<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION NO. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________________________________
AMERICREDIT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2291093
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT FINANCIAL SERVICES, INC.
DELAWARE 75-2439888
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT OPERATING CO., INC.
DELAWARE 75-2313963
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
ACF INVESTMENT CORP.
DELAWARE 75-2442194
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT PREMIUM FINANCE, INC.
DELAWARE 75-2447312
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT CORPORATION OF CALIFORNIA
CALIFORNIA 33-0011256
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
<PAGE>
6199
(Primary Standard Industrial
Classification Code Number)
________________________________
200 BAILEY AVENUE
FORT WORTH, TEXAS 76107
(817) 332-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_______________________
DANIEL E. BERCE
CHIEF FINANCIAL OFFICER
AMERICREDIT CORP.
200 BAILEY AVENUE
FT. WORTH, TEXAS 76107
(817) 332-7000
(Name, address, including zip code, and telephone number,
including area code, of Agent for service)
Copies to:
L. STEVEN LESHIN
JENKENS & GILCHRIST,
A PROFESSIONAL CORPORATION
1445 ROSS AVENUE, SUITE 3200
DALLAS, TEXAS 75202
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price per Aggregate Amount of
Securities to be Registered be Registered Unit (1) Offering Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Notes due 2004 $50,000,000 100% $50,000,000 $14,750
- -----------------------------------------------------------------------------------------------------------------
AmeriCredit Financial Services, Inc.
AmeriCredit Operating Co., Inc.
ACF Investment Corp.
AmeriCredit Premium Finance, Inc.
Americredit Corporation of
California $50,000,000 100% $50,000,000 (3)
Guarantees (2)
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
(2) Each of these subsidiaries of AmeriCredit Corp. has guaranteed the Notes
being registered pursuant hereto.
(3) Pursuant to Rule 457(n), no separate fee is payable with respect to
guarantees of the Notes being registered.
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
2
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
AMERICREDIT CORP.
OFFER TO EXCHANGE
ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2004
($50,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 9 1/4% SENIOR NOTES DUE 2004
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on _________ ___, 1998 (as such date may be extended, the "Expiration
Date").
AmeriCredit Corp., a Texas corporation ("AmeriCredit" or the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal"), to exchange $1,000 in principal
amount of its 9 1/4% Senior Notes due 2004 (the "New Notes") for each $1,000 in
principal amount of its outstanding 9 1/4% Senior Notes due 2004 (the "Old
Notes") (the Old Notes and the New Notes are collectively referred to herein as
the "Notes"). An aggregate principal amount of $50,000,000 of Old Notes is
outstanding. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date and ending on the close of business one year after the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of the Old Notes being tendered for exchange.
However, the Exchange Offer is subject to the terms and provisions of the C/D
Exchange Registration Rights Agreement, dated as of January 29, 1998 (the
"Registration Rights Agreement"), among the Company, the Company's Guarantors
(as described in the Registration Rights Agreement) and Salomon Brothers Inc and
Credit Suisse First Boston (the "Initial Purchasers"). The Old Notes may be
tendered only in multiples of $1,000. See "The Exchange Offer."
(continued on next page)
__________________________
SEE "RISK FACTORS" BEGINNING ON PAGE 10 HEREIN FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________________
THE DATE OF THIS PROSPECTUS IS __________, 1998
<PAGE>
The Old Notes were issued in a transaction (the "Prior Offering") pursuant to
which the Company issued an aggregate of $50,000,000 principal amount of the Old
Notes to the Initial Purchasers on January 29, 1998 pursuant to a Purchase
Agreement, dated January 26, 1998 (the "Purchase Agreement"), among the Company,
the Company's Guarantors and the Initial Purchasers. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company and the Initial Purchasers also entered into the Registration
Rights Agreement, pursuant to which the Company granted certain registration
rights for the benefit of the holders of the Old Notes. The Exchange Offer is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement with respect to the Old Notes. See "The Exchange Offer--Purpose
and Effect."
The Old Notes were, and the New Notes will be, issued under the Indenture,
dated as of January 29, 1998 (the "Indenture"), among the Company and Bank One,
N.A., as trustee (in such capacity, the "Trustee"). The terms of the Old Notes
were, and the New Notes will be, substantially similar to those of the Company's
9 1/4% Senior Notes due 2004 (the "Original Notes") which were issued under an
Indenture dated February 4, 1997 (the "Original Indenture"). The form and terms
of the New Notes will be identical in all material respects to the form and
terms of the Old Notes, except that (i) the New Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, (ii) holders of New Notes will not be entitled to liquidated
damages equal to $.05 per week per $1,000 principal amount of Old Notes held by
such holders (up to a maximum amount of $0.50 per week per $1,000 principal
amount) otherwise payable under the terms of the Registration Rights Agreement
in respect of the Old Notes held by such holders during any period in which a
Registration Default (as defined under "The Exchange Offer--Termination of
Certain Rights") is continuing (the "Liquidated Damages") and (iii) holders of
New Notes will not be, and upon the consummation of the Exchange Offer, holders
of Old Notes will no longer be, entitled to certain rights under the
Registration Rights Agreement intended for the holders of unregistered
securities. The Exchange Offer shall be deemed consummated upon the occurrence
of the delivery by the Company to Bank One, N.A., as registrar of the Old Notes
(in such capacity, the "Registrar") under the Indenture of New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
are validly tendered by holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer --Termination of Certain Rights," "--Procedures for Tendering Old
Notes" and "Description of Notes."
The New Notes will bear interest at a rate equal to 9 1/4% per annum.
Interest on the New Notes is payable semiannually, on February 1 and August 1 of
each year, commencing on August 1, 1998 (each, an "Interest Payment Date") and
shall accrue from January 29, 1998 or from the most recent Interest Payment Date
with respect to the Old Notes to which interest was paid or duly provided for.
The New Notes will mature on February 1, 2004. See "Description of Notes."
The New Notes will not be redeemable at the Company's option prior to February
1, 2001. Thereafter, the New Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 2001 at the
redemption prices set forth herein plus accrued and unpaid interest to the date
of redemption. In addition, at the option of the Company, up to $16.7 million
in aggregate principal amount of Notes may be redeemed prior to February 1, 2000
at a redemption price of 109.25% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date with the net cash proceeds of a public offering of common stock of the
Company; provided, however, that at least $33.3 million in aggregate principal
amount of Notes remain outstanding following such redemption; and provided,
further, that such redemption shall occur within 45 days of the date of closing
of such public offering. The Indenture provides that any such optional
redemption of Notes shall be accompanied by a proportionate redemption of
Original Notes.
In the event of a Change of Control (as defined), holders of the New Notes
will have the right to require the Company to purchase their New Notes, in whole
or in part, at a price equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase.
The New Notes will be senior unsecured obligations of the Company, will rank
pari passu in right of payment with the Original Notes and all other existing
and future unsecured senior Indebtedness (as defined) of the Company and will
rank senior in right of payment to future subordinated Indebtedness of the
Company. At December 31, 1997, on an as adjusted basis after giving effect to
the Prior Offering and the application of the net proceeds therefrom, the
aggregate principal amount of senior Indebtedness of the Company and its
subsidiaries (excluding trade payables and other accrued liabilities) would have
been approximately $251.2 million, an aggregate of $57.6 million of which would
have been secured Indebtedness outstanding under the Credit Agreement (as
defined), the Warehouse Facility (as defined) and the Mortgage Subsidiary Credit
Agreement (as defined) and approximately $14.1 million of which would have been
asset-backed notes of the Company's Special Purpose Finance Subsidiaries (as
defined). All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust (as
defined) under the Indenture. The Indenture, which is substantially similar to
the Original Indenture, permits the Company and its subsidiaries to incur
additional secured Indebtedness. The payment of principal, premium,
(i)
<PAGE>
if any, and interest and Liquidated Damages, if any, on the New Notes will be
guaranteed on a senior unsecured basis (the "Subsidiary Guarantees") by all of
the Company's current and future Restricted Subsidiaries (the "Guarantors"),
which on the date of the Indenture included all of the Company's existing
subsidiaries, except the Company's Special Purpose Finance Subsidiaries and AFS
Funding Corp and CP Funding Corp. The Subsidiary Guarantees will rank pari passu
in right of payment with the Guarantor's Guarantees of the Original Notes (the
"Original Guarantees") and all other senior unsecured Indebtedness of the
Guarantors. However, the Guarantors' obligations under the Credit Agreement and
the Mortgage Subsidiary Credit Agreement are secured by liens on certain assets
of the Guarantors and, accordingly, such Indebtedness will rank prior to the New
Notes with respect to such assets. The New Notes will effectively be
subordinated to the obligations of the Special Purpose Finance Subsidiaries with
respect to Existing Indebtedness (as defined), the obligations of AFS Funding
Corp. with respect to Credit Enhancement Agreements (as defined) and the
obligations of CP Funding Corp. with respect to the Warehouse Facility.
Based on existing interpretations of the Securities Act by the Staff of the
Securities and Exchange Commission (the "Commission") set forth in "no-action"
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer to any holder of Old Notes in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such holder
(other than a broker-dealer who purchased Old Notes directly from the Company
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such holder
is not an affiliate of the Company, is acquiring the New Notes in the ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders wishing to accept the Exchange Offer must represent to the
Company, as required by the Registration Rights Agreement, that such conditions
have been met. In addition, if such holder is not a broker-dealer, it must
represent that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "The
Exchange Offer--Resales of the New Notes." This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities.
As of __________ __, 1998, Cede & Co. ("Cede"), as nominee for The Depository
Trust Company, New York, New York ("DTC"), was the sole registered holder of the
Old Notes and held the Old Notes for _____ of its participants. The Company
believes that no such participant is an affiliate (as such term is defined in
Rule 405 of the Securities Act) of the Company. There has previously been only
a limited secondary market, and no public market, for the Old Notes. The Old
Notes are eligible for trading in the Private Offering, Resales and Trading
through Automatic Linkages ("PORTAL") market. In addition, the Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes; however, the Initial Purchasers are not obligated to do so and
any market making activities may be discontinued by the Initial Purchasers at
any time. Therefore, there can be no assurance that an active market for the
New Notes will develop. If such a trading market develops for the New Notes,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on such factors, the New Notes may
trade at a discount from their face value. See "Risk Factors--Absence of Public
Market; Restrictions on Transfer."
The Company will not receive any proceeds from this Exchange Offer. Pursuant
to the Registration Rights Agreement, the Company will bear certain registration
expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old Note").
The Global Old Note was deposited with, or on behalf of, DTC, as the initial
depository with respect to the Old Notes (in such capacity, the "Depository").
The Global Old Note is registered in the name of Cede & Co., as nominee of DTC,
and beneficial interests in the Global Old Note are shown on, and transfers
thereof are effected only through, records maintained by the Depository and its
participants. The use of the Global Old Note to represent the Old Notes permits
the Depository's participants, and anyone holding a beneficial interest in an
Old Note registered in the name of such a participant, to transfer interests in
the Old Notes electronically in accordance with the Depository's established
procedures without the need to transfer a physical
(ii)
<PAGE>
certificate. New Notes issued in exchange for the Global Old Note "will also be
issued initially as a note in global form (the "Global New Note," and, together
with the Global Old Note, the "Global Note") and be deposited with, or on behalf
of, the Depository. After the initial issuance of the Global New Note, New Notes
in certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Note only as set forth in the Indenture.
(iii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION......................................... (v)
INFORMATION INCORPORATED BY REFERENCE......................... (v)
NOTE REGARDING FORWARD-LOOKING INFORMATION.................... (vi)
PROSPECTUS SUMMARY............................................ 1
RISK FACTORS.................................................. 10
THE EXCHANGE OFFER............................................ 18
CAPITALIZATION................................................ 25
SELECTED CONSOLIDATED FINANCIAL DATA.......................... 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 29
BUSINESS...................................................... 41
MANAGEMENT.................................................... 51
PRINCIPAL SHAREHOLDERS........................................ 57
DESCRIPTION OF NOTES.......................................... 59
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................... 82
DESCRIPTION OF OTHER DEBT..................................... 84
PLAN OF DISTRIBUTION.......................................... 86
LEGAL MATTERS................................................. 87
EXPERTS....................................................... 87
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................... F-1
</TABLE>
(iv)
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Such information is available for inspection at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, NW,
Washington, DC 20549, and at the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511 and
Seven World Trade Center, Suite 1300, New York, NY 10048. Copies of such
information are obtainable, by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
NW, Washington, DC 20549. Such material is also available for inspection at the
library of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York,
New York 10005. The Commission maintains a web site (http://www.sec.gov) that
contains periodic reports, proxy statements and other information regarding
registrants that file documents electronically with the Commission. The Common
Stock of the Company is listed and traded on the NYSE under the symbol "ACF."
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of Notes and submit to the
Commission (unless the Commission will not accept such materials) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's independent
accountants, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
INFORMATION INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS
THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO
AMERICREDIT CORP., 200 BAILEY AVENUE, FORT WORTH, TEXAS 76107, ATTENTION: DANIEL
E. BERCE, (817) 332-7000.
The following AmeriCredit documents are incorporated by reference herein:
(1) AmeriCredit's Annual Report on Form 10-K for the year ended June
30, 1997, filed with the Commission;
(2) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, filed with the Commission;
(3) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997, filed with the Commission;
(4) AmeriCredit's Reports on Form 8-K, dated August 28, 1997, January
22, 1998, and January 29, 1998, all as filed with the Commission; and
(5) AmeriCredit's Form 8-A, as filed with the Commission on September
5, 1997.
All documents filed with the Commission by AmeriCredit pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
effectiveness of the Registration Statement of which this Prospectus forms a
part are incorporated herein by reference and such documents will be deemed to
be a part hereof from the date of filing of such documents. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
(v)
<PAGE>
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
NOTE REGARDING FORWARD-LOOKING INFORMATION
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH
AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE
STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS.
(vi)
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the Consolidated Financial Statements and related notes thereto,
appearing elsewhere in this Prospectus. This Prospectus contains certain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of, among other factors,
the factors set forth under "Risk Factors" below. In addition to other
information in this Prospectus, the factors set forth under "Risk Factors" below
should be considered carefully in evaluating an investment in the Notes offered
hereby. Unless the context indicates otherwise, all references herein to
"AmeriCredit" or the "Company" refer to AmeriCredit Corp. and its subsidiaries.
The Company's fiscal year ends on June 30. References to a particular fiscal
year are to the twelve-month period ending on June 30 of that year.
THE COMPANY
The Company is a consumer finance company specializing in purchasing,
securitizing and servicing retail automobile installment sales contracts
originated by franchised and select independent dealers in connection with the
sale of late model used and to a lesser extent new automobiles. The Company
targets borrowers with limited credit histories, modest incomes or those who
have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use
of proprietary credit scoring models, the Company underwrites contracts on a
decentralized basis through a nationwide branch office network. These credit
scoring models, combined with experienced underwriting personnel, enable the
Company to implement a risk-based pricing approach to structuring and
underwriting individual contracts. The Company's centralized risk management
department monitors these underwriting strategies and portfolio performance to
balance credit quality and profitability objectives. The loan portfolio is
serviced by the Company at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
The Company had 108 branch offices as of December 31, 1997. As a result of the
Company's expansion strategy, the Company has been able to increase its
aggregate volume of automobile installment sales contracts purchased to $906.8
million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has
continued this growth during the first six months of fiscal 1998, with purchases
aggregating $696.3 million, compared to $359.4 million during the same period in
fiscal 1997. The Company purchases contracts originated by dealers at prices
ranging from par to a discount of up to 10%. The average discount as a
percentage of the contracts purchased by the Company was approximately 3.4% in
fiscal 1997. For fiscal 1997, the average principal amount financed and weighted
average APR of contracts purchased by the Company were $11,874 and 19.7%,
respectively.
The Company generates earnings and cash flow primarily through the
purchase, retention, securitization and servicing of automobile receivables. In
each securitization, the Company sells automobile receivables to a trust or
special purpose finance subsidiary that, in turn, sells asset-backed securities
to investors. The Company recognizes a gain on the sale of the receivables to
the trust and receives monthly excess cash flow distributions from the trust
resulting from the difference between the interest received from the obligors on
the receivables and the interest on the asset-backed securities paid to
investors, net of 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. The Company received
excess cash flow of $24.0 million from securitization trusts and special purpose
finance subsidiaries in fiscal 1997. Due to the time delay associated with
distributions of excess cash flow from securitizations, the Company expects to
receive increased cash flow distributions in fiscal 1998 from trusts created as
a result of securitization transactions occurring in fiscal 1997. Prior to such
time as the Company begins to receive excess cash flow, all excess cash flow is
utilized to fund credit enhancement requirements to secure financial guaranty
insurance policies issued by a monoline 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
servicing fees of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized. Over the four quarters ended December 31,
1997 the Company completed four securitization transactions totaling $1.2
billion.
According to CNW Marketing/Research, an independent automobile finance market
research firm, the automobile finance industry is the second largest consumer
finance industry in the United States with over $427 billion of loan and
1
<PAGE>
lease originations during 1996. The industry is generally segmented according to
the type of car sold (new vs. used) and the credit characteristics of the
borrower (prime vs. sub-prime). The sub-prime segment of the market accounted
for approximately $75 billion of these originations.
The Company's principal objective is to continue to build upon its position as
a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the
Company employs the following key strategies:
Continued Expansion of the Automobile Finance Branch Network. The Company
opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995,
20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31,
1997, bringing its branch office network to 108 offices located in 32 states as
of December 31, 1997. Branch office personnel are responsible for the
development and maintenance of dealer relationships. As part of its goal of
increasing the number of dealers from whom it is purchasing automobile finance
contracts, the Company plans to open approximately 17 additional branch offices
during the remainder of fiscal 1998.
Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company
has developed and implemented a credit scoring system across its branch office
network to support the branch level credit approval process. The Company's
proprietary credit scoring models are designed to enable AmeriCredit to tailor
each loan's pricing and structure to a statistical assessment of the underlying
credit risk.
Sophisticated Risk Management Techniques. The Company's centralized risk
management department is responsible for monitoring the origination process,
supporting management's supervision of each branch office, tracking collateral
values of the Company's receivables portfolio and monitoring portfolio returns.
This risk management department uses proprietary databases to identify
concentrations of risk, to price for the risk associated with selected market
segments and to endeavor to enhance the credit quality and profitability of the
contracts purchased.
High Investment in Technology to Support Operating Efficiency and Growth.
The use of leading-edge technology in both loan origination and servicing has
enabled AmeriCredit to become a low-cost provider in the sub-prime automobile
finance market. AmeriCredit's annualized ratio of operating expenses to average
managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for
fiscal 1997 and 6.0% for the six months ended December 31, 1997.
Leveraging Sub-Prime Lending Expertise. In November 1996, AmeriCredit acquired
a small residential mortgage lender which was later renamed Americredit
Corporation of California and which conducts business under the name AmeriCredit
Mortgage Services ("AMS"). AMS specializes in originating and purchasing home
equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage
brokers. AMS has originated $105.4 million of mortgage loans from its date of
acquisition through December 31, 1997. The Company believes that over time it
can leverage its national presence, risk management techniques and state-of-the-
art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's
corporate office is located in Orange, California. AMS has historically sold its
home equity loans and the related servicing rights to third party investors.
Funding and Liquidity Through Securitizations. The Company sells automobile
receivables in securitization transactions in order to obtain a cost-effective
source of funds for the purchase of additional automobile finance contracts, to
reduce the risk of interest rate fluctuations and to utilize capital
efficiently. Since the Company's first securitization transaction in December
1994, the Company has securitized approximately $2.0 billion of automobile
receivables in private and public offerings of asset-backed securities.
AmeriCredit was incorporated in Texas in 1988 and succeeded to the business,
assets and liabilities of a predecessor corporation formed under the laws of
Texas in 1986. The Company's common stock, $.01 par value per share (the "Common
Stock"), is traded on the NYSE under the symbol "ACF." The Company's principal
executive offices are located at 200 Bailey Avenue, Fort Worth, Texas 76107 and
its telephone number is 817-332-7000.
2
<PAGE>
THE PRIOR OFFERING
The outstanding $50.0 million principal amount of Old Notes were sold by
the Company to the Initial Purchasers on January 29, 1998, pursuant to the
Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement with respect to
the Old Notes. See "The Exchange Offer--Purpose and Effect."
THE EXCHANGE OFFER
The Exchange Offer............. The Company is offering upon the terms
and subject to the conditions set forth
herein and in the Letter of Transmittal
to exchange the New Notes for the
outstanding Old Notes. As of the date of
this Prospectus, $50.0 million in
aggregate principal amount of the Old
Notes is outstanding, the maximum amount
authorized by the Indenture for all
Notes. As of _____________, 1998, there
was one registered holder of the Old
Notes, Cede & Co., which held the Old
Notes for _____ of its participants. See
"The Exchange Offer--Terms of the
Exchange Offer."
