998, compared 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. 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 $14.0 million, or 70%, primarily due to the
addition of auto lending branch offices and management and auto loan
processing and servicing staff.
The provision for losses increased to $2.2 million for the three months ended
September 30, 1998 from $1.9 million for the three months ended September 30,
1997 due to higher average amounts of auto receivables held for sale. As a
percentage of average receivables held for sale, the provision for losses was
3.0% for the three months ended September 30, 1998 and 1997.
Interest expense increased to $8.3 million for the three months ended
September 30, 1998 from $5.8 million for the three months ended September 30,
1997 due to higher debt levels. Average debt outstanding was $366.7 million
and $243.4 million for the three months ended September 30, 1998 and 1997,
respectively. The Company's effective rate of interest paid on its debt
decreased to 9.0% from 9.5% as a result of larger amounts of debt outstanding
under the Company's warehouse credit facilities for the three months ended
September 30, 1998. Interest rates on the warehouse credit facilities are
lower than rates on the Senior Notes.
The Company's effective income tax rate was 38.5% for the three months ended
September 30, 1998 and 1997, respectively.
CREDIT QUALITY
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
losses in the receivables held for sale portfolio. The Company typically
purchases individual finance contracts for a non-refundable acquisition fee
on a non-
21
<PAGE>
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 cumulative 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 assumptions for cumulative credit losses,
provisions for losses and allowance for losses. Although the Company uses
many resources to assess the adequacy of loss reserves, there is no precise
method for estimating the ultimate losses in the receivables portfolio.
The following table presents certain data related to the receivables
portfolio (dollars in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
---------------------------------------------------------
HELD FOR SALE
---------------------------- AUTO MANAGED AUTO
AUTO MORTGAGE TOTAL SERVICED PORTFOLIO (2)
------ -------- ----- -------- -------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables $384,664 $ 12,469 $397,133 $2,332,227 $2,716,891
--------- ---------
--------- ---------
Allowance for losses (10,657) (10,657) $ (213,991)(1) $(224,648)
------- ------ ------- ------- -------
------- -------
Receivables, net $374,007 $12,469 $386,476
------- ------ -------
------- ------ -------
Number of outstanding contracts 29,358 146 219,005 248,363
------ --- ------- -------
------ --- ------- -------
Average amount of outstanding
contract (principal amount)
(in dollars) $ 13,103 $ 85,404 $ 10,649 $ 10,939
------ ------- ------ ------
------ ------- ------ ------
Allowance for losses as a percentage
of receivables 2.8% 9.2% 8.3%
--- --- ---
--- --- ---
</TABLE>
(1) The allowance for losses related to serviced auto receivables is netted
against interest-only receivables from Trusts in the Company's
consolidated balance sheets.
(2) Includes auto receivables only.
22
<PAGE>
The following is a summary of managed auto receivables which are (i) more than
30 days delinquent, but not in repossession, and (ii) in repossession(dollars in
thousands):
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Delinquent contracts:
31 to 60 days $169,609 6.3% $ 94,592 6.8%
Greater than 60 days 75,882 2.8 46,531 3.4
------- --- ------- ----
245,491 9.1 141,123 10.2
In repossession 17,368 0.6 18,571 1.3
------- ---- ------- ----
$262,859 9.7% $159,694 11.5%
------- ---- ------- ----
------- ---- ------- ----
</TABLE>
In accordance with its policies and guidelines, the Company at times offers
payment deferrals to consumers, whereby the consumer 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 quarterly percentage of average managed auto receivables
outstanding were 4.6% and 4.3% for the three months ended September 30, 1998
and 1997, respectively. The Company believes that payment deferrals granted
according to its policies and guidelines are an effective portfolio
management technique and result in higher ultimate cash collections from the
portfolio.
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Net charge-offs:
Held for sale $1,858 $2,902
Serviced 28,861 14,542
------ ------
$30,719 $17,444
------ ------
------ ------
Net charge-offs as an
annualized percentage of
average managed auto
receivables outstanding 4.9% 5.5%
--- ---
--- ---
Net recoveries as a percentage
of gross charge-offs 47.6% 46.6%
---- ----
---- ----
</TABLE>
Delinquency and charge-off ratios typically fluctuate over time as a
portfolio matures. Accordingly, the delinquency and charge-off data above is
not necessarily indicative of delinquency and charge-off experience that
could be expected for a portfolio with a different level of seasoning.
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
1998 1997
---- ----
<S> <C> <C>
Operating activities $27,184 $ 6,628
Investing activities (77,155) (41,505)
Financing activities 45,102 31,015
------- -------
Net decrease in
cash and cash equivalents $(4,869) $(3,862)
------- -------
------- -------
</TABLE>
The Company's primary sources of liquidity have been cash flows from
operating activities, including excess cash flow distributions from the
Trusts, borrowings under its warehouse credit facilities and sales of auto
receivables to Trusts in securitization transactions. The Company's primary
uses of cash have been purchases and originations of receivables and funding
credit enhancement requirements for securitization transactions.
The Company purchased $625.0 million and $355.1 million of auto finance
contracts during the three months ended September 30, 1998 and 1997,
respectively, requiring cash of $622.2 million and $350.8 million,
respectively, net of acquisition fees and other items. These purchases were
funded initially utilizing warehouse credit facilities and subsequently
through the sale of auto receivables in securitization transactions.
In September 1998, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks and increased the amount of structured warehouse
financing available under the agreement from $245 million to $505 million.
The Company utilizes this facility to fund auto receivables pending
securitization. A total of $196.7 million was outstanding under this facility
as of September 30, 1998. The facility matures in September 1999.
In addition, the Company has a credit agreement with a group of banks that
provides for borrowings up to $235 million, subject to a defined borrowing
base. The Company utilizes the facility to fund its auto lending activities
and daily operations. The facility matures in April 1999. There were no
outstanding balances under the credit agreement as of September 30, 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 mortgage loan originations. The facility expires in February
1999. A total of $11.5 million was outstanding under the mortgage facility as
of September 30, 1998.
24
<PAGE>
The Company has completed fourteen auto receivables securitization
transactions through September 30, 1998. The proceeds from the transactions
were primarily used to repay borrowings outstanding under the Company's
warehouse credit facilities.
A summary of these transactions is as follows:
<TABLE>
<CAPTION>
Original Balance at
Amount September 30,1998
Transaction Date (in millions) (in millions)
- ----------- ---- ------------- -----------------
<S> <C> <C> <C>
1994-A December 1994 $ 51.0 Paid in full
1995-A June 1995 99.2 Paid in full
1995-B December 1995 65.0 $ 6.5
1996-A March 1996 89.4 14.8
1996-B May 1996 115.9 28.8
1996-C August 1996 175.0 44.5
1996-D November 1996 200.0 74.9
1997-A March 1997 225.0 103.0
1997-B May 1997 250.0 129.5
1997-C August 1997 325.0 197.0
1997-D November 1997 400.0 289.5
1998-A February 1998 425.0 344.9
1998-B May 1998 525.0 465.5
1998-C August 1998 575.0 555.4
----- -----
$3,520.5 $2,254.3
------- -------
------- -------
</TABLE>
In connection with securitization transactions, the Company is required to
fund certain credit enhancement levels set by the insurer of the asset-backed
securities issued by the Trusts. The Company typically makes an initial
deposit to a restricted cash account and subsequently uses excess cash flows
generated by the Trusts to either increase the restricted cash account or
repay the outstanding asset-backed securities on an accelerated basis, thus
creating additional credit enhancement through overcolleratization in the
Trusts. When the credit enhancement levels reach specified percentages of the
Trust's pool of receivables, excess cash flows can be utilized by the Company
on an unrestricted basis.
Initial deposits to restricted cash accounts were $16.8 million and $26.6
million for the three months ended September 30, 1998 and 1997, respectively.
Excess cash flows distributed to the Company were $12.4 million and $9.5
million for the three months ended September 30, 1998 and 1997, respectively.
Certain agreements with the insurer provide that if delinquency, default and
net loss ratios in a Trust's pool of receivables exceed certain targets, the
specified credit enhancement levels would be increased. As of September 30,
1998, none of the Company's securitizations had delinquency, default and net
loss ratios in excess of the targeted levels.
25
<PAGE>
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, 1998, although no common stock has been
repurchased since September 1996. The Indenture pursuant to which the Senior
Notes were issued contains restrictions as to the amount of common stock
which may be repurchased by the Company.
The Company operated 149 auto lending branch offices as of September 30, 1998
and plans to open an additional 25 branches through the remainder of fiscal
1999. The Company may also expand loan production capacity at existing auto
lending branch offices where appropriate and may expand its mortgage lending
activities. While the Company has been able to establish and grow its finance
businesses thus far, there can be no assurance that future expansion will be
successful due to competitive, regulatory, market, economic or other factors.
As of September 30, 1998, the Company had $28.2 million in cash and cash
equivalents. The Company also had available borrowing capacity of $76.1
million under its bank credit agreement pursuant to the borrowing base
requirement of such facility. The Company estimates that it will require
additional external capital for fiscal 1999 in addition to existing capital
resources in order to fund expansion of its lending activities.
The Company anticipates that such funding will be in the form of additional
securitization transactions and implementation of new warehouse credit
facilities. There can be no assurance that funding will be available to the
Company through these sources or, if available, that it will be on terms
acceptable to the Company.
INTEREST RATE RISK
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 derivative financial 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 the Company's strategies will be
effective in minimizing
26
<PAGE>
interest rate risk or that increases in interest rates will not have an
adverse effect on the Company's profitability.