Expiration Date................ 5:00 p.m., New York City time, on
__________ __, 1998 as the same may be
extended. See "The Exchange Offer--
Expiration Date; Extensions;
Amendments."
Conditions of the
Exchange Offer............... The Exchange Offer is not conditioned
upon any minimum principal amount of Old
Notes being tendered for exchange. The
only condition to the Exchange Offer is
the declaration by the Commission of the
effectiveness of the Registration
Statement of which this Prospectus
constitutes a part (the "Exchange Offer
Registration Statement"). See "The
Exchange Offer--Conditions of the
Exchange Offer."
Termination of Certain
Rights....................... Pursuant to the Registration Rights
Agreement and the Old Notes, holders of
Old Notes (i) have rights to receive
Liquidated Damages and (ii) have certain
rights intended for the holders of
unregistered securities. "Liquidated
Damages" means damages of $0.05 per week
per $1,000 principal amount of Old Notes
(up to a maximum of $0.50 per week per
$1,000 principal amount) during the
period in which a Registration Default
is continuing pursuant to the terms of
the Registration Rights Agreement.
Holders of New Notes will not be and,
upon consummation of the Exchange Offer,
holders of Old Notes will no longer be,
entitled to (i) the right to receive the
Liquidated Damages or (ii) certain other
rights under the Registration Rights
Agreement intended for holders of
unregistered securities. See "The
Exchange Offer--Termination of Certain
Rights" and "Procedures for Tendering
Old Notes."
Accrued Interest............... The New Notes will bear interest at a
rate equal to 9 1/4% per annum. Interest
shall accrue from January 29, 1998 or
from the most recent Interest Payment
Date with respect to the Old Notes to
which interest was paid or duly provided
for. See "Description of Notes--
Principal, Maturity and Interest."
3
<PAGE>
Procedures for Tendering
Old Notes.................... Each holder desiring to accept the
Exchange Offer must complete and sign
the Letter of Transmittal, have the
signature thereon guaranteed if required
by the Letter of Transmittal, and mail
or deliver the Letter of Transmittal,
together with the Old Notes or a Notice
of Guaranteed Delivery (as defined in
the Letter of Transmittal) and any other
required documents (such as evidence of
authority to act, if the Letter of
Transmittal is signed by someone acting
in a fiduciary or representative
capacity), to the Exchange Agent (as
defined under "The Exchange Offer--The
Exchange Agent; Assistance") at the
address set forth on the back cover page
of this Prospectus prior to 5:00 p.m.,
New York City time, on the Expiration
Date. Any Beneficial Owner (as defined
under "The Exchange Offer--Procedures
for Tendering Old Notes") of the Old
Notes whose Old Notes are registered in
the name of a nominee, such as a broker,
dealer, commercial bank or trust company
and who wishes to tender Old Notes in
the Exchange Offer, should instruct such
entity or person to promptly tender on
such Beneficial Owner's behalf. See "The
Exchange Offer--Procedures for Tendering
Old Notes."
Guaranteed Delivery
Procedures................... Holders of Old Notes who wish to tender
their Old Notes and (i) whose Old Notes
are not immediately available or (ii)
who cannot deliver their Old Notes or
any other documents required by the
Letter of Transmittal to the Exchange
Agent prior to the Expiration Date, may
tender their Old Notes according to the
guaranteed delivery procedures set forth
in the Letter of Transmittal. See "The
Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Old Notes and
Delivery of New Notes........ Upon effectiveness of the Exchange Offer
Registration Statement of which this
Prospectus constitutes a part and
consummation of the Exchange Offer, the
Company will accept any and all Old
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly after acceptance of the Old
Notes. See "The Exchange Offer--
Acceptance of Old Notes for Exchange;
Delivery of New Notes."
Withdrawal Rights.............. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See
"The Exchange Offer--Withdrawal Rights."
Certain Federal Income
Tax Considerations........... There will not be any U.S. Federal
income tax consequences to holders
exchanging Old Notes for New Notes
pursuant to the Exchange Offer. See
"Certain Federal Income Tax
Consequences."
The Exchange Agent............. Bank One, N.A. is the exchange Agent (in
such capacity, the "Exchange Agent").
The address and telephone number of the
Exchange Agent are set forth in "The
Exchange Offer--The Exchange Agent;
Assistance."
4
<PAGE>
Fees and Expenses.............. All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by the Company.
The Company will also pay certain
transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer
-- Fees and Expenses."
Resales of the New
Notes........................ Based on existing interpretations by the
Staff of the Commission set forth in
"no-action" letters issued to third
parties, the Company believes that New
Notes issued pursuant to the Exchange
Offer to a holder in exchange for Old
Notes may be offered for resale, resold
and otherwise transferred by a holder
(other than (i) a broker-dealer who
purchased the Old Notes directly from
the Company for resale pursuant to Rule
144A under the Securities Act or any
other available exemption under the
Securities Act or (ii) a person that is
an affiliate of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such holder is acquiring
the New Notes in the ordinary course of
business and is not participating, and
has no arrangement or understanding with
any person to participate, in a
distribution of the New Notes. Each
broker-dealer that receives New Notes
for its own account in exchange for Old
Notes, where such Old Notes were
acquired by such broker as a result of
market-making or other trading
activities, must acknowledge that it
will deliver a prospectus in connection
with any resale of such New Notes. See
"The Exchange Offer--Resales of the New
Notes" and "Plan of Distribution."
Effect of Not Tendering
Old Notes for Exchange....... Old Notes that are not tendered or that
are not properly tendered will,
following the expiration of the Exchange
Offer, continue to be subject to the
existing restrictions upon transfer
thereof. The Company will have no
further obligations to provide for the
registration under the Securities Act of
such Old Notes and such Old Notes will,
following the expiration of the Exchange
Offer, bear interest at the same rate as
the New Notes.
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of the New Notes will not
be entitled to Liquidated Damages and (iii) holders of the New Notes will not
be, and upon consummation of the Exchange Offer, holders of the Old Notes will
no longer be, entitled to certain rights under the Registration Rights Agreement
intended for the holders of unregistered securities, except in limited
circumstances. See "The Exchange Offer--Termination of Certain Rights." The
Exchange Offer shall be deemed consummated upon the occurrence of the delivery
by the Company to the Registrar under the Indenture of the New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
are tendered by holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer--Termination of Certain Rights," "-- Procedures for Tendering Old
Notes" and "Description of Notes."
Securities Offered............. $50 million in aggregate principal
amount of 9 1/4% Senior Notes due
2004.
Maturity....................... February 1, 2004.
Interest....................... The Notes will bear interest at the
rate of 9 1/4% per annum, payable
semiannually on February 1 and August
1, commencing August 1, 1998.
5
<PAGE>
Ranking........................ The Notes will be general unsecured
obligations of the Company. The Notes
will rank pari passu in right of payment
with the Original Notes (as defined) and
all other existing and future senior
unsecured Indebtedness of the Company
and senior in right of payment to all
future subordinated Indebtedness of the
Company. However, the Company and
certain of the Company's subsidiaries
are parties to the Credit Agreement and
the Mortgage Subsidiary Credit Agreement
and all borrowings under the these
agreements are secured by first priority
liens on certain assets of the Company
and certain of the Company's
subsidiaries, including the Guarantors.
In addition, in October 1997 the Company
established a Warehouse Facility. All
financings under the Warehouse Facility
are secured by a first priority lien on
the receivables and related assets held
by CP Funding Corp., a special purpose
subsidiary which is treated as a
Securitization Trust under the
Indenture. At December 31, 1997, on an
as adjusted basis after giving effect to
the Prior Offering and the application
of the net proceeds therefrom, the
aggregate principal amount of senior
Indebtedness of the Company and its
subsidiaries (excluding trade payables
and other accrued liabilities) would
have been approximately $251.2 million,
an aggregate of $57.6 million of which
would have been secured Indebtedness
outstanding under the Credit Agreement,
the Warehouse Facility and the Mortgage
Subsidiary Credit Agreement and
approximately $14.1 million of which
would have been asset-backed notes
outstanding of the Company's Special
Purpose Finance Subsidiaries. The Notes
will be effectively subordinated to the
obligations of the Special Purpose
Finance Subsidiaries with respect to
Existing Indebtedness (as defined) and
to the obligations of AFS Funding Corp.
with respect to Credit Enhancement
Agreements (as defined) and to the
obligations of CP Funding Corp. with
respect to the Warehouse Facility. See
"Risk Factors--Holding Company
Structure; Effective Subordination," "--
Leverage" and "Description of Other
Debt."
Subsidiary Guarantees.......... Pursuant to the Subsidiary Guarantees,
the Notes will be guaranteed by each
existing and future Restricted
Subsidiary (as defined) of the Company,
except the Company's Special Purpose
Finance Subsidiaries, AFS Funding Corp.
and CP Funding Corp. The Subsidiary
Guarantees will rank pari passu in right
of payment with the Guarantor's
Guarantees of the Original Notes
("Original Guarantees") and all other
existing and future senior unsecured
Indebtedness of the Guarantors. The
Company's and the Guarantors'
obligations under the Credit Agreement
and Mortgage Subsidiary Credit Agreement
are secured by liens on certain of their
assets and, accordingly, such
Indebtedness will effectively rank prior
to the Notes with respect to such
assets. See "Risk Factors--Holding
Company Structure; Effective
Subordination."
6
<PAGE>
Optional Redemption............ The Notes may be redeemed at the
option of the Company, in whole or in
part, on or after February 1, 2001 at
a premium declining to par in 2003,
plus accrued and unpaid interest and
Liquidated Damages, if any, through
the redemption date. Notwithstanding
the foregoing, at any time prior to
February 1, 2000, the Company may on
any one or more occasions redeem up
to an aggregate of $16.7 million in
principal amount of Notes at a
redemption price of 109.25% of the
principal amount thereof, plus
accrued and unpaid interest and
Liquidated Damages thereon, if any,
to the redemption date, with the net
cash proceeds of a public offering of
common stock of the Company; provided
that at least $33.3 million in
aggregate principal amount of Notes
remain outstanding immediately after
the occurrence of such redemption; and
provided, further, that such redemption
shall occur within 45 days of the date
of the closing of such public offering.
The Indenture provides that any such
optional redemption of Notes shall be
accompanied by a proportionate
redemption of Original Notes. See
"Description of the Notes--Optional
Redemption."
Change of Control.............. In the event of a Change of Control, the
holders of the Notes will have the right
to require the Company to purchase their
Notes at a price equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and
Liquidated Damages, if any, to the date
of purchase.
Covenants...................... The indenture, pursuant to which the
Notes will be issued (the "Indenture"),
will be substantially similar to the
Original Indenture and will contain
certain covenants that, among other
things, limit the ability of the Company
and its subsidiaries to incur additional
Indebtedness and issue preferred stock,
pay dividends or make other
distributions, repurchase Equity
Interests (as defined) or subordinated
Indebtedness, create certain liens,
enter into certain transactions with
affiliates, sell assets of the Company
or its subsidiaries, issue or sell
Equity Interests of the Company's
subsidiaries or enter into certain
mergers and consolidations. In addition,
under certain circumstances, the Company
will be required to offer to purchase
Notes at a price equal to 100% of the
principal amount thereof, plus accrued
and unpaid interest and Liquidated
Damages, if any, to the date of
purchase, with the proceeds of certain
Asset Sales (as defined). See
"Description of the Notes" and
"Description of Other Debt--Original
Notes."
Absence of a Public Market
for the New Notes............ The New Notes are a new issue of
securities with no established market.
Accordingly, there can be no assurance
as to the development or liquidity of
any market for the New Notes. The
Initial Purchasers have advised the
Company that they currently intend to
make a market in the New Notes. However,
the Initial Purchasers are not obligated
to do so, and any market making with
respect to the New Notes may be
discontinued at any time without notice.
The Company does not intend to apply for
listing of the New Notes on a securities
exchange.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be considered
in evaluating the Exchange Offer.
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
---------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income...................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910
Gain on sale of receivables................ -- -- -- 22,873 67,256
Servicing fee income....................... -- -- -- 3,712 21,024
Investment income.......................... 2,052 2,550 1,284 1,075 2,909
Other income............................... 21,704 5,512 2,761 1,639 1,648
----------- ----------- ----------- ----------- -----------
Total revenue........................... 24,881 15,882 33,084 80,978 137,747
Costs and expenses............................ 44,247 10,817 23,066 46,722 74,822
----------- ----------- ----------- ----------- -----------
Income (loss) before taxes.................... (19,366) 5,065 10,018 34,256 62,925
Provision (credit) for taxes.................. -- -- (18,875) 12,665 24,226
----------- ----------- ----------- ----------- -----------
Net income (loss).......................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699
Basic earnings (loss) per share(1)......... $ (.66) $ .17 $ 1.01 $ .75 $ 1.34
Diluted earnings (loss) per share(1)....... $ (.66) $ .16 $ .95 $ .71 $ 1.26
Weighted average shares outstanding........ 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362
Weighted average shares and assumed
incremental shares....................... 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471
CASH FLOW DATA:
(Used in) Provided by operating activities.... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132
(Used in) Provided by investing activities.... (8,121) (12,174) (144,512) (63,116) (123,076)
(Used in) Provided by financing activities.... (5,705) (9,238) 132,433 12,050 60,826
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882
OTHER DATA:
Auto receivable originations(2).............. $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794
Managed auto receivables(2).................. $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255
Average managed auto receivables(2).......... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155
Auto loans securitized....................... $ -- $ -- $ 150,170 $ 270,351 $ 817,500
Number of branches........................... 5 18 31 51 85
Average principal amount per managed
auto receivable(2).......................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087
Effective yield on owned auto
receivables (5)............................. 21.7% 20.9% 20.5% 19.7% 19.9%
RATIOS:
Ratio of earnings to fixed charges(4)........ (86.6) 31.2 3.5 3.6 4.9
Percentage of total indebtedness to total
capitalization.............................. 1.0% 0.3% 47.9% 48.6% 50.9%
Return on average common equity(5)........... (14.7)% 4.1% 23.1% 14.3% 20.8%
Operating expenses as a percentage of
average managed auto receivables(5)......... 18.2% 15.0% 10.0% 7.2% 6.6%
Percentage of senior unsecured debt to
total equity................................ 0.% 0.% 0.% 0.% 57.7%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2).......................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421
Delinquencies as a percentage of
managed auto receivables(2)................. 0.9% 1.9% 2.0% 3.1% 3.2%
Net charge-offs.............................. $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231
Net charge-offs as a percentage of
average managed auto
receivables(2)(5)........................... 0.7% 3.8% 4.5% 5.6% 5.5%
<CAPTION>
SIX MONTHS ENDED
-----------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- -----------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income................................ $ 21,503 $ 26,190
Gain on sale of receivables.......................... 28,151 53,775
Servicing fee income................................. 8,242 19,191
Investment income.................................... 1,152 2,570
Other income......................................... 622 502
----------- -----------
Total revenue..................................... 59,670 102,228
Costs and expenses...................................... 31,590 57,716
----------- -----------
Income (loss) before taxes.............................. 28,080 44,512
Provision (credit) for taxes............................ 10,810 17,137
----------- -----------
Net income (loss).................................... $ 17,270 $ 27,375
Basic earnings (loss) per share(1)................... $ .61 $ .92
Diluted earnings (loss) per share(1)................. $ .57 $ .85
Weighted average shares outstanding.................. 28,513,145 29,684,960
Weighted average shares and assumed
incremental shares................................. 30,398,569 32,199,267
CASH FLOW DATA:
(Used in) Provided by operating activities.............. $ 23,414 $ 8,950
(Used in) Provided by investing activities.............. (20,820) (42,948)
(Used in) Provided by financing activities.............. 352 30,238
----------- -----------
Net increase (decrease) in cash and cash
equivalents............................................ $ 2,946 $ (3,760)
OTHER DATA:
Auto receivable originations(2)........................ $ 359,407 $ 696,252
Managed auto receivables(2)............................ $ 761,716 $ 1,599,273
Average managed auto receivables(2).................... $ 641,522 $ 1,375,614
Auto loans securitized................................. $ 345,570 $ 682,499
Number of branches..................................... 66 108
Average principal amount per managed
auto receivable(2).................................... $ 9,481 $ 10,456
Effective yield on owned auto
receivables (5)....................................... 19.6% 20.7%
RATIOS:
Ratio of earnings to fixed charges(4).................. 5.2 4.7
Percentage of total indebtedness to total
capitalization........................................ 46.2% 49.4%
Return on average common equity(5)..................... 20.0% 22.9%
Operating expenses as a percentage of
average managed auto receivables(5)................... 6.7% 6.0%
Percentage of senior unsecured debt to
total equity.......................................... 0.% 49.0%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2).................................... $ 28,251 $ 57,186
Delinquencies as a percentage of
managed auto receivables(2)........................... 3.7% 3.6%
Net charge-offs........................................ $ 17,749 $ 38,073
Net charge-offs as a percentage of
average managed auto
receivables(2)(5)..................................... 5.5% 5.5%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
JUNE 30, JUNE 30, AS
1996 1997 ACTUAL ADJUSTED(6)
----------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 2,145 $ 6,027 $ 2,267 $ 2,267
Excess servicing receivable........................ 33,093 114,376 179,788 179,788
Owned auto receivables............................. 264,086 275,249 261,333 261,333
Total assets....................................... 330,159 493,453 562,295 564,533
Credit Agreement................................... 86,000 71,700 2,100 --
Warehouse Facility................................. -- -- 95,989 50,327
Mortgage Subsidiary Credit Agreement (7)........... -- 345 7,281 7,281
Automobile receivable-backed notes................. 67,847 23,689 14,138 14,138
9 1/4 Senior Notes due 2004 (8).................... -- 125,000 125,000 175,000
Notes payable (9).................................. 418 3,517 4,458 4,458
Total debt......................................... 154,265 224,251 248,966 251,204
Shareholders' equity............................... 163,225 216,536 254,946 254,946
</TABLE>
_______________
(1) The Company has adopted the requirements of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
establishes new standards for computing and presenting earnings per share,
replacing existing accounting standards. All earnings per share and related
weighted average share amounts for the periods presented in the above table
have been restated to conform to the requirements of SFAS 128.
(2) The Company engaged in the retail used car sales and finance business until
December 31, 1992; effective as of such date, the Company exited the retail
used car sales side of its business. For purposes of this summary, revenues
from vehicle sales and finance charge income relating to the financing of
the sales of vehicles from the Company's former used car sales business are
classified as other income. Receivables generated from the former used car
sales business are classified as other receivables and not included in
managed receivables.
(3) As further described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company recognized an income tax
benefit in fiscal 1995 equal to the expected future tax savings from using
its net operating loss carry forward and other future tax benefits.
(4) Represents the ratio of the sum of income before income taxes plus interest
expense for the period to interest expense.
(5) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
(6) The as adjusted balance sheet data have been calculated giving effect to the
Prior Offering and the application of the net proceeds therefrom as if
each occurred on December 31, 1997.
(7) Fully guaranteed by the Company and certain of its Subsidiaries.
(8) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt - Original Notes."
(9) Consists of certain capitalized equipment leases.
9
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors set forth
below, as well as the other information included in this Prospectus, in
evaluating the Exchange Offer.
DEPENDENCE ON FUNDING SOURCES
Dependence on Credit Facilities and Warehouse Facilities. The Company depends
on credit facilities and warehouse facilities with financial institutions to
finance its purchase of contracts pending securitization. At the date of this
Prospectus, the Company has two credit facilities with various banks providing
for revolving credit borrowings of up to a total of $385 million, subject to
defined borrowing bases. The Company's main credit Agreement (the "Credit
Agreement"), which provides for up to $310 million of revolving borrowings
(subject to a borrowing base), matures in October 1998. The Company's mortgage
subsidiary credit Agreement (the "Mortgage Subsidiary Credit Agreement"), which
provides for up to $75 million of revolving borrowings (subject to a borrowing
base), matures in February 1999. In addition, the Company has a $245 million
warehouse facility (the "Warehouse Facility") which expires in October 1998. All
financings under the Warehouse Facility are secured by a first priority lien on
the receivables and related assets held by CP Funding Corp., a special purpose
subsidiary which is treated as a Securitization Trust under the Indenture.
Financings under the Warehouse Facility are available pursuant to an advance
formula which is subject to downward adjustment upon certain defined financial
performance "Trigger Events." See "Description of Other Debt." There can be no
assurance that such financing resources will continue to be available to the
Company on reasonable terms or at all. To the extent that the Company is unable
to extend or replace any of the these facilities and arrange new credit or
warehouse facilities, the Company would have to curtail its contract purchasing
activities, which would have a material adverse effect on the Company's
financial position, liquidity and results of operations.
The Company's Credit Agreement, Warehouse Facility and Mortgage Subsidiary
Credit Agreement contain more extensive restrictions and covenants than the
Indenture and require the Company to maintain specified financial ratios and
satisfy certain financial tests. A breach of any of these covenants could result
in an event of default under these agreements. Upon the occurrence of an event
of default under these agreements, the lenders thereunder could elect to declare
all amounts outstanding under these agreements, including accrued interest or
other obligations, to be immediately due and payable and/or restrict the
Company's ability to obtain additional borrowings under these agreements. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those financial ratios and tests.
Dependence on Securitization Program. Since December 1994, the Company has
relied upon its ability to aggregate and sell receivables in the asset-backed
securities market to generate cash proceeds for repayment of credit facilities
and to purchase additional contracts from automobile dealers. Further, gains on
sales generated by the Company's securitizations represent a significant portion
of the Company's revenues. The Company endeavors to effect securitizations of
its receivables on at least a quarterly basis. Accordingly, adverse changes in
the Company's asset-backed securities program or in the asset-backed securities
market for automobile receivables generally could materially adversely affect
the Company's ability to purchase and resell loans on a timely basis and upon
terms reasonably favorable to the Company. Any delay in the sale of receivables
beyond a quarter-end would eliminate the gain on sale in the given quarter and
adversely affect the Company's reported earnings for such quarter. Any such
adverse changes or delays would have a material adverse effect on the Company's
financial position, liquidity and results of operations.
Dependence on Credit Enhancement. To date, all of the Company's
securitizations have utilized credit enhancement in the form of financial
guaranty insurance policies issued by Financial Security Assurance Inc. ("FSA")
in order to achieve "AAA/Aaa" ratings, which reduces the costs of
securitizations relative to alternative forms of credit enhancement available to
the Company. FSA is not required to insure Company-sponsored securitizations and
there can be no assurance that it will continue to do so or that future Company-
sponsored securitizations will be similarly rated. Likewise, the Company is not
required to utilize financial guaranty insurance policies issued by FSA or any
other form of credit enhancement in connection with its securitizations. A
downgrading of FSA's credit rating or FSA's withdrawal of credit enhancement
could result in higher interest costs for future Company-sponsored
securitizations. Such events could have a material adverse effect on the
Company's financial position, liquidity and results of operations.
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ABILITY TO SERVICE DEBT; LIQUIDITY AND CAPITAL NEEDS
Although the Company believes that cash available from operating, investing
and financing activities will be sufficient to enable it to make required
interest payments on the Notes, its other debt obligations and other required
payments for the foreseeable future, there can be no assurance in this regard.
The Company may encounter liquidity problems which could affect its ability to
meet such obligations while attempting to withstand competitive pressures or
adverse economic conditions. In such circumstances, the value of the Notes could
be materially adversely affected.
The Company requires substantial amounts of cash to fund its contract purchase
and securitization activities. Although the Company recognizes a gain on the
sale of receivables upon the closing of a securitization, it typically receives
the cash representing such gain over the actual life of the receivables
securitized. The Company also incurs significant transaction costs in connection
with a securitization and incurs both current and deferred tax liabilities as a
result of the gains on sale. Accordingly, the Company's strategy of securitizing
substantially all of its newly purchased receivables and increasing the number
of contracts purchased will require substantial amounts of cash.
The Company expects to continue to require substantial amounts of cash as the
volume of the Company's contract purchases increases and its securitization
program grows. The Company's primary cash requirements include the funding of:
(i) contract purchases pending their securitization and sale; (ii) credit
enhancement requirements in connection with the securitization and sale of the
receivables; (iii) interest and principal payments under the Credit Agreement,
the Mortgage Subsidiary Credit Agreement, the Warehouse Facility and the
Original Notes and other indebtedness; (iv) fees and expenses incurred in
connection with the securitization of receivables and the servicing of such
receivables; (v) ongoing operating expenses; and (vi) tax payments due on
receipt of excess cash flows from securitization trusts.
The Company's primary sources of liquidity in the future are expected to be
existing cash, financings under the Credit Agreement, the Mortgage Subsidiary
Credit Agreement and the Warehouse Facility, sales of automobile receivables
through securitizations, excess cash flow received from securitization trusts
and, subject to capital market conditions, further issuances of debt or equity
securities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Company's primary sources of liquidity as described in the paragraph above
are expected to be sufficient to fund the Company's liquidity requirements for
the next 12 months if the Company's future operations are consistent with
management's current growth expectations. However, because the Company expects
to continue to require substantial amounts of cash for the foreseeable future,
it anticipates that it will need to effect debt or equity financings regularly,
in addition to quarterly securitizations. The type, timing and terms of
financing selected by the Company will be dependent upon the Company's cash
needs, the availability of other financing sources and the prevailing conditions
in the financial markets. There can be no assurance that any such sources will
be available to the Company at any given time or as to the favorableness of the
terms on which such sources may be available.
LEVERAGE
The Company currently has substantial outstanding Indebtedness (as defined in
the Indenture) and the Company is significantly leveraged. Although the
covenants under the Indenture will restrict the incurrence of Indebtedness by
the Company and its Restricted Subsidiaries (as defined in the Indenture), the
Indenture does not limit the amount of Indebtedness under Warehouse Facilities,
such as the existing Warehouse Facility, that qualify as "Permitted Warehouse
Debt" (as defined). Permitted Warehouse Debt will be defined as Indebtedness
used exclusively to finance the purchase of automobile and other consumer loans
or home mortgage loans by the Company or a Restricted Subsidiary, up to the face
amount of the loans financed thereby. All Permitted Warehouse Debt will be
secured by the receivables financed thereby. In addition, the Indenture will
permit substantial additional secured borrowings under the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and other Credit Facilities (as defined in
the Indenture), subject to a borrowing base formula. See "Description of the
Notes--Certain Definitions."
At December 31, 1997, on an as adjusted basis after giving effect to the Prior
Offering and the application of the net proceeds therefrom, the aggregate
principal amount of senior Indebtedness of the Company and its subsidiaries
(excluding trade payables and other accrued liabilities) would have been
approximately $251.2 million, an aggregate of $57.6 million of which would have
been secured Indebtedness outstanding under the Credit Agreement, the Warehouse
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Facility and the Mortgage Subsidiary Credit Agreement and approximately $14.1
million of which would have been asset-backed notes outstanding of the Company's
Special Purpose Finance Subsidiaries. After giving effect to the Prior Offering
and the application of the net proceeds therefrom, as of December 31, 1997, the
Company would have had up to $125.3 million available for additional borrowing
under the Credit Agreement, pursuant to the borrowing base requirements of such
Agreement. All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust under the
Indenture. See "--Holding Company Structure; Effective Subordination" and
"Description of Other Debt."
The Company's ability to make payments of principal or interest on, or to
refinance its Indebtedness (including the Notes) will depend on its future
operating performance, and its ability to effect additional securitizations and
debt and/or equity financings, which to a certain extent is subject to economic,
financial, competitive and other factors beyond its control. If the Company is
unable to generate sufficient cash flow in the future to service its debt, it
may be required to refinance all or a portion of its existing debt, including
the Notes, or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained. The inability to obtain additional financing could have a material
adverse effect on the Company.
The degree to which the Company is leveraged could have important consequences
to the holders of the Notes, including: (i) the Company may be more vulnerable
to adverse general economic and industry conditions; (ii) the Company may find
it more difficult to obtain additional financing for future working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes; and (iii) the Company will have to dedicate a substantial portion of
the Company's cash resources to the payment of principal and interest on
indebtedness outstanding under the Credit Agreement, the Mortgage Subsidiary
Credit Agreement, the Warehouse Facility (all of which become due prior to the
maturity of the Notes) and the Original Notes, thereby reducing the funds
available for operations and future business opportunities. In addition, the
Indenture contains certain covenants which could limit the Company's operating
and financial flexibility. See "Description of the Notes--Certain Covenants."
DEFAULT AND PREPAYMENT RISKS
The Company's results of operations, financial condition and liquidity depend,
to a material extent, on the performance of contracts purchased and held by the
Company prior to their sale in a securitization transaction as well as the
subsequent performance of receivables sold to securitization trusts. A portion
of the loans acquired by the Company may default or prepay during the period
prior to their sale in a securitization transaction or if they remain owned by
the Company. The Company bears the full risk of losses resulting from payment
defaults during such period. In the event of a payment default, the collateral
value of the financed vehicle may not cover the outstanding loan balance and
costs of recovery. The Company maintains an allowance for losses on loans held
by the Company, which reflects management's estimates of anticipated losses for
such loans. If the allowance is inadequate, then the Company would recognize as
an expense the losses in excess of such allowance and results of operations
could be adversely affected. In addition, under the terms of the Credit
Agreement, the Company is not able to borrow against defaulted loans and loans
greater than 30 days delinquent held by the Company. Similarly, payment
defaults can cause the amount of financings available under the Warehouse
Facility to be reduced or terminated.
The Company also retains a substantial portion of the default and prepayment
risk associated with the receivables that it sells pursuant to Company-sponsored
securitizations. A large component of the gain recognized on such sales and the
corresponding asset recorded on the Company's balance sheet is excess servicing
receivable which is based on the present value of estimated future excess cash
flows from the securitized receivables which will be received by the Company.
Accordingly, excess servicing receivable is calculated on the basis of
management's assumptions concerning, among other things, defaults and
prepayments. Actual defaults and prepayments may vary from management's
assumptions, possibly to a material degree. In addition, the Company is required
to deposit substantial amounts of the cash flows generated by its interests in
Company-sponsored securitizations ("restricted cash") into spread accounts which
are pledged to FSA as security for the Company's obligation to reimburse FSA for
any amounts which may be paid out on financial guarantee insurance policies.
The Company regularly measures its default, prepayment and other assumptions
against the actual performance of securitized receivables. If the Company were
to determine, as a result of such regular review or otherwise, that it
underestimated defaults and/or prepayments, or that any other material
assumptions were inaccurate, the Company would
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be required to adjust the carrying value of its excess servicing receivable by
making a charge to income and writing down the carrying value of excess
servicing receivable on its balance sheet. Future cash flows from securitization
trusts may also be less than expected and the Company's results of operations
and liquidity would be adversely affected, possibly to a material degree. In
addition, an increase in prepayments and defaults would reduce the size of the
Company's servicing portfolio which would reduce the Company's servicing fee
income further adversely affecting results of operations and cash flow. A
material write-down in excess servicing receivable and the corresponding
decreases in earnings and cash flow could limit the Company's ability to service
debt (including the Notes) and to affect future securitizations and other
financings. To date, no material write downs have been required. Although the
Company believes that it has made reasonable assumptions as to the future cash
flows of the various pools of receivables that have been sold in securitization
transactions, actual rates of default or prepayment may differ from those
assumed and other assumptions may be required to be revised upon future events.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
As of December 31, 1997, restricted cash and excess servicing receivable were
approximately $76.2 million and $179.8 million, respectively. Depending on the
Company's growth, restricted cash and excess servicing receivable may become a
larger share of the Company's overall assets.
PORTFOLIO PERFORMANCE; NEGATIVE IMPACT ON CASH FLOW; RIGHT TO TERMINATE NORMAL
SERVICING
Generally, the form of credit enhancement agreement entered into in connection
with securitization transactions contains specified limits on the delinquency,
default and loss rates on the receivables included in each trust. If, at any
measuring date, the delinquency, default or loss rate with respect to any trust
were to exceed the specified limits, provisions of the credit enhancement
agreement would automatically increase the level of credit enhancement
requirements for that trust. During the period in which the specified
delinquency, default and loss rates were exceeded, excess cash flow, if any,
from the trust would be used to fund the increased credit enhancement levels
instead of being distributed to the Company, which would have an adverse effect
on the Company's cash flow. Further, the credit enhancement requirements for
each securitization trust are cross-collateralized to the credit enhancement
requirements established in connection with each of the Company's other
securitization trusts, such that excess cash flow from a performing
securitization trust insured by FSA may be used to support increased credit
enhancement requirements for a nonperforming securitization trust insured by
FSA, thereby further restricting excess cash flow available to the Company. As
of the date of this Prospectus, the Company has on occasion exceeded these
specified limits, however, FSA waived each of these occurrences. There can be no
assurance that FSA would waive any such future occurrence.
The credit enhancement agreements entered into in connection with
securitization transactions contain additional specified limits on the
delinquency, default and loss rates on the receivables included in each trust
which are higher than the limits referred to in the preceding paragraph. If, at
any measuring date, the delinquency, default or loss rate with respect to any
trust were to exceed these additional specified limits applicable to such trust,
provisions of the credit enhancement agreements permit FSA to terminate the
Company's servicing rights to the receivables sold to that trust. In addition,
the servicing agreements are cross-defaulted so that a default under one
servicing agreement would allow FSA to terminate the Company's servicing rights
under all of its servicing agreements. Although the Company has never exceeded
such delinquency, default or loss rates, there can be no assurance that the
Company's servicing rights with respect to the automobile receivables in such
trusts, or any other trust which exceeds the specified limits in future periods,
will not be terminated. FSA has other rights to terminate the Company as
servicer if (i) the Company were to breach its obligations under the servicing
agreements, (ii) FSA was required to make payments under its policy or (iii)
certain bankruptcy or insolvency events were to occur. As of the date of this
Prospectus, no such termination events have occurred with respect to any of the
trusts formed by the Company.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
The Company derives substantially all of its revenues from its subsidiaries
and from its interests in securitization trusts. Holders of any secured
indebtedness of the Company or its subsidiaries or such securitization trusts
will have claims that are prior to the claims of the holders of the Notes with
respect to the assets securing most of the Company's other indebtedness.
Notably, the Company and certain of its subsidiaries (including the Guarantors)
are parties to the Credit Agreement and the Mortgage Subsidiary Credit Agreement
which are secured by liens on all of the receivables
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financed thereby and certain of the Company's and its subsidiaries' other
assets. All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust under the
Indenture. The Notes will be effectively subordinated to all such secured
indebtedness. As of December 31, 1997, on an as adjusted basis after giving
effect to the Prior Offering and the application of the net proceeds therefrom,
the aggregate amount of secured indebtedness of the Company and its subsidiaries
(including borrowings under the Credit Agreement, the Warehouse Facility and the
Mortgage Subsidiary Credit Agreement) would have been approximately $251.2
million and approximately $125.3 million would have been available for
additional borrowing under the Credit Agreement, pursuant to the borrowing base
requirements of such agreement. If the Company defaulted under its obligations
under the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary
Credit Agreement, such lenders could proceed against the collateral granted to
them to secure that indebtedness. If any senior Indebtedness were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full that indebtedness and the other indebtedness of the
Company, including the Notes. See "Description of Other Debt."
In addition, although a substantial portion of the Company's business is
conducted through AFS Funding Corp. and CP Funding Corp., wholly-owned
subsidiaries, AFS Funding Corp. and CP Funding Corp. will not be Guarantors with
respect to the Notes. AFS Funding Corp. is a limited purpose corporation
established by the Company to facilitate Company-sponsored securitizations and
its ability to pay dividends is dependent on the performance of the receivables
underlying those securitizations and is subject to substantial contractual
restrictions pertaining to the Company-sponsored securitizations. CP Funding
Corp. is also a limited purpose corporation established by the Company to
facilitate financings under the Warehouse Facility and is subject to substantial
contractual restrictions under the Warehouse Facility. Because AFS Funding
Corp. and CP Funding Corp. are not Guarantors, the Notes will be effectively
subordinated to all indebtedness and other obligations of AFS Funding Corp. and
CP Funding Corp.
AFS Funding Corp. is also subject to certain contingent claims by FSA relating
to the financial guarantee insurance policies issued by FSA in connection with
the Company-sponsored securitizations. The Company has agreed to reimburse FSA,
on a limited recourse basis, for amounts paid by FSA under these financial
guarantee insurance policies. In order to secure such reimbursement obligations,
the Company has granted to FSA a lien on the capital stock of, and certain
assets of, AFS Funding Corp., most notably the spread accounts and the
restricted cash required to be deposited therein. FSA will have claims that are
prior to the claims of the holders of the Notes with respect to these assets and
the Notes will be effectively subordinated to all such reimbursement rights.
Substantially all of AFS Funding Corp.'s other assets are excess servicing
receivable consisting of subordinated interests in Company-sponsored
securitizations that are effectively subordinated to the asset-backed securities
issued in such securitizations. As of December 31, 1997, restricted cash and
excess servicing receivable were approximately $76.2 million and $179.8 million,
respectively. There can be no assurance that the Company's operations,
independent of AFS Funding Corp., will generate sufficient cash flow to support
payment of interest or principal on the Notes, or that dividend distributions
will be available from AFS Funding Corp. to fund such payments. See "Description
of Other Debt--Financial Guarantee Insurance Policies."
IMPLEMENTATION OF BUSINESS STRATEGY
The Company's financial position and results of operations depend on its
ability to execute its business strategy. The Company's ability to execute its
business strategy depends on its ability to obtain substantial additional
financing, to expand its automobile finance branch network, to attract and
retain skilled employees and on the ability of its officers and key employees to
manage growth successfully. The failure or inability of the Company to execute
its business strategy could materially adversely affect its financial position,
liquidity and results of operations.
The Company's business strategy also includes leveraging its expertise to
broaden its indirect lending to Sub-Prime Borrowers through the 1996 purchase of
AMS, the Company's mortgage subsidiary. While not currently representing a
material portion of the Company's assets or revenues, management intends over
time to devote substantial resources to pursue growth of AMS's business of
originating and purchasing home equity loans made to Sub-Prime Borrowers. The
conduct of a mortgage finance business requires a substantial amount of cash.
Prior to the purchase of AMS, the Company had no prior experience in the
residential mortgage business. Further, AMS's business will require substantial
additional resources to fund its growth. There can be no assurance that the
Company will be able to successfully implement its sub-prime residential
mortgage loan business strategy. The failure to effectively implement such
strategy or to obtain adequate
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resources to fund AMS's growth will have material adverse effects on the
Company's financial position, liquidity and results of operations.
CREDIT-IMPAIRED BORROWERS
The Company specializes in purchasing, securitizing and servicing sub-prime
receivables. Sub-Prime Borrowers are associated with higher-than-average
delinquency and default rates. While the Company believes that it effectively
manages such risks with its proprietary credit scoring models, risk-based loan
pricing and other underwriting policies and collection methods, no assurance can
be given that such criteria or methods will be effective in the future. In the
event that the Company underestimates the default risk or under-prices contracts
that it purchases, the Company's financial position, liquidity and results of
operations would be adversely affected, possibly to a material degree.
ECONOMIC CONDITIONS
General. Delinquencies, defaults, repossessions and losses generally
increase during periods of economic recession. Such periods also may be
accompanied by decreased consumer demand for automobiles and declining values of
automobiles securing outstanding loans, thereby weakening collateral coverage
and increasing the possibility of a loss in the event of default. Significant
increases in the inventory of used automobiles during periods of economic
recession may also depress the prices at which repossessed automobiles may be
sold or delay the timing of such sales. Because the Company focuses on Sub-Prime
Borrowers, the actual rates of delinquencies, defaults, repossessions and losses
on such loans could be higher than those experienced in the general automobile
finance industry and could be more dramatically affected by a general economic
downturn. In addition, during an economic slowdown or recession, the Company's
servicing costs may increase without a corresponding increase in its servicing
fee income. While the Company believes that the underwriting criteria and
collection methods it employs enable it to manage the higher risks inherent in
loans made to Sub-Prime Borrowers, no assurance can be given that such criteria
or methods will afford adequate protection against such risks. Any sustained
period of increased delinquencies, defaults, repossessions or losses or
increased servicing costs could also adversely affect the Company's ability to
effect future securitizations and correspondingly, its financial position,
liquidity and results of operations. See "--Dependence on Funding Sources."
Interest Rates. The Company's profitability may be directly affected by the
level of and fluctuations in interest rates, which affect the Company's ability
to earn a gross interest rate spread. As the level of interest rates increases,
the Company's gross interest rate spread will generally decline since the rates
charged on the contracts it purchases from dealers are generally at or near the
statutory maximums, affording the Company little opportunity to pass on any
increased interest costs. Furthermore, the Company's future gains recognized
upon the securitization of automobile receivables will also be affected by
interest rates. The Company recognizes a gain in connection with its
securitizations based upon the estimated present value of projected future
excess cash flows from the securitization trusts, which is largely dependent
upon the gross interest rate spread. The Company believes that its profitability
and liquidity would be adversely affected during any period of higher interest
rates, possibly to a material degree. The Company monitors the interest rate
environment and employs pre-funding or other hedging strategies designed to
mitigate the impact of changes in interest rates. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Hedging and Pre-
funding Strategy." There can be no assurance, however, that pre-funding or other
hedging strategies will mitigate the impact of changes in interest rates.
COMPETITION
Competition in the field of sub-prime automobile finance is intense. The
automobile finance market is highly fragmented and is served by a variety of
financial entities including the captive finance affiliates of major automotive
manufacturers, banks, thrifts, credit unions and independent finance companies.
Many of these competitors have substantially greater financial resources and
lower costs of funds than the Company. Many of these competitors also have long
standing relationships with automobile dealerships and may offer dealerships or
their customers other forms of financing, including dealer floor plan financing
and leasing, which are not provided by the Company. Providers of automobile
financing have traditionally competed on the bases of interest rate charged, the
quality of credit accepted, the flexibility of loan terms offered and the
quality of service provided to dealers and customers. In seeking to establish
itself
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as one of the principal financing sources of the dealers it serves, the Company
competes predominately on the basis of its high level of dealer service and
strong dealer relationships and by offering flexible loan terms. There can be no
assurance that the Company will be able to compete successfully in this market
or against such competitors. See "Business--Competition."
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable provisions
of state fraudulent transfer law, if, among other things, the Company or any
Guarantor, at the time it incurred the indebtedness evidenced by the Notes or
its Subsidiary Guarantee, (i) (a) was or is insolvent or rendered insolvent by
reason of such occurrence or (b) was or is engaged in a business or transaction
for which the assets remaining with the Company or such Guarantor constituted
unreasonably small capital or (c) intended or intends to incur, or believed or
believes that it would incur, debts beyond its ability to pay such debts as they
mature, and (ii) the Company or such Guarantor received or receives less than
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, the Notes and the Subsidiary Guarantees, and any pledge or other
security interest securing such indebtedness, could be voided, or claims in
respect of the Notes or the Subsidiary Guarantees could be subordinated to all
other debts of the Company or such Guarantor, as the case may be. The voiding or
subordination of any such indebtedness could result in an Event of Default (as
defined in the Indenture) with respect to such indebtedness, which could result
in acceleration thereof. In addition, the payment of interest and principal by
the Company pursuant to the Notes or the payment of amounts by a Guarantor
pursuant to a Subsidiary Guarantee could be voided and required to be returned
to the person making such payment, or to a fund for the benefit of the creditors
of the Company or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets at a fair valuation or
if the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of their historical financial information, recent operating
history as discussed in "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other factors, the Company and each Guarantor believes that, after giving effect
to the indebtedness incurred in connection with the Prior Offering, it (i) will
not be insolvent, will not have unreasonably small capital for the businesses in
which it is engaged and will not incur debts beyond its ability to pay such
debts as they mature and (ii) will have sufficient assets to satisfy any
probable money judgment against it in any pending action. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
REGULATION
The Company's business is subject to numerous federal and state consumer
protection laws and regulations which, among other things: (i) require the
Company to obtain and maintain certain licenses and qualifications; (ii) limit
the interest rates, fees and other charges the Company is allowed to charge;
(iii) limit or prescribe certain other terms of the Company's automobile
installment sales contracts; (iv) require specific disclosures; and (v) define
the Company's rights to repossess and sell collateral. The Company believes it
is in substantial compliance with all such laws and regulations, and that such
laws and regulations have had no material effect on the Company's ability to
operate its business. Changes in existing laws or regulations, or in the
interpretation thereof, or the promulgation of any additional laws or
regulations, could have a material adverse effect on the Company's business. In
addition, the Company retains some of the regulatory risk on receivables sold in
securitizations as a result of representations and warranties made by the
Company in such transactions. See "Business--Regulation."
As a result of the consumer-oriented nature of the industry in which the
Company operates and uncertainties with respect to the application of various
laws and regulations in certain circumstances, industry participants are named
from time to time as defendants in litigation involving alleged violations of
federal and state consumer lending or other similar laws and regulations. A
significant judgment against the Company in connection with any litigation could
have a material
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adverse affect on the Company's financial condition and results of operations.
In addition, if it were determined that a material number of loans purchased by
the Company involved violations of applicable lending laws by automobile
dealers, the Company's financial condition and results of operations could be
materially adversely affected. See "Business--Regulation."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to repurchase
all outstanding Notes and Original Notes at 101% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase and Liquidated
Damages, if any. However, there can be no assurance that sufficient funds will
be available at the time of any Change of Control to make any required
repurchases of Notes or Original Notes tendered, or that restrictions in the
Credit Agreement or the Mortgage Subsidiary Credit Agreement will allow the
Company to make such required repurchases. Notwithstanding these provisions, the
Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of debt outstanding at such time. See "Description of the
Notes--Repurchase at the Option of Holders."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company does not intend to list
the New Notes on any national securities exchange or to seek the admission
thereof to trading in the National Association of Securities Dealers Automated
Quotation System. The Company has been advised by the Initial Purchasers that
they presently intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so and any market making activities with
respect to the New Notes may be discontinued at any time without notice. In
addition, such market making activity will be subject to the limitations imposed
by the Exchange Act and may be limited during the Exchange Offer and at certain
other times. No assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of or the trading market
for the New Notes. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time. If a public trading market
develops for the New Notes, future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other facts, including the financial condition of the Company, the New Notes may
trade at a discount from their principal amount.
17
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on January
29, 1998, pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company, the Guarantors and the Initial Purchasers also entered into
the Registration Rights Agreement, pursuant to which the Company agreed, with
respect to the Old Notes and subject to the Company's determination that the
Exchange Offer is permitted under applicable law, to (i) cause to be filed, on
or prior to February 28, 1998, a registration statement with the Commission
under the Securities Act concerning the Exchange Offer, (ii) use its best
efforts (a) to cause such registration statement to be declared effective by the
Commission on or prior to April 29, 1998, and (b) to cause the Exchange Offer to
be consummated on or prior to 30 business days after the date such registration
statement is declared effective by the Commission. The Company will keep the
Exchange Offer open for a period of not less than 20 business days and not more
than 30 business days. This Exchange Offer is intended to satisfy the Company's
exchange offer obligations under the Registration Rights Agreement.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered, will not have any further registration
rights and such Old Notes will continue to be subject to the existing
restrictions on transfer thereof. Accordingly, the liquidity of the market for
a holder's Old Notes could be adversely affected upon expiration of the Exchange
Offer if such holder elects to not participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to the terms and
provisions of the Registration Rights Agreement. See "--Conditions of the
Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders of Old Notes may tender less than the aggregate principal
amount represented by the Old Notes held by them, provided that they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes.
As of the date of this Prospectus, $50.0 million in aggregate principal amount
of the Old Notes is outstanding, the maximum amount authorized by the Indenture
for all Notes. As of __________ ___, 1998, there was one registered holder of
the Old Notes, Cede & Co., which held the Old Notes for _____ of its
participants. Solely for reasons of administration, the Company has fixed the
close of business on ___________ ___, 1998, as the record date (the "Record
Date") for purposes of determining the persons to whom this Prospectus and the
Letter of Transmittal will be mailed initially. Only a holder of the Old Notes
(or such holder's legal representative or attorney-in-fact) may participate in
the Exchange Offer. There will be no fixed record date for determining holders
of the Old Notes entitled to participate in the Exchange Offer. The Company
believes that, as of the date of this Prospectus, no such holder is an affiliate
(as defined in Rule 405 under the Securities Act) of the Company.
The Company shall be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes and for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
18
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be __________ ___, 1998, at 5:00 p.m., New York City
time, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended, but shall not be later than __________ ___, 1998.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the conditions
set forth below under "--Conditions of the Exchange Offer" shall not have been
satisfied, to terminate the Exchange Offer, by giving oral or written notice of
such delay, extension, or termination to the Exchange Agent, and (iv) to amend
the terms of the Exchange Offer in any manner. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendments by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes.
Modification of the Exchange Offer, including, but not limited to, (i) extension
of the period during which the Exchange Offer is open and (ii) satisfaction of
the conditions set forth below under "--Conditions of the Exchange Offer" may
require that at least five (5) business days remain in the Exchange Offer.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount of the
Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Exchange Offer Registration Statement of which this Prospectus constitutes a
part.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default, holders of Old Notes are
entitled to receive Liquidated Damages of $0.05 per week per $1,000 principal
amount of Old Notes held by such holders (up to a maximum of $0.50 per week per
$1,000 principal amount of Old Notes). A "Registration Default" with respect to
the Exchange Offer shall occur if: (i) the Exchange Offer Registration
Statement has not been filed with the Commission on or prior to February 28,
1998; (ii) the Exchange Offer Registration Statement is not declared effective
on or prior to April 29, 1998 (the "Effectiveness Target Date"), (iii) the
Company fails to consummate the Exchange Offer within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective during the period specified in
the Registration Rights Agreement. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages or (ii) certain
other rights under the Registration Rights Agreement intended for holders of Old
Notes. The Exchange Offer shall be deemed consummated upon the occurrence of
the delivery by the Company to the Registrar under the Indenture of New Notes in
the same aggregate principal amount as the aggregate principal amount of Old
Notes that are tendered by holders thereof pursuant to the Exchange Offer.
ACCRUED INTEREST
The New Notes will bear interest at a rate equal to 9 1/4% per annum, which
interest shall accrue from January 29, 1998 or from the most recent Interest
Payment Date with respect to the Old Notes to which interest was paid or duly
provided for. See "Description of Notes--Principal, Maturity and Interest."
19
<PAGE>
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined under "The Exchange Offer--Procedures for
Tendering Old Notes"). In the event that a signature on a Letter of Transmittal
or a notice of withdrawal, as the case may be, is required to be guaranteed,
such guarantee must be by a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or otherwise be an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If
the Letter of Transmittal is signed by a person other than the registered holder
of the Old Notes, the Old Notes surrendered for exchange must either (i) be
endorsed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution, or (ii) be accompanied by a bond power, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution. The term "registered holder" as used herein with respect to the
Old Notes means any person in whose name the Old Notes are registered on the
books of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old Notes
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender Old Notes in the Exchange Offer should
contact such registered holder promptly and instruct such registered holder to
tender on such Beneficial Owner's behalf. If such Beneficial Owner wishes to
tender directly, such Beneficial Owner must, prior to completing and executing
the Letter of Transmittal and tendering Old Notes, make appropriate arrangements
to register ownership of the Old Notes in such Beneficial Owner's name.
Beneficial Owners should be aware that the transfer of registered ownership may
take considerable time.
20
<PAGE>
By tendering, each registered holder will represent to the Company that, among
other things (i) the New Notes to be acquired in connection with the Exchange
Offer by the holder and each Beneficial Owner of the Old Notes are being
acquired by the holder and each Beneficial Owner in the ordinary course of
business of the holder and each Beneficial Owner, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the Staff of the Commission set forth in "no-action"
letters that are discussed herein under "--Resales of the New Notes," (iv) that
if the holder is a broker-dealer that acquired Old Notes as a result of market
making or other trading activities, it will deliver a prospectus in connection
with any resale of New Notes acquired in the Exchange Offer, (v) the holder and
each Beneficial Owner understand that a secondary resale transaction described
in clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K of the Securities Act, and (vi) neither the holder nor any
Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of Transmittal. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
and a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal)
must be signed by such holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the holder and the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number or numbers of the tendered Old Notes, and the
principal amount of tendered Old Notes, stating that the tender is being made
thereby and guaranteeing that, within five (5) business days after the date of
delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a duly
executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer must be received by the
Exchange Agent within five (5) business days after the Expiration Date. Any
Holder who wishes to tender Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old
Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer, the
Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted validly tendered Old Notes, when, as,
and if the Company has given oral or written notice thereof to the Exchange
Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes
are not accepted for any reason, such unaccepted Old Notes will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.
21
<PAGE>
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice to
the Exchange Agent, at its address set forth on the back cover page of this
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, as applicable), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by a bond power in the name of the
person withdrawing the tender, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution together with the other
documents required upon transfer by the Indenture, and (iv) specify the name in
which such Old Notes are to be re-registered, if different from the Depositor,
pursuant to such documents of transfer. Any questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, in its sole discretion. The Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are withdrawn will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "The Exchange
Offer--Procedures for Tendering Old Notes" at any time on or prior to the
Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
Bank One, N.A. is the Exchange Agent. All tendered Old Notes, executed
Letters of Transmittal and other related documents should be directed to the
Exchange Agent. Questions and requests for assistance and requests for
additional copies of this Prospectus, the Letter of Transmittal and other
related documents should be addressed to the Exchange Agent as follows:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY HAND OR OVERNIGHT COURIER:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
22
<PAGE>
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-9987 (OH)
or
(212) 240-8941 (NY)
Confirm by Telephone: (212) 240-8938 (NY)
1-800-346-5153
FEES AND EXPENSES
All expenses incident to the Company's consummation of the Exchange Offer and
compliance with the Registration Rights Agreement will be borne by the Company,
including, without limitation: (i) all registration and filing fees (including
fees and expenses of compliance with state securities or Blue Sky laws), (ii)
printing expenses (including expenses of printing certificates for the New Notes
in a form eligible for deposit with DTC and of printing prospectuses), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) fees and disbursements of independent certified
public accountants, (vi) rating agency fees, (vii) internal expenses of the
Company (including all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), and (viii) fees and expenses, if
any, incurred in connection with the listing of the New Notes on a securities
exchange.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes, as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
RESALES OF THE NEW NOTES
Based on an interpretation by the Staff of the Commission set forth in "no-
action" letters issued to third parties, the Company believes that the New Notes
issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by such holder (other
than (i) a broker-dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act, or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities
23
<PAGE>
Act, provided that such holder is acquiring the New Notes in the ordinary course
of business and is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of the New Notes. The
Company has not requested or obtained an interpretive letter from the Staff of
the Commission with respect to this Exchange Offer, and the Company and the
holders are not entitled to rely on interpretive advice provided by the Staff to
other persons, which advice was based on the facts and conditions represented in
such letters. However, the Exchange Offer is being conducted in a manner
intended to be consistent with the facts and conditions represented in such
letters. If any holder acquires New Notes in the Exchange Offer for the purpose
of distributing or participating in a distribution of the New Notes, such holder
cannot rely on the position of the Staff of the Commission enunciated in Morgan
Stanley & Co., Incorporated (available June 5, 1991) and Exxon Capital Holdings
Corporation (available April 13, 1989), or interpreted in the Commission's
letter to Shearman & Sterling (available July 2, 1993), or similar "no-action"
or interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Company within the meaning of the Securities
Act will be subject to certain limitations on resale under Rule 144 of the
Securities Act. Such persons will only be entitled to sell New Notes in
compliance with the volume limitations set forth in Rule 144, and sales of New
Notes by affiliates will be subject to certain Rule 144 requirements as to the
manner of sale, notice and the availability of current public information
regarding the Company. The foregoing is a summary only of Rule 144 as it may
apply to affiliates of the Company. Any such persons must consult their own
legal counsel for advice as to any restrictions that might apply to the resale
of their Notes.
24
<PAGE>
CAPITALIZATION
The following table sets forth certain information regarding the Company's
debt and capitalization as of December 31, 1997, and as adjusted to give effect
to the sale by the Company of the Old Notes and the application of the net
proceeds therefrom. This table should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Credit Agreement (1)............................................................ $ 2,100 $ -
Warehouse Facility.............................................................. 95,989 50,327
Mortgage Subsidiary Credit Agreement............................................ 7,281 7,281
Automobile receivables--backed notes(2)......................................... 14,138 14,138
9 1/4% Senior Notes (3)......................................................... 125,000 175,000
Notes payable (4)............................................................... 4,458 4,458
-------- --------
Total debt................................................................. 248,966 251,204
-------- --------
Shareholders' equity:
Preferred stock, $.01 par value per share, 20,000,000 shares authorized;
none issued................................................................... __ __
Common stock, $.01 par value per share; 120,000,000 shares authorized;
33,841,815 shares issued...................................................... 338 338
Additional paid-in capital...................................................... 213,890 213,890
Unrealized gain on excess servicing receivable, net of income taxes............. 3,410 3,410
Retained earnings............................................................... 60,841 60,841
Treasury stock, at cost (3,921,028 shares)...................................... (23,533) (23,533)
-------- --------
Total shareholders' equity................................................... 254,946 254,946
-------- --------
Total capitalization...................................................... $503,912 $506,150
======== ========
</TABLE>
______________
(1) As of December 31, 1997, on an as adjusted basis after giving effect to the
Prior Offering, approximately $125.3 million was available for borrowing
under the Credit Agreement, pursuant to the borrowing base requirements of
such Agreement. See "Description of Other Debt."
(2) These secured notes were issued in the Company's second securitization
transaction. See "Description of Other Debt--Asset-Backed Securities."
(3) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt--Original Notes."
(4) Consists of certain capitalized equipment leases.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected unaudited consolidated data for the
Company. The historical consolidated financial information under the captions
"Statement of Income" and "Balance Sheet Data" for each of the years in the
five-year period ended June 30, 1997 have been derived from the Company's
consolidated financial statements, which financial statements have been audited
by Coopers & Lybrand L.L.P., independent accountants. The consolidated financial
statements as of June 30, 1996 and June 30, 1997 and for each of the years in
the three-year period ended June 30, 1997, and the report thereon, are included
elsewhere herein. The historical consolidated financial information under the
captions "Statement of Income" and "Balance Sheet Data" as of December 31, 1996
and December 31, 1997 and for the six months then ended have been derived from
the unaudited consolidated financial statements which, except for the
consolidated balance sheet as of December 31, 1996, are included elsewhere
herein; however, in the opinion of the Company, such information reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for such periods. The results of
operations for the six-months ended December 31, 1997 are not necessarily
indicative of the results to be expected for the entire year. The selected
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Other Debt" and the Company's Consolidated Financial Statements
(including related notes thereto) included elsewhere in this Prospectus.
26
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
---------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income........................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910
Gain on sale of receivables..................... -- -- -- 22,873 67,256
Servicing fee income............................ -- -- -- 3,712 21,024
Investment income............................... 2,052 2,550 1,284 1,075 2,909
Other income.................................... 21,704 5,512 2,761 1,639 1,648
----------- ------------ ------------ ------------ ------------
Total revenue................................ 24,881 15,882 33,084 80,978 137,747
Costs and expenses................................. 44,247 10,817 23,066 46,722 74,822
----------- ------------ ------------ ------------ ------------
Income (loss) before taxes......................... (19,366) 5,065 10,018 34,256 62,925
Provision (credit) for taxes....................... -- -- (18,875) 12,665 24,226
----------- ------------ ------------ ------------ ------------
Net income (loss)............................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699
Basic earnings (loss) per share................. $ (.66) $ .17 $ 1.01 $ .75 $ 1.34
Diluted earnings (loss) per share(1)............ $ (.66) $ .16 $ .95 $ .71 $ 1.26
Weighted average shares outstanding............. 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362
Weighted average shares and assumed
incremental shares............................ 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471
CASH FLOW DATA:
(Used in) Provided by operating activities......... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132
(Used in) Provided by investing activities......... (8,121) (12,174) (144,512) (63,116) (123,076)
(Used in) Provided by financing activities......... (5,705) (9,238) 132,433 12,050 60,826
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents....................................... $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882
OTHER DATA:
Auto receivable originations(2)................... $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794
Managed auto receivables(2)....................... $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255
Average managed auto receivables(2)............... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155
Auto loans securitized............................ $ -- $ -- $ 150,170 $ 270,351 $ 817,500
Number of branches................................ 5 18 31 51 85
Average principal amount per managed
auto receivable(2)............................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087
Effective yield on owned auto
receivables (5)................................ 21.7% 20.9% 20.5% 19.7% 19.9%
RATIOS:
Ratio of earnings to fixed charges(4)............. (86.6) 31.2 3.5 3.6 4.9
Percentage of total indebtedness to total
capitalization................................... 1.0% 0.3% 47.9% 48.6% 50.9%
Return on average common equity(5)................ (14.7)% 4.1% 23.1% 14.3% 20.8%
Operating expenses as a percentage of
average managed auto receivables(5).............. 18.2% 15.0% 10.0% 7.2% 6.6%
Percentage of senior unsecured debt to
total equity.................................... 0.% 0.% 0.% 0.% 57.7%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2)............................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421
Delinquencies as a percentage of
managed auto receivables(2)...................... 0.9% 1.9% 2.0% 3.1% 3.2%
Net charge-offs................................... $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231
Net charge-offs as a percentage of
average managed auto receivables(2)(5)........... 0.7% 3.8% 4.5% 5.6% 5.5%
<CAPTION>
SIX MONTHS ENDED
---------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income........................... $ 21,503 $ 26,190
Gain on sale of receivables..................... 28,151 53,775
Servicing fee income............................ 8,242 19,191
Investment income............................... 1,152 2,570
Other income.................................... 622 502
----------- ------------
Total revenue................................ 59,670 102,228
Costs and expenses................................. 31,590 57,716
----------- ------------
Income (loss) before taxes......................... 28,080 44,512
Provision (credit) for taxes....................... 10,810 17,137
----------- ------------
Net income (loss)............................... $ 17,270 $ 27,375
Basic earnings (loss) per share................. $ .61 $ .92
Diluted earnings (loss) per share(1)............ $ .57 $ .85
Weighted average shares outstanding............. 28,513,145 29,684,960
Weighted average shares and assumed
incremental shares............................ 30,398,569 32,199,267
CASH FLOW DATA:
(Used in) Provided by operating activities......... $ 23,414 $ 8,950
(Used in) Provided by investing activities......... (20,820) (42,948)
(Used in) Provided by financing activities......... 352 30,238
----------- ------------
Net increase (decrease) in cash and cash
equivalents....................................... $ 2,946 $ (3,760)
OTHER DATA:
Auto receivable originations(2)................... $ 359,407 $ 696,252
Managed auto receivables(2)....................... $ 761,716 $ 1,599,273
Average managed auto receivables(2)............... $ 641,522 $ 1,375,614
Auto loans securitized............................ $ 345,570 $ 682,499
Number of branches................................ 66 108
Average principal amount per managed
auto receivable(2)............................... $ 9,481 $ 10,456
Effective yield on owned auto
receivables (5)................................ 19.6% 20.7%
RATIOS:
Ratio of earnings to fixed charges(4)............. 5.2 4.7
Percentage of total indebtedness to total
capitalization................................... 46.2% 49.4%
Return on average common equity(5)................ 20.0% 22.9%
Operating expenses as a percentage of
average managed auto receivables(5).............. 6.7% 6.0%
Percentage of senior unsecured debt to
total equity.................................... 0.% 49.0%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2)............................... $ 28,251 $ 57,186
Delinquencies as a percentage of
managed auto receivables(2)...................... 3.7% 3.6%
Net charge-offs................................... $ 17,749 $ 38,073
Net charge-offs as a percentage of
average managed auto receivables(2)(5)........... 5.5% 5.5%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 33,268 $ 15,756 $ 18,314 $ 2,145 $ 6,027
Excess servicing receivable.............. -- -- -- 33,093 114,376
Owned auto receivables................... 15,964 67,636 240,491 264,086 275,249
Total assets............................. 131,127 122,215 285,725 330,159 493,453
Credit Agreement......................... -- -- -- 86,000 71,700
Warehouse Facility....................... -- -- -- -- --
Mortgage Subsidiary Credit Agreement(6).. -- -- -- -- 345
Automobile receivable-backed notes....... -- -- 134,520 67,847 23,689
9 1/4% Senior Notes due 2004 (7)......... -- -- -- -- 125,000
Notes payable (8)........................ 1,278 388 716 418 3,517
Total debt............................... 1,278 388 135,236 154,265 224,251
Shareholders' equity..................... 122,784 119,501 147,226 163,225 216,536
<CAPTION>
SIX MONTHS ENDED
--------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 5,091 $ 2,267
Excess servicing receivable.................. 59,780 179,788
Owned auto receivables....................... 233,792 261,333
Total assets................................. 369,882 562,295
Credit Agreement............................. 114,900 2,100
Warehouse Facility........................... -- 95,989
Mortgage Subsidiary Credit Agreement(6)...... 3,573 7,281
Automobile receivable-backed notes........... 40,543 14,138
9 1/4% Senior Notes due 2004 (7)............. -- 125,000
Notes payable (8)............................ 1,520 4,458
Total debt................................... 160,536 248,966
Shareholders' equity......................... 187,282 254,946
</TABLE>
________________
(1) The Company has adopted the requirements of SFAS 128. SFAS 128 establishes
new standards for computing and presenting earnings per share, replacing
existing accounting standards. All earnings per share and related weighted
average share amounts for the periods presented in the above table have been
restated to conform to the requirements of SFAS 128.
(2) The Company engaged in the retail used car sales and finance business until
December 31, 1992; effective as of such date, the Company exited the retail
used car sales side of its business. For purposes of this summary, revenues
from vehicle sales and finance charge income relating to the financing of
the sales of vehicles from the Company's former used car sales business are
classified as other income. Receivables generated from the former used car
sales business are classified as other receivables and not included in
managed receivables.
(3) As further described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company recognized an income tax
benefit in fiscal 1995 equal to the expected future tax savings from using
its net operating loss carry forward and other future tax benefits.
(4) Represents the ratio of the sum of income before income taxes plus interest
expense for the period to interest expense.
(5) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
(6) Fully guaranteed by the Company and certain of its Subsidiaries.
(7) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt - Original Notes."
(8) Consists of certain capitalized equipment leases.
28
<PAGE>
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 the Credit Agreement and the Warehouse Facility. The
Company generates finance charge income on its receivables pending
securitization ("owned receivables") and pays interest expense on borrowings
under the Credit Agreement and the Warehouse Facility.
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 AMS, which originates and sells home
equity loans. The acquisition was accounted for as a purchase and the results
of operations for AMS have been included in the consolidated financial
statements since the acquisition date. Receivables originated in this business
are referred to as mortgage receivables. Such receivables are generally packaged
and sold for cash on a servicing released, whole-loan basis. The Company
recognizes a gain at the time of sale.
29
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended December 31, 1996 as compared to Six Months Ended December 31,
1997
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------
1996 1997
--------- ----------
<S> <C> <C>
Auto:
Owned.......................... $217,156 $ 245,296
Serviced....................... 424,366 1,130,318
-------- ----------
641,522 1,375,614
Mortgage......................... 4,753 11,534
-------- ----------
$646,275 $1,387,148
======== ==========
</TABLE>
Average managed receivables outstanding increased by 115% as a result of
higher loan purchase volume. The Company purchased $359.4 million of auto loans
during the six months ended December 31, 1996, compared to purchases of $696.3
million during the six months ended December 31, 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 66 auto lending
branch offices as of December 31, 1996, compared to 108 as of December 31, 1997.
The Company purchased $51.6 million of mortgage loans during the six months
ended December 31, 1997 as compared to $7.7 million from the date of acquisition
of AMS through December 31, 1996.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Auto............................. $21,472 $25,645
Mortgage......................... 31 545
------- -------
$21,503 $26,190
======= =======
</TABLE>
The increase in finance charge income is due primarily to an increase of 13%
in average owned auto receivables outstanding for the six months ended December
31, 1997 versus the six months ended December 31, 1996.
The Company's effective yield on its owned auto receivables increased from
19.6% for the six months ended December 31, 1996 to 20.7% for the six months
ended December 31, 1997.
The gain on sale of receivables consists of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Auto............................. $27,851 $51,531
Mortgage......................... 300 2,244
------- -------
$28,151 $53,775
======= =======
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$345.6 million of receivables in the six months ended December 31, 1996 as
compared to $682.5 million of receivables sold in the six months ended
30
<PAGE>
December 31, 1997. The gains amounted to 8.1% and 7.6% of the sales proceeds for
the six months ended December 31, 1996 and 1997, respectively.
The gain on sale of mortgage receivables resulted from the sale of $48.1
million of mortgage receivables in the six months ended December 31, 1997 as
compared to $4.8 million of mortgage receivables sold from the date of
acquisition of AMS through December 31, 1996.
Servicing fee income increased from $8.2 million, or 3.9% of average serviced
auto receivables, for the six months ended December 31, 1996, to $19.2 million,
or 3.4% of average serviced auto receivables, for the six months ended December
31, 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. The growth in servicing fee income is primarily due to the
increase in average serviced auto receivables outstanding for the six months
ended December 31, 1997 compared to the six months ended December 31, 1996.
Investment income increased from $1.2 million for the six months ended
December 31, 1996 to $2.6 million for the six months ended December 31, 1997
primarily as a result of higher restricted cash balances. Restricted cash is
used as credit enhancement for the Trusts and generally increases as greater
amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased from 6.7% (6.6% excluding operating expenses of $.4
million related to the mortgage business) for the six months ended December 31,
1996 to 6.0% (5.7% excluding operating expenses of $2.6 million related to the
mortgage business) for the six months ended December 31, 1997. The ratio
improved as a result of economies of scale realized from a growing receivables
portfolio and automation of loan origination, processing and servicing
functions. The dollar amount of operating expenses increased by $20.2 million,
or 93%, primarily due to the addition of auto lending branch offices and
management, auto loan processing and servicing staff and the recently acquired
mortgage business.
The provision for losses increased from $3.2 million for the six months ended
December 31, 1996 to $3.8 million for the six months ended December 31, 1997 due
to higher average owned auto receivables outstanding.
Interest expense increased from $6.6 million for the six months ended December
31, 1996 to $12.0 million for the six months ended December 31, 1997 due to
higher debt levels and effective interest rates. Average debt outstanding was
$165.7 million and $257.6 million for the six months ended December 31, 1996 and
1997, respectively. The Company's effective rate of interest paid on its debt
increased from 7.9% to 9.3% as a result of the issuance of the Original Notes in
February 1997.
The Company's effective income tax rate was 38.5% for the six months ended
December 31, 1996 and 1997, respectively.
31
<PAGE>
Year Ended June 30, 1996 as compared to Year Ended June 30, 1997
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Auto
Owned.......................... $261,776 $223,351
Serviced....................... 96,190 568,804
-------- --------
357,966 792,155
Mortgage......................... 8,187
Other............................ 443
-------- --------
$358,409 $800,342
======== ========
</TABLE>
Average managed receivables outstanding increased by 123% as a result of
higher loan purchase volume. The Company purchased $432.4 million of auto loans
during fiscal 1996, compared to purchases of $906.8 million during fiscal 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 51 auto lending branch offices as of June 30, 1996, compared to 85 as
of June 30, 1997.
The Company purchased $53.8 million of mortgage loans from the date of
acquisition of AMS through June 30, 1997.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Auto............................. $51,679 $44,417
Mortgage......................... 493
Other............................ 27
------- -------
$51,706 $44,910
======= =======
</TABLE>
The decrease in finance charge income is due to a reduction of 15% in average
owned auto receivables outstanding for fiscal 1997 versus fiscal 1996. Prior to
December 1995, all of the auto finance contracts purchased by the Company were
held as owned auto receivables on the Company's consolidated balance sheets.
The Company began selling auto receivables to the Trusts in December 1995,
reducing average owned receivables with corresponding increases in average
serviced receivables.
The Company's effective yield on its owned auto receivables increased from
19.7% for fiscal 1996 to 19.9% for fiscal 1997.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Auto............................. $22,873 $64,338
Mortgage......................... 2,918
------- -------
$22,873 $67,256
======= =======
</TABLE>
32
<PAGE>
The increase in gain on sale of auto receivables resulted from the sale of
$270.4 million of receivables in fiscal 1996 as compared to $817.5 million of
receivables sold in fiscal 1997. The gains amounted to 8.5% and 7.9% of the
sales proceeds for fiscal 1996 and 1997, respectively.
The gain on sale of mortgage receivables resulted from the sale of $52.5
million of mortgage receivables.
Servicing fee income increased from $3.7 million, or 3.9% of average serviced
auto receivables, for fiscal 1996, to $21.0 million, or 3.7% of average serviced
auto receivables, for fiscal 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 receivables sold to the Trusts. The growth in servicing fee income is
primarily due to the increase in average serviced auto receivables outstanding
for fiscal 1997 compared to fiscal 1996.
Investment income rose from $1.1 million for fiscal 1996 to $2.9 million for
fiscal 1997 primarily as a result of higher restricted cash balances.
Restricted cash is used as credit enhancement for the Trusts and increases as
greater amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as a percentage of average managed receivables outstanding
decreased from 7.2% for fiscal 1996 to 6.6% (6.2% excluding operating expenses
of $2.6 million related to the mortgage business) for fiscal 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 $26.2 million,
or 102%, primarily due to the addition of auto lending branch offices and
management, auto loan processing and servicing staff and the recently acquired
mortgage business.
The provision for losses decreased from $7.9 million for fiscal 1996 to $6.6
million for fiscal 1997 due to lower average owned auto receivables outstanding.
Interest expense increased from $13.1 million for fiscal 1996 to $16.3 million
for fiscal 1997 due to higher debt levels and effective interest rates. Average
debt outstanding was $156.4 million and $187.6 million for fiscal 1996 and 1997,
respectively. The Company's effective rate of interest paid on its debt
increased from 8.4% to 8.7% as a result of the issuance of the Original Notes in
February 1997.
The Company's effective income tax rate increased from 37.0% for fiscal 1996
to 38.5% for fiscal 1997 due to a larger portion of the Company's income being
generated in states which have higher tax rates.
Year Ended June 30, 1995 as compared to Year Ended June 30, 1996
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Auto:
Owned....................... $141,526 $261,776
Serviced.................... 96,190
-------- --------
141,526 357,966
Other............................ 6,918 443
-------- --------
$148,444 $358,409
======== ========
</TABLE>
Average managed receivables outstanding increased by 141% as a result of
higher loan purchase volume. The Company purchased $230.2 million of auto loans
during fiscal 1995, compared to purchases of $432.4 million during
33
<PAGE>
fiscal 1996. This growth resulted from loan production at branches open during
both periods as well as expansion of the Company's loan production capacity. The
Company operated 31 branch offices as of June 30, 1995, compared to 51 as of
June 30, 1996.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1995 1996
--------- --------
<S> <C> <C>
Auto............................. $29,039 $51,679
Other............................ 1,210 27
------- -------
$30,249 $51,706
======= =======
</TABLE>
The rise in finance charge income is due to an increase of 85% in average
owned auto receivables outstanding for fiscal 1996 versus fiscal 1995. The
Company's effective yield on its owned auto receivables decreased from 20.5% to
19.7%.
The gain on sale of receivables of $22.9 million in fiscal 1996 resulted from
the sale of $270.4 million of receivables to the Trusts. The gain amounted to
8.5% of the sales proceeds. The Company's asset-backed securities transactions
in fiscal 1995 were structured as debt issuances by subsidiaries of the Company
and thus were accounted for as borrowings on the Company's consolidated balance
sheets rather than as sales of receivables.
Servicing fee income of $3.7 million in fiscal 1996 represents accretion of
the present value discount on estimated future excess cash flows from the
Trusts, base servicing fees and other fees earned by the Company as servicer of
the auto receivables sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as a percentage of average managed receivables outstanding
decreased from 10.0% for fiscal 1995 to 7.2% for fiscal 1996. The ratio
improved as a result of economies of scale realized from a growing receivables
portfolio and automation of loan origination, processing and servicing
functions. The dollar amount of operating expenses increased by $10.9 million,
or 74%, primarily due to the addition of auto lending branch offices and
management and auto loan processing and servicing staff.
The provision for losses increased from $4.3 million for fiscal 1995 to $7.9
million for fiscal 1996 due to higher average owned auto receivables
outstanding.
Interest expense increased from $4.0 million for fiscal 1995 to $13.1 million
for fiscal 1996 due to the higher debt levels necessary to fund the Company's
increased loan origination volume.
The provision for income taxes in fiscal 1996 resulted primarily from
amortization of the Company's deferred tax asset at the federal statutory income
tax rate. In the fourth quarter of fiscal 1995, the Company recognized an
income tax benefit and a corresponding deferred tax asset equal to the expected
future tax savings from using its net operating loss carryforward and other
future tax benefits. The deferred tax asset is amortized through a non-cash
income tax provision against the Company's earnings as the net operating loss
carryforward and other future tax benefits are utilized. Prior to the fourth
quarter of fiscal 1995, the Company had offset the deferred tax asset with a
valuation allowance. Accordingly, there was no provision for federal income
taxes in fiscal 1995.
FINANCE RECEIVABLES
The Company provides financing in relatively high-risk markets, and therefore,
charge-offs are anticipated. The Company records a periodic provision for
losses as a charge to operations and a related allowance for losses in the
consolidated balance sheets as a reserve against estimated future losses in the
owned auto receivables portfolio. The Company typically purchases individual
finance contracts for a non-refundable acquisition fee on a non-recourse basis.
Such acquisition fees are also recorded in the consolidated balance sheets as an
allowance for losses. When the Company
34
<PAGE>
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 has been provided by the
Company for the mortgage receivables.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports, estimates
of the value of the underlying collateral, economic conditions and trends and
other information in order to make the necessary judgments as to the
appropriateness of the provisions for losses and the allowance for losses.
Although the Company uses many resources to assess the adequacy of the allowance
for losses, there is no precise method for accurately estimating the ultimate
losses in the receivables portfolio.
The following tables present certain data related to the receivables portfolio
(dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------
AUTO AUTO MANAGED
OWNED SERVICED PORTFOLIO
--------- ------------ ----------
<S> <C> <C> <C>
Principal amount of receivables............................. $264,086 $259,895 $523,981
Allowance for losses........................................ (13,602) $(25,616)(1) $(39,218)
-------- --------
Finance receivables, net................................ $250,484
--------
Number of outstanding contracts............................. 30,366 29,547 59,913
-------- -------- --------
Average amount of outstanding contract
(principal amount) (in dollars).......................... $ 8,697 $ 8,796 $ 8,746
-------- -------- --------
Allowance for losses as a percentage of receivables......... 5.2% 9.9% 7.5%
-------- -------- --------
<CAPTION>
JUNE 30, 1997
---------------------------------------------------- --------------
AUTO BALANCE AUTO MANAGED
OWNED MORTGAGE SHEET TOTAL SERVICED PORTFOLIO
---------- -------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables............. $275,249 $ 4,354 $279,603 $ 863,006 $ 1,138,255 (2)
Allowance for losses........................ (12,946) (12,946) $ (74,925)(1) $ (87,871)(2)
-------- ------- -------- ----------- -----------
Finance receivables, net................ $262,303 $ 4,354 $266,657
-------- ------- --------
Number of outstanding contracts............. 25,757 48 87,090 112,847 (2)
-------- ------- ----------- -----------
Average amount of outstanding contracts
(principal amount) (in dollars).......... $ 10,686 $90,708 $ 9,909 $ 10,087 (2)
-------- ------- ----------- -----------
Allowance for losses as a percentage
of receivables........................... 4.7% 8.7% 7.7%(2)
-------- ----------- -----------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------- ----------------
AUTO BALANCE AUTO MANAGED
OWNED MORTGAGE SHEET TOTAL SERVICED PORTFOLIO
---------- -------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables........... $261,333 $ 7,808 $269,141 $ 1,337,940 $ 1,599,273 (2)
Allowance for losses...................... (11,350) (11,350) $ (112,294)(1) $ (123,644)(2)
-------- -------- -------- ------------ ------------
Finance receivables, net.............. $249,983 $ 7,808 $257,791
-------- -------- --------
Number of outstanding contracts........... 23,538 72 129,420 152,958 (2)
-------- -------- ------------ ------------
Average amount of outstanding contracts
(principal amount) (in dollars)........ $ 11,103 $108,444 $ 10,338 $ 10,456 (2)
-------- -------- ------------ ------------
Allowance for losses as a percentage
of receivables......................... 4.3% 8.4% 7.7%(2)
-------- ------------ ------------
</TABLE>
___________________
(1) The allowance for losses relating 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):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1996 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
Delinquent contracts........................................ $16,207 $36,421 $57,186
Delinquent contracts as a percentage of managed auto
receivables............................................... 3.1% 3.2% 3.6%
Contracts in repossession................................... $ 6,751 $14,471 $22,012
Contracts in repossession as a percentage of managed auto
receivables.............................................. 1.3% 1.3% 1.4%
</TABLE>
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ --------------------
1995 1996 1997 1996 1997
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net charge-offs:
Owned.......................................................... $6,409 $18,322 $16,965 $ 9,065 $ 5,624
Serviced....................................................... 1,652 26,266 8,684 32,449
------ ------- ------- ------- -------
$6,409 $19,974 $43,231 $17,749 $38,073
====== ======= ======= ======= =======
Net charge-offs as an annualized percentage of average managed
auto receivables outstanding (1)............................... 4.5% 5.6% 5.5% 5.5% 5.5%
====== ======= ======= ======= =======
</TABLE>
____________________
(1) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
The Company began its indirect automobile finance business in September 1992
and has grown its managed receivables portfolio to $1.6 billion as of December
31, 1997. The Company expects that its delinquency and charge-offs will
increase over time as the portfolio matures and its portfolio growth rate
moderates. Accordingly, the delinquency and charge-off data above is not
necessarily indicative of delinquency and charge-off experience that could be
expected for a more seasoned portfolio.
36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
--------------------------------- --------------------
1995 1996 1997 1996 1997
---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating activities....................... $ 14,637 $ 34,897 $ 66,132 $ 23,414 $ 8,950
Investing activities....................... (144,512) (63,116) (123,076) (20,820) (42,948)
Financing activities....................... 132,433 12,050 60,826 352 30,238
--------- -------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................. $ 2,558 $(16,169) $ 3,882 $ 2,946 $ (3,760)
========= ======== ========= ======== ========
</TABLE>
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 the Original Notes in
February 1997.
The Company's line of credit arrangement (the "Credit Agreement") with a group
of banks provides for borrowings up to $310 million, subject to a defined
borrowing base. The Company utilizes the line of credit to fund its auto
lending activities and daily operations. The facility matures in October 1998.
A total of $2.1 million was outstanding under the Credit Agreement as of
December 31, 1997.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse financing
is available to the Company (the "Warehouse Facility"). The Company utilizes
this facility to fund auto receivables pending securitization. The facility
matures in October 1998. A total of $96.0 million was outstanding under the
Warehouse Facility as of December 31, 1997.
The Company also has a mortgage warehouse facility (the "Mortgage Subsidiary
Credit Agreement") 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 matures in February 1999. A total of $7.3 million
was outstanding under the Mortgage Subsidiary Credit Agreement as of December
31, 1997.
The Company has completed 11 securitization transactions through December 31,
1997. The proceeds from the transactions were used in each case to repay
borrowings then outstanding under the Company's Credit Agreement and Warehouse
Facility. A summary of these transactions is as follows:
37
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
AS OF
ORIGINAL AMOUNT DEC. 31, 1997 ACCOUNTING
TRANSACTION DATE (IN MILLIONS) (IN MILLIONS) TREATMENT
- ------------------------------ --------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C>
1994-A......................... Dec. 1994 $ 51.0 $ 0 Borrowing
1995-A......................... Jun. 1995 99.2 14.1 Borrowing
1995-B......................... Dec. 1995 65.0 16.1 Sale of Receivables
1996-A......................... Mar. 1996 89.4 30.5 Sale of Receivables
1996-B......................... May. 1996 115.9 52.8 Sale of Receivables
1996-C......................... Aug. 1996 175.0 85.5 Sale of Receivables
1996-D......................... Nov. 1996 200.0 119.7 Sale of Receivables
1997-A......................... Mar. 1997 225.0 163.6 Sale of Receivables
1997-B......................... May. 1997 250.0 202.6 Sale of Receivables
1997-C......................... Aug. 1997 325.0 296.2 Sale of Receivables
1997-D......................... Nov. 1997 400.0 395.7 Sale of Receivables
-------- --------
$1,995.5 $1,376.8
======== ========
</TABLE>
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes
(Original Notes) which are due in February 2004. Interest on the notes is
payable semi-annually, in February and August. The notes, which are unsecured,
may be redeemed at the option of the Company after February 2001 at a premium
declining to par in February 2003. In January 1998, the Company issued an
additional $50 million of its 9 1/4% Senior Notes ("Old Notes").
The Company's primary use of cash has been purchases and originations of
receivables. The Company purchased $696.3 million of auto finance contracts
during the six months ended December 31, 1997 requiring cash of $686.5 million,
net of acquisition fees and other items. The Company purchased $906.8 million
of auto finance contracts during fiscal 1997 requiring cash of $896.7 million,
net of acquisition fees and other items. The Company operated 108 auto lending
branch offices as of December 31, 1997 and plans to open 17 additional branches
in the remainder of fiscal 1998. The Company may also expand loan production
capacity at existing offices where appropriate. While the Company has been able
to establish and grow its auto finance business thus far, there can be no
assurance that future expansion will be successful due to competitive,
regulatory, market, economic or other factors.
The Company's Board of Directors has authorized the repurchase of up to
6,000,000 shares of the Company's common stock. A total 4,594,700 shares at an
aggregate purchase price of $27.3 million had been purchased pursuant to this
program through December 31, 1997, although no common stock has been repurchased
since September 30, 1996. Certain restrictions contained in the Indenture
pursuant to which the Original Notes were issued limit the amount of common
stock which may be repurchased by the Company.
As of December 31, 1997, the Company had $8.8 million in cash and cash
equivalents and investment securities. The Company also had available borrowing
capacity of $125.3 million under the Credit Agreement, as adjusted for the
application of the net proceeds from the Prior Offering, pursuant to borrowing
base requirements. The Company estimates that it will require additional
external capital for the remainder of fiscal 1998 in addition to these existing
capital resources and collections and recoveries on its receivables portfolio
and excess cash flow distributions from the Trusts in order to fund expansion of
its lending activities, capital expenditures, and other costs and expenses.
The Company anticipates that such funding will be in the form of additional
securitization transactions. There can be no assurance that funding will be
available to the Company through these sources, or if available, that it will be
on terms acceptable to the Company.
FACTORS AFFECTING FUTURE LIQUIDITY
The Company's ability to make payments of principal of or interest on, or to
refinance its Indebtedness (including the Notes) will depend on its future
operating performance, and its ability to effect additional securitizations and
debt and/or equity financings, which to a certain extent is subject to economic,
financial, competitive and other factors beyond
38
<PAGE>
the Company's control. If the Company is unable to generate sufficient cash flow
in the future to service its debt, it may be required to refinance all or a
portion of its existing debt, including the Notes, or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The inability to obtain
additional financing could have a material adverse effect on the Company.
The degree to which the Company is leveraged could have important consequences
to the holders of the Notes, including: (i) the Company may be more vulnerable
to adverse general economic and industry conditions; (ii) the Company may find
it more difficult to obtain additional financing for future working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes; and (iii) the Company will have to dedicate a substantial portion of
the Company's cash resources to pay principal and interest on the Credit
Agreement, the Mortgage Subsidiary Credit Agreement and the Warehouse Facility
(all of which become due prior to the maturity of the Notes), thereby reducing
the funds available for operations and future business opportunities. In
addition, the Original Indenture, the Indenture, the Credit Agreement, the
Warehouse Facility and the Mortgage Subsidiary Credit Agreement contain certain
covenants which could limit the Company's operating and financial flexibility.
See "Risk Factors."
HEDGING AND PRE-FUNDING STRATEGY
Since the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in interest
rates impact the Company's profitability. The Company utilizes several
strategies to minimize the risk of interest rate fluctuations including the use
of hedging instruments, the regular sale of auto receivables to the Trusts and
pre-funding securitizations, whereby the amount of asset-backed securities
issued in a securitization exceeds the amount of receivables initially sold to a
Trust. The proceeds from the pre-funded portion are held in an escrow account
until the Company sells additional receivables to the Trust in amounts up to the
balance of the pre-funded escrow account. In pre-funded securitizations, the
Company locks in the borrowing costs with respect to the loans it subsequently
delivers to the Trust. However, the Company incurs an expense in pre-funded
securitizations equal to the difference between the money market yields earned
on the proceeds held in escrow prior to subsequent delivery of receivables and
the interest rate paid on the asset-backed securities outstanding. There can be
no assurance that these strategies will be effective in minimizing interest rate
risk or that increases in interest rates will not have an adverse effect on the
Company's profitability.
RECENT ACCOUNTING DEVELOPMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting
comprehensive income and its components in a full set of financial statements.
The new standard requires that all items that are required to be recognized
under accounting standards as components of comprehensive income, including an
amount representing total comprehensive income, be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Pursuant to SFAS 130, the Company will be required to display total
comprehensive income, including net income and changes in the unrealized gain on
excess servicing receivable, in its consolidated financial statements for the
year ended June 30, 1999 and thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way companies report
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
financial reports. The new pronouncement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The statement is effective for financial statements for periods beginning after
December 15, 1997. The disclosures required by SFAS 131 are generally not
applicable, since the Company currently operates in only one reportable segment.
YEAR 2000 ISSUE
The Company is in the preliminary stages of investigating the impact of the
year 2000 issue and developing a remediation plan. The year 2000 issue is
whether the Company's or its vendors' computer systems will properly
39
<PAGE>
recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail.
The Company is in the process of conducting an initial assessment of
applicable computer systems to identify the systems that could be affected by
the year 2000 issue and has determined that modification or replacement of
portions of existing software will be required. The Company is utilizing both
internal and external resources to identify, modify or replace and test systems
for year 2000 compliance. The Company plans to complete application
modifications and upgrades by December 31, 1998, with testing to take place in
the first quarter of calendar year 1999. While the Company has not yet fully
evaluated the cost of year 2000 compliance, such costs are not expected to be
material to the Company's results of operations and liquidity.
The Company presently believes that with modifications to existing software
and conversion to new software, the year 2000 issue will not pose significant
operational problems for the Company's computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have a material impact on the operations of the Company.
In addition, there can be no assurance that unforeseen problems in the Company's
computer systems, or the systems of third parties on which the Company's
computers rely, would not have an adverse effect on the Company's systems or
operations.
40
<PAGE>
BUSINESS
GENERAL
The Company is a consumer finance company specializing in purchasing,
securitizing and servicing retail automobile installment sales contracts
originated by franchised and select independent dealers in connection with the
sale of late model used and to a lesser extent new automobiles. The Company
targets borrowers with limited credit histories, modest incomes or those who
have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use
of proprietary credit scoring models, the Company underwrites contracts on a
decentralized basis through a nationwide branch office network. These credit
scoring models, combined with experienced underwriting personnel, enable the
Company to implement a risk-based pricing approach to structuring and
underwriting individual contracts. The Company's centralized risk management
department monitors these underwriting strategies and portfolio performance to
balance credit quality and profitability objectives. The loan portfolio is
serviced by the Company at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
The Company had 108 branch offices as of December 31, 1997. As a result of
the Company's expansion strategy, the Company has been able to increase its
aggregate volume of automobile installment sales contracts purchased to $906.8
million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has
continued this growth during the first six months of fiscal 1998, with purchases
aggregating $696.3 million, compared to $359.4 million during the same period in
fiscal 1997. The Company purchases contracts originated by dealers at prices
ranging from par to a discount of up to 10%. The average discount as a
percentage of the contracts purchased by the Company was approximately 3.4% in
fiscal 1997. For fiscal 1997, the average principal amount financed and weighted
average APR of contracts purchased by the Company were $11,874 and 19.7%,
respectively.
The Company generates earnings and cash flow primarily through the purchase,
retention, securitization and servicing of automobile receivables. In each
securitization, the Company sells automobile receivables to a trust or special
purpose finance subsidiary that, in turn, sells asset-backed securities to
investors. The Company recognizes a gain on the sale of the receivables to the
trust and receives monthly excess cash flow distributions from the trust
resulting from the difference between the interest received from the obligors on
the receivables and the interest on the asset-backed securities paid to
investors, net of 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. The Company received
excess cash flow of $24.0 million from securitization trusts and special purpose
finance subsidiaries in fiscal 1997. Due to the time delay associated with
distributions of excess cash flow from securitizations, the Company expects to
receive increased cash flow distributions in fiscal 1998 from trusts created as
a result of securitization transactions occurring in fiscal 1997. Prior to such
time as the Company begins to receive excess cash flow, all excess cash flow is
utilized to fund credit enhancement requirements to secure financial guaranty
insurance policies issued by a monoline 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
servicing fees of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized. Over the four quarters ended December 31,
1997 the Company completed four securitization transactions totaling $1.2
billion.
BUSINESS STRATEGY
The Company's principal objective is to continue to build upon its position as
a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the
Company employs the following key strategies:
Continued Expansion of the Automobile Finance Branch Network. The Company
opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995,
20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31,
1997, bringing its branch office network to 108 offices located in 32 states as
of December 31, 1997. Branch office personnel are responsible for the
development and maintenance of dealer relationships. As part of its goal of
increasing the number of dealers from whom it is purchasing automobile finance
contracts, the Company plans to open approximately 17 additional branch offices
during the remainder of fiscal 1998.
41
<PAGE>
Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company
has developed and implemented a credit scoring system across its branch office
network to support the branch level credit approval process. The Company's
proprietary credit scoring models are designed to enable AmeriCredit to tailor
each loan's pricing and structure to a statistical assessment of the underlying
credit risk.
Sophisticated Risk Management Techniques. The Company's centralized risk
management department is responsible for monitoring the origination process,
supporting management's supervision of each branch office, tracking collateral
values of the Company's receivables portfolio and monitoring portfolio returns.
This risk management department uses proprietary databases to identify
concentrations of risk, to price for the risk associated with selected market
segments and to endeavor to enhance the credit quality and profitability of the
contracts purchased.
High Investment in Technology to Support Operating Efficiency and Growth.
The use of leading-edge technology in both loan origination and servicing has
enabled AmeriCredit to become a low-cost provider in the sub-prime automobile
finance market. AmeriCredit's annualized ratio of operating expenses to average
managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for
fiscal 1997 and 6.0% for the six months ended December 31, 1997.
Leveraging Sub-Prime Lending Expertise. AMS, a subsidiary acquired in 1996,
is a residential mortgage lender specializing in originating and purchasing home
equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage
brokers. AMS has originated $105.4 million of mortgage loans from its date of
acquisition through December 31, 1997. The Company believes that over time it
can leverage its national presence, risk management techniques and state-of-the-
art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's
corporate office is located in Orange, California. AMS has historically sold its
home equity loans and the related servicing rights to third party investors.
Funding and Liquidity Through Securitizations. The Company sells automobile
receivables in securitization transactions in order to obtain a cost-effective
source of funds for the purchase of additional automobile finance contracts, to
reduce the risk of interest rate fluctuations and to utilize capital
efficiently. Since the Company's first securitization transaction in December
1994, the Company has securitized approximately $2.0 billion of automobile
receivables in private and public offerings of asset-backed securities.
MARKET AND COMPETITION
According to CNW Marketing/Research, an independent automobile finance market
research firm, the automobile finance industry is the second largest consumer
finance industry in the United States with over $427 billion of franchised
dealers loan and lease originations during 1996. The industry is generally
segmented according to the type of car sold (new vs. used) and the credit
characteristics of the borrower (prime vs. sub-prime segment). The sub-prime
segment of the market accounted for approximately $75 billion of these
originations.
Competition in the field of sub-prime automobile finance is intense. The
automobile finance market is highly fragmented and is served by a variety of
financial entities including the captive finance affiliates of major automotive
manufacturers, banks, thrifts, credit unions and independent finance companies.
Many of these competitors have greater financial resources and lower costs of
funds than the Company. Many of these competitors also have long standing
relationships with automobile dealerships and may offer dealerships or their
customers other forms of financing, including dealer floor plan financing and
leasing, which are not provided by the Company. Providers of automobile
financing have traditionally competed on the basis of interest rates charged,
the quality of credit accepted, the flexibility of loan terms offered and the
quality of service provided to dealers and customers. In seeking to establish
itself as one of the principal financing sources at the dealers it serves, the
Company competes predominately on the basis of its high level of dealer service
and strong dealer relationships and by offering flexible loan terms. The Company
also seeks to offer rates that are competitive and that are consistent with its
goal of balancing risk and returns.
OPERATIONS
Dealership Marketing. Since the Company is an indirect lender, the Company
focuses its marketing activities on automobile dealerships. The Company is
selective in choosing the dealers with whom it conducts business and primarily
pursues manufacturer franchised dealerships with used car operations and select
independent dealerships. The
42
<PAGE>
Company selects these dealers because they sell the type of used cars the
Company prefers to finance, specifically later model, low mileage used cars. Of
the contracts purchased by the Company during the fiscal year ended June 30,
1997, approximately 84% were originated by manufacturer franchised dealers with
used car operations and 16% by select independent dealers. The Company purchased
contracts from 5,657 dealers during the fiscal year ended June 30, 1997. No
dealer accounted for more than 2% of the total volume of contracts purchased by
the Company for that same period.
The Company's financing programs are marketed to dealers through branch
office personnel, including branch managers, assistant managers and in some
cases marketing representatives. The Company believes that the personal
relationships its branch managers and other branch office personnel establish
with the dealership personnel are an important factor in creating and
maintaining productive relationships with its dealership customer base. Branch
office personnel are responsible for the solicitation, enrollment and education
of new dealers regarding the Company's financing programs. Branch office
personnel visit dealerships to present information regarding the Company's
financing programs and capabilities. These personnel explain the Company's
underwriting philosophy, including its preference for sub-prime quality
contracts secured by later model, lower mileage used vehicles and its practice
of underwriting in the local branch office.
Prior to entering into a relationship with a dealer, the Company considers
the dealer's operating history and reputation in the marketplace. The Company
then maintains a non-exclusive relationship with the dealer. This relationship
is actively monitored with the objective of maximizing the volume of
applications received from the dealer that meet the Company's underwriting
standards and profitability objectives. Due to the non-exclusive nature of the
Company's relationships with dealerships, the dealerships retain discretion to
determine whether to obtain financing from the Company or from another source
for a customer seeking to finance a vehicle purchase. Branch managers and other
branch office personnel regularly telephone and visit dealers to solicit new
business and to answer any questions dealers may have regarding the Company's
financing programs and capabilities. To increase the effectiveness of these
contacts, the branch managers and other branch office personnel have access to
the Company's management information systems which detail current information
regarding the number of applications submitted by dealership, the Company's
response and the reasons why a particular application was rejected.
Finance contracts are generally purchased by the Company without recourse
to the dealer, and accordingly, the dealer usually has no liability to the
Company if the consumer defaults on the contract. To mitigate the Company's
risk from potential credit losses, the Company typically charges dealers an
acquisition fee when purchasing finance contracts. Such acquisition fees are
negotiated with dealers on a contract-by-contract basis and are usually non-
refundable. Although finance contracts are purchased without recourse to the
dealer, the dealer typically makes certain representations as to the validity of
the contract and compliance with certain laws, and indemnifies the Company
against any claims, defenses and set-offs that may be asserted against the
Company because of assignment of the contract. Recourse based upon such
representations and indemnities would be limited in circumstances in which the
dealer has insufficient financial resources to perform upon such representations
and indemnities. The Company does not view recourse against the dealer on these
representations and indemnities to be of material significance in its decision
to purchase finance contracts from a dealer.
Branch Office Network. The Company uses a branch office network to market
its financing programs to selected dealers and develop relationships with these
dealers throughout the country. Additionally, the branch office network is used
for the underwriting of contracts submitted by dealerships. The Company believes
a local presence enables the Company to more fully service dealers and be more
responsive to dealer concerns and local market conditions. The Company selects
markets for branch office locations based upon numerous factors, including
demographic trends and data, competitive conditions and the regulatory
environment in addition to the availability of qualified personnel. Branch
offices are typically situated in suburban office buildings which are accessible
to local dealers.
Each branch office solicits dealers for contracts and maintains the
Company's relationship with the dealers in the geographic vicinity of that
branch office. Branch office locations are typically staffed by a branch
manager, an assistant manager and one or more dealer and customer service
representatives. Larger branch offices may also have an additional assistant
manager and/or dealer marketing representative. Branch managers are compensated
with base salaries, annual incentives based primarily on branch level credit
quality and, if the credit quality objectives are met, loan volume. The
incentives are typically paid in cash and stock option grants. The branch
managers report to regional vice presidents.
The Company's regional vice presidents monitor branch office compliance
with the Company's underwriting guidelines. The Company's automated application
processing system and loan accounting system provide the regional
43
<PAGE>
vice presidents access to credit application information enabling them to
consult with the branch managers on daily credit decisions and review exceptions
to the Company's underwriting guidelines. The regional vice presidents also make
periodic visits to the branch offices to conduct operating reviews. The regional
vice presidents receive incentives based on the overall performance of the
Company.
The following table sets forth information with respect to the number of
branches, dollar volume of contracts purchased and number of producing
dealerships for the periods set forth below.
<TABLE>
<CAPTION>
SIX-MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------- ------------------
1995 1996 1997 1996 1997
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Number of branch offices............................ 31 51 85 66 108
Dollar volume of contracts purchased................ $230,176 $432,442 $906,794 $359,407 $696,252
Number of producing dealerships(1).................. 1,861 3,262 5,657 3,299 5,911
</TABLE>
______________
(1) A producing dealership refers to a dealership from which the Company had
purchased contracts in the relevant period.
The Company plans to expand its indirect automobile finance business by adding
additional branch offices and increasing dealer penetration at its existing
branch offices. The success of this strategy is dependent upon, among other
factors, the Company's ability to hire and retain qualified branch managers and
other personnel and to develop relationships with more dealers. The Company
confronts intense competition in attracting key personnel and establishing
relationships with dealers. Dealers often already have favorable sub-prime
financing sources, which may restrict the Company's ability to develop dealer
relationships and delay the Company's growth. In addition, the competitive
conditions in the Company's markets may result in a reduction in the
profitability of the contracts that the Company purchases or a decrease in
contract acquisition volume, which would adversely affect the Company's results
of operations.
UNDERWRITING AND PURCHASING OF CONTRACTS
Proprietary Credit Scoring System and Risk-based Pricing. The Company has
implemented a credit scoring system throughout its branch office network to
support the branch level credit approval process. The credit scoring system was
developed with the assistance of Fair, Isaac and Co., Inc. from the Company's
loan and portfolio databases. Credit scoring is used to differentiate credit
applicants and to rank order credit risk in terms of expected default rates,
which enables the Company to tailor loan pricing and structure according to this
statistical assessment of credit risk. For example, a consumer with a lower
score would indicate a higher probability of default and, therefore, the Company
could compensate for this higher default risk through the structuring and
pricing of the transaction. While the Company employs a credit scoring system in
the credit approval process, credit scoring does not eliminate credit risk.
Adverse determinations in evaluating contracts for purchase could adversely
affect the credit quality of the Company's receivables portfolio.
The credit scoring system contrasts the quality of credit applicant profiles
resulting in a statistical assessment of the most predictive characteristics.
Factors considered in any loan application include data presented on the
application, the credit bureau report and the type of loan the applicant wishes
to secure. Specifically, the credit scoring system considers customer
residential and employment stability, the customer's financial history, current
financial capacity, integrity of meeting historical financial obligations, loan
structure and credit bureau information. The scorecards take these factors into
account and produce a statistical assessment of these attributes. This
assessment is used to segregate applicant risk profiles and determine whether
risk is acceptable and the price the Company should charge for that risk. The
credit scorecards are validated on a monthly basis through the comparison of
actual versus projected performance by score. The Company will continue to
refine its proprietary scorecards based on increased information and identified
correlations relating to receivables performance.
44
<PAGE>
Through the use of the Company's proprietary credit scoring system, branch
office personnel with credit authority are able to more efficiently review and
prioritize loan applications. Applications which receive a high score are
processed rapidly and credit decisions can be quickly faxed back to the dealer.
Applications receiving low scores can be quickly rejected without further
processing and review by the Company. This ability to prioritize applications
allows for a more effective allocation of resources to those applications
requiring more review.
Decentralized Loan Approval Process. The Company purchases individual
contracts through its branch offices based on a decentralized credit approval
process tailored to local market conditions. Each branch manager has a specific
credit authority based upon his experience and historical loan portfolio results
as well as established credit scoring parameters. In certain markets where a
branch office is not present and with respect to certain large dealer groups,
contracts are purchased through the Company's regional purchasing offices.
Although the credit approval process is decentralized, all credit decisions are
guided by the Company's credit scoring strategies, overall credit and
underwriting policies and procedures and daily monitoring process.
Loan application packages completed by prospective obligors are received via
facsimile at the branch offices from dealers. Application data are entered into
the Company's automated application processing system. A credit bureau report is
automatically generated and credit scores are computed. Branch office personnel
with credit authority review the application package and determine whether to
approve the application, approve the application subject to conditions that must
be met or deny the application. These personnel consider many factors in
arriving at a credit decision, relying primarily on the applicant's credit
score, but also taking into account the applicant's capacity to pay, stability,
character and intent to pay, the contract terms and collateral value. The
Company estimates that approximately 60% to 65% of applicants are denied credit
by the Company typically because of their credit histories or because their
income levels are not sufficient to support the proposed level of monthly
payments. As part of the credit decision process, a customer service
representative investigates the residence, employment and credit history of the
applicant. Dealers are contacted regarding credit decisions by telefax and/or
telephone. Declined and conditioned applicants are also provided with
appropriate notification of the decision.
The Company's underwriting and collateral guidelines as well as credit scoring
parameters form the basis for the branch level credit decision; however, the
qualitative judgment of the branch office personnel with credit authority with
respect to the credit quality of an applicant is a significant factor in the
final credit decision. Exceptions to credit policies and authorities must be
approved by a regional vice president or other designated credit officer.
Completed loan packages are sent by the dealers to the branch office. Loan
terms and insurance coverages are generally reverified with the consumer by
branch office personnel and the loan packages are forwarded to the Company's
centralized loan services department, where the packages are scanned to create
electronic copies. Key original documents are stored in a fire-proof vault and
the loan packages are further processed in an electronic environment. The loans
are reviewed for proper documentation and regulatory compliance and are entered
into the Company's loan accounting system. Daily loan reports are generated for
final review by senior operations management. Once cleared for funding, the loan
services department issues a check or electronically transfers funds to the
dealer. Upon funding of the contract, the Company acquires a perfected security
interest in the automobile that was financed. All of the Company's contracts are
fully amortizing with substantially equal monthly installments.
SERVICING AND COLLECTIONS PROCEDURES
General. The Company services its receivables portfolio at facilities located
in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. The
Company's servicing activities consist of collecting and processing customer
payments, responding to customer inquiries, initiating contact with customers
who are delinquent in payment of a receivable installment, maintaining the
security interest in the financed vehicle and repossessing and liquidating
collateral when necessary. The Company utilizes various automated systems to
support its servicing and collections activities. The Company uses monthly
billing statements to serve as a reminder to customers as well as an early
warning mechanism in the event a customer has failed to notify the Company of an
address change. Approximately 15 days before a customer's first payment due date
and each month thereafter, the Company mails the customer a billing statement
directing the customer to mail payments to a lockbox bank for deposit in a
lockbox account. Payment receipt data is electronically transferred from the
Company's lockbox bank to the Company for posting to the loan accounting system.
Payments may also be received directly by the Company from customers. All
payment processing and customer account maintenance
45
<PAGE>
is performed centrally in Fort Worth, Texas by the loan services department. The
Company receives servicing fees for servicing securitized receivables equal to
2.25% to 2.50% per annum of the outstanding principal balance of such
receivables.
The Company maintains computerized records with respect to each finance
contract to record receipts and disbursements and to prepare related reports.
The Company utilizes a predictive dialing system to make phone calls to
customers whose payments are past due by less than 30 days. The predictive
dialer is a computer-controlled telephone dialing system which dials phone
numbers of customers from a file of records extracted from the Company's
database. Once a live voice responds to the automated dialer's call, the system
automatically transfers the call to a collector and the relevant account
information appears on the collector's computer screen. The system also tracks
and notifies collections management of phone numbers that the system has been
unable to reach within a specified number of days, thereby promptly identifying
for management all customers who cannot be reached by telephone. By eliminating
time wasted on attempting to reach customers, the system gives a single
collector the ability to speak with a larger number of accounts daily.
Once an account becomes more than 30 days delinquent, the account moves to the
Company's mid-range collection unit. The objective of these collectors is to
prevent the account from becoming further delinquent. After a scheduled payment
on an account becomes approximately 60 days past due, the Company typically
initiates repossession of the financed vehicle. However, if an account is deemed
uncollectible, if the financed vehicle is deemed by collection personnel to be
in danger of being damaged, destroyed or hidden, if the customer deals in bad
faith or if the customer voluntarily surrenders the financed vehicle, the
Company may repossess it without regard to the length of payment delinquency.
Payment deferrals are at times offered to customers who have encountered
temporary financial difficulty, hindering their ability to pay as contracted,
and when other methods of assisting the customer in meeting the contract terms
and conditions have been exhausted. A deferral allows the customer to move a
delinquent payment to the end of the loan by paying a fee (approximately the
interest portion of the payment deferred). The collector must review the past
payment history and assess the customer's desire and capacity to make future
payments and, before agreeing to a deferral, must comply with the Company's
policies and guidelines for deferrals. Exceptions to the Company's policies and
guidelines for deferrals must be approved by a collections officer. Deferment
transactions are processed by the loan services department. As of December 31,
1997, approximately 11.8% of the Company's managed receivables have ever
received a deferral.
Repossessions. The Company follows prescribed legal procedures for
repossessions, which include peaceful repossession, one or more consumer
notifications, a prescribed waiting period prior to disposition of the
repossessed automobile and return of personal items to the consumer. In some
jurisdictions, the Company must provide the consumer with reinstatement or
redemption rights. Legal requirements, particularly in the event of bankruptcy,
may restrict the Company's ability to dispose of the repossessed vehicle.
Repossessions are handled by independent repossession firms engaged by the
Company. Repossessions must be approved by a collections officer. Upon
repossession and after any prescribed waiting period, the repossessed automobile
is sold at auction. The Company does not sell any vehicles on a retail basis.
The proceeds from the sale of the automobile at auction, and any other
recoveries, are credited against the balance of the contract. Auction proceeds
from the sale of the repossessed vehicle and other recoveries are usually not
sufficient to cover the outstanding balance of the contract, and the resulting
deficiency is charged-off. The Company may pursue collection of deficiencies
when it deems such action to be appropriate.
Charge-Off Policy. The Company's policy is to charge-off an account in the
month in which the account becomes 180 days contractually delinquent even if the
Company has not repossessed the related vehicle. On accounts less than 180 days
delinquent, the Company charges-off the account when the vehicle securing the
delinquent contract is repossessed and disposed of. The charge-off represents
the difference between the actual net sales proceeds and the amount of the
delinquent contract, including accrued interest. Accrual of finance charge
income is suspended on accounts which are more than 60 days contractually
delinquent.
46
<PAGE>
RISK MANAGEMENT
Overview. The Company has developed procedures to evaluate and supervise the
operations of each branch office on a centralized basis. The Company's
centralized risk management department is responsible for monitoring the
contract purchase process and supporting the supervisory role of senior
operations management. This department tracks via databases key variables, such
as loan applicant data, credit bureau and credit score information, loan
structures and terms and payment histories. The risk management department also
regularly reviews the performance of the Company's credit scoring system and is
involved with third-party vendors in the development and enhancement of credit
scorecards for the Company.
The risk management department also prepares regular credit indicator packages
reviewing portfolio performance at various levels of detail including total
Company, branch office and dealer. Various daily reports and analytical data are
also generated by the Company's management information systems. This information
is used to monitor credit quality as well as to constantly refine the structure
and mix of new contract purchases. Portfolio returns are reviewed on a
consolidated basis, as well as at the branch office, dealer and contract levels.
Behavioral Scoring. A behavioral scoring model is used to project the relative
probability that an individual account will default and to validate the credit
scoring system after the receivable has aged for a sufficient period of time
(generally six to nine months). Default probabilities are calculated for each
account independent of the credit score. The Company believes that, when grouped
by credit score at origination, projected default rates from the behavioral
scoring model coincide with the credit scoring system.
Collateral Value Management. The value of the collateral underlying the
Company's receivables portfolio is updated monthly with a loan-by-loan link to
national wholesale auction values. This data, along with the Company's own
experience relative to mileage and vehicle condition, are used for evaluating
collateral disposition activities as well as for reserve analysis models.
Compliance Audits. The Company's risk management department conducts regular
compliance audits of branch office operations and the loan services and
collections departments. The primary objective of the audits is to measure
compliance with the Company's written policies and procedures as well as
regulatory matters. Audits of branch office operations are conducted no less
than every six months and include a review of compliance with underwriting
policies, completeness of loan documentation, assessment of collateral value and
extent of applicant data investigation. Written audit reports are distributed to
local branch office personnel and the regional vice presidents for response and
follow-up. Senior operations management reviews copies of these reports.
SECURITIZATION OF LOANS
Since December 1994, the Company has pursued a strategy of securitizing its
receivables to diversify its funding, improve liquidity and obtain a cost-
effective source of funds for the purchase of additional automobile finance
contracts. The Company applies the net proceeds from securitizations to pay down
borrowings under its Credit Agreement and Warehouse Facility, thereby increasing
availability thereunder for further contract purchases. Through December 31,
1997, the Company had securitized approximately $2.0 billion of automobile
receivables.
In its securitizations, the Company, through wholly-owned subsidiaries,
transfers automobile receivables to newly-formed securitization trusts, which
issue one or more classes of asset-backed securities. The asset-backed
securities are simultaneously sold to investors, except for certain subordinated
interests which may be retained by wholly-owned subsidiaries of the Company and
which are included in excess servicing receivable in the Company's consolidated
financial statements.
When receivables are transferred to securitization trusts in securitization
transactions, the Company recognizes a gain on sale of receivables and continues
to service such receivables. The gain on sale of receivables represents the
difference between the sales proceeds, net of transaction costs, and the
Company's net carrying value of the receivables sold, plus the present value of
estimated excess cash flows. The excess cash flows are the difference between
the cash collected from obligors on securitized receivables and the sum of (i)
principal and interest paid to investors in the asset-backed securities; (ii)
contractual servicing fees; (iii) defaults, net of recoveries; and (iv) other
expenses such as trustee
47
<PAGE>
fees and financial guarantee insurance premiums. Concurrently with recognizing
such gain on sale of receivables, the Company records a corresponding asset,
excess servicing receivable, which includes the present value of estimated
excess cash flows as described above plus any subordinated interests in the
securitization trusts retained by the Company.
The calculation of excess servicing receivable includes estimates of future
losses and prepayment rates for the remaining term of the receivables sold since
these factors impact the amount and timing of future cash collected on the
receivables sold. The carrying value of excess servicing receivable is reviewed
on a quarterly basis. If future losses and prepayment rates exceed the
Company's original estimates, excess servicing receivable will be adjusted
through a charge to operations. Through December 31, 1997, no material charge
has been made. Favorable credit loss and prepayment experience compared to the
Company's original estimates would result in additional income when realized.
See "Risk Factors--Default and Prepayment Risks."
In connection with the Company's securitization program, the Company arranges
for credit enhancement to achieve a desired credit rating on the asset-backed
securities issued. The credit enhancement for the Company's securitizations has
taken the form of financial guaranty insurance policies issued by FSA, a
monoline insurer, which insures the timely payment of principal and interest due
on the asset-backed securities. As of December 31, 1997, FSA had insured all the
Company's asset-backed securities. See "Risk Factors--Dependence on Funding
Sources--Dependence on Securitization Program." The Company has limited
reimbursement obligations to FSA; however, credit enhancement requirements,
including FSA's encumbrance of certain restricted cash accounts and subordinated
interests in trusts, provide a source of funds to cover shortfalls in
collections (as described below) and to reimburse FSA for any claims which may
be made under the policies issued with respect to the Company's securitizations.
The credit enhancement requirements for any securitization include restricted
cash accounts which are generally established with an initial deposit and
subsequently funded through excess cash flows from securitized receivables.
Funds are withdrawn from the restricted cash accounts to cover any shortfalls in
amounts payable on the asset-backed securities. Funds are also available to be
withdrawn in an event of default to reimburse FSA for draws on its financial
guaranty insurance policy. In addition, the restricted cash account for each
securitization trust is cross-collateralized to the restricted cash accounts
established in connection with the Company's other securitization trusts, such
that excess cash flow from a performing securitization trust insured by FSA may
be used to support cash flow shortfalls from a non-performing securitization
trust insured by FSA, thereby further restricting excess cash flow available to
the Company. The Company is entitled to receive amounts from the restricted cash
accounts to the extent the amounts deposited exceed predetermined required
minimum levels.
FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned
subsidiary of the Company that owns the restricted cash accounts and excess
servicing receivable, such that, if the pledge is exercised in the event of a
payment under one of its insurance policies or certain material adverse changes
in the business of the Company, FSA would control all of the restricted cash
accounts and excess servicing receivable. The terms of each securitization also
provide that, under certain tests relating to delinquencies, defaults and
losses, cash may be retained in the restricted cash account and not released to
the Company until increased minimum levels of credit enhancement requirements
have been reached.
TRADE NAMES
The Company has obtained federal trademark protection for the "AmeriCredit"
name and the logo that incorporates the "AmeriCredit" name.
REGULATION
The Company's operations are subject to regulation, supervision and licensing
under various federal, state and local statutes, ordinances and regulations.
In most states in which the Company operates, a consumer credit regulatory
agency regulates and enforces laws relating to consumer lenders and sales
finance agencies such as the Company. Such rules and regulations generally
provide for licensing of sales finance agencies, limitations on the amount,
duration and charges, including interest rates, for various categories of loans,
requirements as to the form and content of finance contracts and other
documentation and
48
<PAGE>
restrictions on collection practices and creditors' rights. In certain states,
the Company's branch offices are subject to periodic examination by state
regulatory authorities. Some states in which the Company operates do not require
special licensing or provide extensive regulation of the Company's business.
The Company is also subject to extensive federal regulation, including the
Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act. These laws require the Company to provide certain disclosures to
prospective borrowers and protect against discriminatory lending practices and
unfair credit practices. The principal disclosures required under the Truth in
Lending Act include the terms of repayment, the total finance charge and the
annual percentage rate charged on each loan. The Equal Credit Opportunity Act
prohibits creditors from discriminating against loan applicants on the basis of
race, color, sex, age or marital status. Pursuant to Regulation B promulgated
under the Equal Credit Opportunity Act, creditors are required to make certain
disclosures regarding consumer rights and advise consumers whose credit
applications are not approved of the reasons for the rejection. In addition, the
credit scoring system used by the Company must comply with the requirements for
such a system as set forth in the Equal Credit Opportunity Act and Regulation B.
The Fair Credit Reporting Act requires the Company to provide certain
information to consumers whose credit applications are not approved on the basis
of a report obtained from a consumer reporting agency.
The dealers who originate automobile loans purchased by the Company also must
comply with both state and federal credit and trade practice statutes and
regulations. Failure of the dealers to comply with such statutes and regulations
could result in consumers having rights of rescission and other remedies that
could have an adverse effect on the Company.
Management believes that the Company maintains all material licenses and
permits required for its current operations and is in substantial compliance
with all applicable local, state and federal regulations. There can be no
assurance, however, that the Company will be able to maintain all requisite
licenses and permits and the failure to satisfy those and other regulatory
requirements could have a material adverse effect on the operations of the
Company. Further, the adoption of additional, or the revision of existing, rules
and regulations could have a material adverse effect on the Company's business.
As a consumer finance company, the Company is subject to various consumer
claims and litigation seeking damages and statutory penalties based upon, among
other theories of liability, usury, wrongful repossession, fraud and
discriminatory treatment of credit applicants, which could take the form of a
plaintiffs class action complaint. The Company, as the assignee of finance
contracts originated by dealers, may also be named as a co-defendant in lawsuits
filed by consumers principally against dealers. The damages and penalties
claimed by consumers in these types of matters can be substantial. Management
believes that the Company has taken prudent steps to address the litigation
risks associated with its business activities. However, there can be no
assurance that the Company will be able to successfully defend against all such
consumer claims, or that the determination of any such claim in a manner adverse
to the Company would not have a material adverse effect on the Company's
indirect automobile finance business.
HOME EQUITY LOAN OPERATIONS
In November 1996, the Company acquired AMS. AMS originates and acquires sub-
prime home equity loans through a network of mortgage brokers. AMS sells its
home equity loans and the related servicing rights in the wholesale markets.
While not currently representing a material portion of the Company's assets or
revenues, management intends over time to devote substantial resources to pursue
growth of AMS's business of originating home equity loans to sub-prime
borrowers. There can be no assurance, however, that the Company will be able to
successfully expand such business or that the failure to effectively expand such
business will not have a material adverse effect on the Company's financial
position, liquidity or results of operations. See "Risk Factors--Implementation
of Business Strategy."
49
<PAGE>
PROPERTIES
The Company's executive offices are located at 200 Bailey Avenue, Fort Worth,
Texas, in a 43,000 square foot building purchased by the Company in February
1994. This building is utilized by the Company for branch office support and
administrative activities. The Company also leases 66,800 square feet of office
space in Tempe, Arizona under a ten year agreement with renewal options that
commenced in 1996, 58,700 square feet of office space in Charlotte, North
Carolina under an eleven year agreement with renewal options that commenced in
1997 and 66,000 square feet of office space in Fort Worth, Texas under
agreements that extend through December 2000. These facilities are used for
various operating activities.
The Company's branch office facilities are generally leased under agreements
with original terms of three to five years. Such facilities are typically
located in a suburban office building and consist of between 1,000 and 2,000
square feet of space.
EMPLOYEES
At December 31, 1997, the Company employed approximately 1,200 persons.
LEGAL PROCEEDINGS
In the normal course of its business, the Company is named as a defendant in
legal proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. In the opinion of
management, the resolution of these proceedings will not have a material adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the current
directors and executive officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Clifton H. Morris, Jr. ... 62 Chairman of the Board and Chief Executive Officer
Michael R. Barrington .... 39 Vice Chairman of the Board, President and Chief Operating Officer
Daniel E. Berce .......... 44 Vice Chairman of the Board and Chief Financial Officer
Edward H. Esstman ........ 57 President and Chief Operating Officer of AmeriCredit Financial
Services, Inc., Executive Vice President--Auto Finance Division
and Director
Chris A. Choate .......... 34 Senior Vice President, General Counsel and Secretary
Cheryl L. Miller ......... 33 Senior Vice President, Director of Collections and
Customer Service of AmeriCredit Financial Services, Inc.
Michael T. Miller ........ 36 Senior Vice President and Chief Credit Officer
Preston A. Miller ........ 34 Senior Vice President and Treasurer
James H. Greer ........... 71 Director
Gerald W. Haddock ........ 50 Director
Douglas K. Higgins ....... 48 Director
Kenneth H. Jones, Jr. .... 62 Director
</TABLE>
Clifton H. Morris, Jr. has been Chairman of the Board and Chief Executive
Officer of the Company since May 1988, and was also President of the Company
from such date until April 1991 and from April 1992 to November 1996. Mr.
Morris is also a director of Service Corporation International, a publicly held
company which owns and operates funeral homes and related businesses.
Michael R. Barrington has been Vice Chairman, President and Chief Operating
Officer of the Company since November 1996 and was Executive Vice President and
Chief Operating Officer of the Company from November 1994 until November 1996.
Mr. Barrington was a Vice President of the Company from May 1991 until November
1994. From its formation in July 1992 until November 1996, Mr. Barrington was
also the President and Chief Operating Officer of AmeriCredit Financial
Services, Inc. ("AFSI"), a subsidiary of the Company.
Daniel E. Berce has been Vice Chairman and Chief Financial Officer of the
Company since November 1996 and was Executive Vice President, Chief Financial
Officer and Treasurer for the Company from November 1994 until November 1996.
Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the
Company from May 1991 until November 1994.
Edward H. Esstman has been President and Chief Operating Officer of AFSI since
November 1996. Mr. Esstman was Executive Vice President, Director of Consumer
Finance Operations of AFSI from November 1994 until November 1996 and was Senior
Vice President, Director of Consumer Finance of AFSI from AFSI's formation in
July 1992 until November 1994. Mr. Esstman has also been Executive Vice
President--Auto Finance Division for the Company since November 1996 and Senior
Vice President and Chief Credit Officer for the Company from November 1994 until
November 1996.
Chris A. Choate has been Senior Vice President, General Counsel and Secretary
of the Company since November 1996 and was Vice President, General Counsel and
Secretary of the Company from November 1994 until November 1996 and General
Counsel and Secretary of the Company from January 1993 until November 1994.
From July 1991 until January 1993, Mr. Choate was Assistant General Counsel.
Cheryl L. Miller has been Senior Vice President, Collections and Customer
Service of AFSI since March 1996 and Vice President, Collections and Customer
Service of AFSI from October 1994 until March 1996. From May 1994 until
51
<PAGE>
October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to
that, Ms. Miller was with Ford Motor Credit Company, most recently as customer
service supervisor of the Dallas branch.
Michael T. Miller has been Senior Vice President and Chief Credit Officer of
the Company since November 1996. Mr. Miller has also been Senior Vice President,
Risk Management, Credit Policy and Planning and Chief of Staff of AFSI since
November 1994 and Vice President, Risk Management, Credit Policy and Planning of
AFSI from AFSI's formation in July 1992 until November 1994.
Preston A. Miller has been Senior Vice President and Treasurer of the Company
since November 1996. Mr. Miller was Vice President and Controller of the
Company from November 1994 until November 1996 and was Controller of the Company
from September 1989 until November 1994.
James H. Greer is the Chairman of the Board of Shelton W. Greer Co., Inc.
which engineers, manufactures, fabricates and installs building specialty
products, and has been such for more than five years. Mr. Greer is also a
director of Service Corporation International and Tanknology Environmental,
Inc., a publicly held company engaged in the environmental services industry.
Gerald W. Haddock is President and Chief Executive Officer of Crescent Real
Estate Equities Company ("Crescent"), a publicly held real estate investment
trust, and has been in such position since December 1996. From May 1994 until
December 1996, Mr. Haddock was President of Crescent. From June 1990 until
December 1993, Mr. Haddock was a partner with the Fort Worth, Texas law firm of
Jackson & Walker, L.L.P. and, from January 1994 until April 1994, was of counsel
to such firm. Mr. Haddock is also a director of ENSCO International
Incorporated, a publicly held oil and natural gas services company.
Douglas K. Higgins is a private investor and owner of Higgins & Associates and
has been in such position since July 1994. In 1983, Mr. Higgins founded H & M
Food Systems Company, Inc., a manufacturer of meat-based products for the food
service industry, and was employed by such company as President until his
retirement in July 1994.
Kenneth H. Jones, Jr. is Vice Chairman of KBK Capital Corporation, a publicly
held non-bank commercial finance company, and has been in such position since
January 1995. Prior to January 1995, Mr. Jones was a shareholder in the Decker,
Jones, McMackin, McClane, Hall & Bates, P.C. law firm in Fort Worth, Texas, and
was with such firm and its predecessor or otherwise involved in the private
practice of law in Fort Worth, Texas for more than five years. Mr. Jones is
also a director of Hallmark Financial Services, Inc., a publicly held company
engaged in the insurance business.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with all of its Named
Executive Officers. Messrs. Clifton H. Morris, Jr., Michael R. Barrington and
Daniel E. Berce entered into employment agreements with the Company during
fiscal 1991. These agreements, as amended, contain terms that renew annually
for successive five year periods (ten years in the case of Mr. Morris), and the
compensation thereunder is determined annually by the Company's Board of
Directors, subject to minimum annual compensation for Messrs. Morris, Barrington
and Berce of $500,000, $345,000 and $345,000, respectively. Included in each
agreement is a covenant of the employee not to compete with the Company during
the term of his employment and for a period of three years thereafter. The
employment agreements also provide that if the employee is terminated by the
Company other than for cause, the Company will pay to the employee the remainder
of his current year's salary (undiscounted) plus the discounted present value
(employing an interest rate of 8%) of two additional years' salary. In the
event the employee resigns or is terminated other than for cause within twelve
months after a "change in control" of the Company (as that term is defined in
the employment agreements), the employee will be entitled to earned and vested
bonuses at the date of termination plus the remainder of his current year's
salary (undiscounted) plus the present value (employing an interest rate of 8%)
of two additional years' salary (for which purpose "salary" includes the annual
rate of compensation immediately prior to the "change in control" plus the
average annual cash bonus for the immediately preceding three year period).
Mr. Edward H. Esstman entered into an employment agreement with the Company in
October 1996 (which agreement replaced a prior employment agreement with Mr.
Esstman). Mr. Esstman's agreement, as amended, contains
52
<PAGE>
terms substantially identical to those contained in the agreements for Messrs.
Barrington and Berce and provides for minimum annual compensation of $300,000.
Mr. Michael T. Miller entered into an employment agreement with the Company in
July 1997 (which agreement replaced a prior employment agreement with Mr.
Miller). Mr. Miller's employment agreement contains a term that renews annually
for successive three year periods and provides for minimum annual compensation
of $165,000. Included in Mr. Miller's agreement is a covenant not to compete
with the Company during the term of his employment and for a period of one year
thereafter. In the event Mr. Miller is terminated by the Company other than for
cause, the Company is obligated to pay him an amount equal to one year's salary
(undiscounted). Mr. Miller's Agreement contains "change in control" provisions
similar to those contained in the employment agreements with the other Named
Executive Officers.
In addition to the employment agreements described above, the terms of all
stock options granted to the Named Executive Officers provide that such options
will become immediately vested and exercisable upon the occurrence of a change
in control as defined in the stock option agreements evidencing such grants.
The provisions and terms contained in these employment and option agreements
could have the effect of increasing the cost of a change in control of the
Company and thereby delay or hinder such a change in control.
BOARD COMMITTEES AND MEETINGS
Standing committees of the Board include the Audit Committee and the Stock
Option/Compensation Committee.
The Audit Committee's principal responsibilities consist of (i) recommending
the selection of independent auditors, (ii) reviewing the scope of the audit
conducted by such auditors, as well as the audit itself, and (iii) reviewing the
Company's internal audit activities and matters concerning financial reporting,
accounting and audit procedures, and policies generally. Members consist of
Messrs. Greer, Haddock, Higgins and Jones.
The Stock Option/Compensation Committee (i) administers the Company's employee
stock option plans and reviews and approves the granting of stock options and
(ii) reviews and approves compensation for executive officers. Members consist
of Messrs. Greer, Haddock, Higgins and Jones.
The Board of Directors held five regularly scheduled meetings during the
fiscal year ended June 30, 1997. Various matters were also approved during the
last fiscal year by unanimous written consent of the Board of Directors. No
director attended fewer than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees of the Board on which such director served, other than Mr.
Haddock who attended 67% of all such meetings.
COMPENSATION OF DIRECTORS
Members of the Board of Directors currently receive a $2,000 quarterly
retainer fee and an additional $3,500 fee for attendance at each meeting of the
Board. Members of Committees of the Board of Directors are paid $1,500 per
quarter for participation in all committee meetings held during that quarter.
At the 1990 Annual Meeting of Shareholders, the Company adopted the 1990 Stock
Option Plan for Non-Employee Directors of AmeriCredit Corp. (the "1990 Director
Plan"), which provides for grants to the Company's nonemployee directors of
nonqualified stock options and reserves, in the aggregate, a total of 750,000
shares of Common Stock for issuance upon exercise of stock options granted under
such plan. Under the 1990 Director Plan, each nonemployee director receives,
upon election as a Director and thereafter on the first business day after the
date of each annual meeting of shareholders of the Company, an option to
purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. Each option is fully
vested upon the date of grant but may not be exercised prior to the expiration
of six months after the date of grant. On November 5, 1997, options to purchase
10,000 shares of Common Stock were granted under the 1990 Director Plan to each
of Messrs. Greer, Haddock, Higgins and Jones at an exercise price of $29.25 per
share. The exercise price for the options granted to Messrs. Greer,
53
<PAGE>
Haddock, Higgins and Jones is equal to the last reported sale price of the
Common Stock on the New York Stock Exchange ("NYSE") on the day preceding the
date of grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company (the "Named Executive Officers")
for the fiscal years shown.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- -----------------------
SHARES OF
COMMON STOCK
UNDERLYING STOCK ALL OTHER
OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($)(1)
- ------------------------------------------- ---- --------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr...................... 1997 397,230 379,230 --- 116,771
Chairman and CEO.......................... 1996 320,921 181,764 300,000 41,771
1995 287,620 128,070 150,000 41,771
Michael R. Barrington...................... 1997 276,704 258,704 --- 43,326
Vice Chairman, President................... 1996 223,832 123,506 200,000 5,758
and Chief Operating Officer............... 1995 201,204 73,281 162,500 5,737
Daniel E. Berce............................ 1997 276,704 258,704 --- 44,120
Vice Chairman and.......................... 1996 223,832 123,506 200,000 6,620
Chief Financial Officer.................... 1995 201,204 73,281 125,000 6,615
Edward H. Esstman.......................... 1997 246,473 171,355 --- 45,655
President and Chief........................ 1996 186,758 91,385 150,000 10,305
Operating Officer--AFSI................... 1995 162,666 65,067 100,000 10,305
Michael T. Miller.......................... 1997 119,822 59,911 70,000 730
Senior Vice President...................... 1996 97,500 39,000 15,000 624
and Chief Credit Officer................... 1995 78,750 25,594 15,000 571
</TABLE>
________
(1) The amounts disclosed in this column for fiscal 1997 include:
(a) Company contributions, made in the form of the Company's Common Stock,
to 401(k) retirement plans on behalf of each executive officer as
follows: Messrs. Morris, Barrington, Berce and Esstman, $4,500 and Mr.
Miller, $550;
(b) Payment by the Company of premiums for term or whole life insurance on
behalf of each executive officer or their dependents, as follows: Mr.
Morris, $37,271; Mr. Barrington, $1,326; Mr. Berce, $2,120; Mr.
Esstman, $3,655; and Mr. Miller, $180; and
(c) Annual premium payments under split-dollar life insurance policies on
Mr. Morris, $75,000; and Messrs. Barrington, Berce and Esstman, $37,500
each.
54
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all individual grants of stock options to the Named
Executive Officers of the Company during the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
SHARES OF % OF TOTAL
COMMON STOCK OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
(#) FISCAL YEAR ($/SH) DATE VALUE ($)(1)
------------------ ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr...................... --- --- --- --- ---
Chairman and CEO
Michael R. Barrington...................... --- --- --- --- ---
Vice Chairman, President and
Chief Operating Officer
Daniel E. Berce............................ --- --- --- --- ---
Vice Chairman and Chief
Financial Officer
Edward H. Esstman.......................... --- --- --- --- ---
President and Chief Operating
Officer--AFSI
Michael T. Miller.......................... 50,000(2) 4.06 17.50 10/22/2006 $266,500
Senior Vice President and Chief.......... 20,000(3) 1.62 14.50 4/22/2007 $ 88,200
Credit Officer
</TABLE>
______________
(1) As suggested by the SEC's rules on executive compensation disclosure, the
Company used the Black-Scholes model of option valuation to determine grant
date pre-tax present value. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. Calculations are based on a ten year option term for all grants and
upon the following assumptions: annual dividend growth of 0 percent,
volatility of approximately 20 percent and a risk-free rate of return based
on the published Treasury yield curve effective on the grant date. There can
be no assurance that the amounts reflected in this column will be achieved.
(2) These options were granted to Mr. Miller for 50,000 shares, which expire ten
years after the date of grant, become exercisable on the earlier of (i)
October 22, 2003, (ii) the next business day (the "Acceleration Date") after
the conclusion of a period of 20 consecutive trading days during which the
average of the closing prices of the Company's Common Stock for such 20 day
period is equal to or greater than $25 per share, provided that the
Acceleration Date must occur, if at all, on or before October 22, 1999, or
(iii) the occurrence of a change in control of the Company. As of December
31, 1997, the Acceleration Date has occurred and these options have become
exercisable.
(3) The options granted to Mr. Miller, for 20,000 shares, which expire ten
years after the date of grant, become exercisable 20% on date of grant and
in 20% increments thereafter on the anniversary date of the grant date.
55
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Shown below is information with respect to the Named Executive Officers
regarding option exercises during the fiscal year ended June 30, 1997, and the
value of unexercised options held as of June 30, 1997.
<TABLE>
<CAPTION>
SHARES OF COMMON VALUE OF
STOCK UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#)(2) FY-END ($)(2)
-------------------- --------------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
--------------- -------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Clifton H. Morris, Jr............... --0-- N/A 883,999/350,000 $14,215,276/$2,406,250
Chairman and CEO
Michael R. Barrington............... 90,167 $1,268,882 358,440/200,000 $ 4,744,430/$1,000,000
Vice Chairman and President and
Chief Operating Officer
Daniel E. Berce..................... 25,000 $ 367,575 473,607/200,000 $ 6,701,415/$1,000,000
Vice Chairman and Chief
Financial Officer
Edward H. Esstman................... 19,000 $ 370,500 295,333/170,000 $ 4,461,568/$1,092,500
President and Chief
Operating Officer--AFSI
Michael T. Miller................... 13,500 $ 170,400 10,000/88,500 $ 65,000/$518,775
Senior Vice President and Chief
Credit Officer
</TABLE>
_________________
(1) The "value realized" represents the difference between the exercise price of
the option shares and the market price of the option shares on the date the
options were exercised. The value realized was determined without
considering any taxes which may have been owed.
(2) Values stated are pre-tax, net of cost and are based upon the closing price
of $21.00 per share of the Company's Common Stock on the NYSE on June 30,
1997, the last trading day of the fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Stock Option/Compensation Committee is or has been an officer
or employee of the Company or any of its subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission ("SEC"). No member of the Stock
Option/Compensation Committee served on the compensation committee, or as a
director, of another corporation, one of whose directors or executive officers
served on the Stock Option/Compensation Committee or whose executive officers
served on the Company's Board of Directors.
56
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table and the notes thereto set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of September
12, 1997, by (i) each current director of the Company; (ii) each Named Executive
Officer; (iii) all present executive officers and directors of the Company as a
group; and (iv) each other person known to the Company to own beneficially more
than five percent of the presently outstanding Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK OWNED PERCENT OF CLASS OWNED
BENEFICIALLY(1) BENEFICIALLY(1)
---------------------- -------------------------
<S> <C> <C>
Regan Partners, L.P..................................... 2,335,200(2) 7.93%
Montgomery Asset Management, L.P........................ 1,885,000(3) 6.40%
Gardner Lewis Asset Management.......................... 1,503,500(4) 5.10%
Clifton H. Morris, Jr................................... 1,322,261(5) 4.31%
Michael R. Barrington................................... 515,973(6) 1.72%
Daniel E. Berce......................................... 698,897(7) 2.32%
Edward H. Esstman....................................... 490,506(8) 1.64%
James H. Greer.......................................... 220,000(9) *
Gerald W. Haddock....................................... 80,000(10) *
Douglas K. Higgins...................................... 80,000(11) *
Kenneth H. Jones, Jr.................................... 276,000(12) *
Michael T. Miller....................................... 34,576(13) *
All Present Executive Officers and Directors as a Group
(12 Persons)(5)(6)(7)(8)(9)(10)(11)(12)(13).......... 3,899,786 11.78%
</TABLE>
- --------------------------
*Less than 1%
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of Common Stock
shown as beneficially owned by them. Beneficial ownership as reported in
the above table has been determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
percentages are based upon 29,457,163 shares outstanding as of September
12, 1997, except for certain parties who hold options that are presently
exercisable or exercisable within 60 days of September 12, 1997. The
percentages for those parties who hold options that are presently
exercisable or exercisable within 60 days of September 12, 1997 are based
upon the sum of 29,457,163 shares outstanding plus the number of shares
subject to options that are presently exercisable or exercisable within 60
days of September 12, 1997 held by them, as indicated in the following
notes.
(2) As of August 31, 1996, the Company has been informed that Regan Partners,
L.P. ("Regan Partners"), Athena Partners, L.P. ("Athena"), Basil P. Regan,
Lenore Robins and Lee R. Robins hold an aggregate of 2,335,200 shares. An
additional 116,700 shares are held by certain trusts and other investment
funds controlled by such group of persons, as to which beneficial ownership
is disclaimed. The address of Regan Partners and Basil P. Regan is 6 East
43rd Street, New York, New York 10017; the address of Athena, Lenore Robins
and Lee R. Robins is 32 East 57th Street, New York, New York 10022.
(3) As of March 31, 1997, the Company has been informed that Montgomery Asset
Management, L.P. ("Montgomery") holds an aggregate of 1,885,000 shares in
various investment funds for which Montgomery serves as investment advisor
and over which Montgomery has sole or shared voting and investment power.
The address of Montgomery is 3200 Cherry Creek Drive S., #370, Denver,
Colorado 80209.
(4) As of September 12, 1997, the Company has been informed that Gardner Lewis
Asset Management ("Gardner Lewis") holds an aggregate of 1,503,500 shares
in various investment funds for which Gardner Lewis serves as investment
advisor and over which Gardner Lewis has sole or shared voting and
investment power. The address of Gardner Lewis is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317.
57
<PAGE>
(5) This amount includes 1,233,999 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount also
includes 38,136 shares of Common Stock in the name of Sheridan C. Morris,
Mr. Morris' wife.
(6) This amount includes 508,440 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(7) This amount includes 673,607 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(8) This amount includes 465,333 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(9) This amount includes 220,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 19,606 shares of Common Stock held by Mr. Greer's wife as separate
property, as to which Mr. Greer disclaims any beneficial interest.
(10) This amount includes 70,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(11) This amount includes 20,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 12,000 shares held in trust for the benefit of certain family
members of Mr. Higgins, as to which Mr. Higgins disclaims any beneficial
interest.
(12) This amount includes 236,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(13) This amount includes 34,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
58
<PAGE>
DESCRIPTION OF NOTES
Except as otherwise indicated below, the following summary applies to both the
Old Notes and the New Notes. As used herein, the term "Notes" shall mean the
Old Notes and the New Notes, unless otherwise indicated.
The form and terms of the New Notes are substantially identical to the form
and terms of the Old Notes, except that (i) the exchange of the New Notes
pursuant to the Exchange Offer will be registered under the Securities Act, (ii)
the New Notes will not provide for payment of penalty interest as Liquidated
Damages, which terminate upon consummation of the Exchange Offer, and (iii) the
New Notes will not bear any legends restricting transfer thereof. The New Notes
will be issued solely in exchange for an equal principal amount of Old Notes.
As of the date hereof, $50.0 million aggregate principal amount of Old Notes is
outstanding. See "The Exchange Offer."
GENERAL
The Old Notes are, and the New Notes will be, issued pursuant to an Indenture
(the "Indenture") between the Company, all current Guarantors and Bank One,
N.A., as trustee (the "Trustee"). See "Notice to Investors." The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Note Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this summary, the term "Company" refers
only to AmeriCredit Corp. and not to any of its Subsidiaries.
The Old Notes are, and the New Notes will be general unsecured obligations of
the Company and will rank pari passu in right of payment with the Original Notes
and all other current and future unsecured senior Indebtedness of the Company.
However, the Old Notes are, and the New Notes will be effectively subordinated
to secured Indebtedness of the Company and its Subsidiaries, Indebtedness of
Securitization Trusts and certain obligations under Credit Enhancement
Agreements. The Company and certain of its Subsidiaries are parties to the
Credit Agreement and the Mortgage Subsidiary Credit Agreement and all borrowings
under these agreements are secured by first priority Liens on certain assets of
the Company and certain of its Subsidiaries. All financings under the Warehouse
Facility are secured by a first priority lien on the receivables and related
assets held by CP Funding