YEAR 2000 ISSUE
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 fail.
The Company has developed a comprehensive project plan for achieving year
2000 readiness. An inventory of critical hardware and software has been
completed and information technology components have been assessed. This
assessment included major suppliers and business partners and the Company is
monitoring their continued progress toward year 2000 compliance; however, the
Company does not rely on any single supplier or partner to conduct business.
The Company is currently in the process of renovating or replacing critical
systems and plans to complete this phase by December 31, 1998. Integrated
testing and installation of all renovated systems is planned for early
calendar 1999 with an estimated completion date of March 31, 1999. In
addition, the Company expects to have contingency plans for critical systems
complete by December 31, 1998. Year 2000 project costs incurred through
September 30, 1998 have not been material. The Company expects to incur
approximately $1 million of costs to fund year 2000 project efforts through
the end of calendar year 1999.
The Company presently believes that with modifications to existing systems
and/or conversion to new systems, the year 2000 issue will not pose
significant operational problems for the Company. However, if such
modifications and conversions are not made, or are not completed in a timely
manner, 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, portfolio credit
quality, the availability of capital resources 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, 1998. Such statements are only predictions and actual
events or results may differ materially.
27
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative financial instruments are utilized to manage the gross interest
rate spread on the Company's securitization transactions. The Company sells
fixed rate auto receivables to Trusts that, in turn, sell either fixed rate
or floating rate securities to investors. The fixed rates on securities
issued by the Trusts are indexed to rates on U.S. Treasury Notes with similar
average maturities. The Company periodically uses Forward U.S. Treasury Rate
Lock agreements to lock in the indexed rate for specific anticipated
securitization transactions. The floating rates on securities issued by the
Trusts are indexed to London Interbank Offered Rates (LIBOR). The Company
uses Interest Rate Swap agreements to convert the floating rate exposures on
these securities to a fixed rate.
The table below provides information about certain of the Company's
derivative financial instruments by expected maturity date as of September
30, 1998 (dollars in thousands). Interest rate swap agreements entered into
with respect to securitization transactions completed prior to September 30,
1998 are excluded from the table since the Company's net market risk is not
material. Notional amounts, which are used to calculate the contractual
payments to be exchanged under the contracts, represent average amounts which
will be outstanding for each of the years included in the table.
<TABLE>
<CAPTION>
Years Ending September 30 1999 2000 2001 Fair Value
- ------------------------- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Forward Interest Rate Swaps: $ 168,000 $102,000 $ 10,000 $ (2,670)
Notional amounts
Average pay rate 5.88% 5.89% 5.88%
Average receive rate 5.50% 5.44% 5.44%
U.S. Treasury Rate Lock:
Notional amounts $150,000 $ (5,754)
Average strike rate 5.61%
Average forward rate 4.80%
</TABLE>
28
<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, 1998.
Certain subsidiaries and affiliates of
the Company filed reports on Form 8-K
during the quarterly period ended
September 30, 1998 reporting monthly
information related to securitization
trusts.
29
<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, 1998 By: /s/ Daniel E. Berce
---------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
30
<PAGE>
EXHIBIT 11.1
AMERICREDIT CORP.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1998 1997
---- ----
<S> <C> <C>
Weighted average shares
outstanding 62,339,479 58,959,096
Incremental shares
resulting from assumed
exercise of stock options 4,629,212 5,024,820
---------- ----------
Weighted average shares and
assumed incremental shares 66,968,691 63,983,916
---------- ----------
---------- ----------
NET INCOME $19,389 $13,194
------- -------
------- -------
EARNINGS PER SHARE:
Basic $ .31 $ .22
------- -------
------- -------
Diluted $ .29 $ .21
------- -------
------- -------
</TABLE>
Basic earnings per share have been computed by dividing net income by the
weighted average shares outstanding. Diluted earnings per share have been
computed by dividing net income by the weighted average shares and assumed
incremental shares.
31
<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>
<CIK> 0000804269
<NAME> AMERICREDIT CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 112,772
<SECURITIES> 0
<RECEIVABLES> 397,133
<ALLOWANCES> (10,657)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 37,024
<DEPRECIATION> 9,687
<TOTAL-ASSETS> 839,121
<CURRENT-LIABILITIES> 0
<BONDS> 391,470
0
0
<COMMON> 702
<OTHER-SE> 334,454
<TOTAL-LIABILITY-AND-EQUITY> 839,121
<SALES> 0
<TOTAL-REVENUES> 76,119
<CGS> 0
<TOTAL-COSTS> 34,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,188
<INTEREST-EXPENSE> 8,345
<INCOME-PRETAX> 31,527
<INCOME-TAX> 12,138
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,389
<EPS-PRIMARY> .31
<EPS-DILUTED> .29
</TABLE>
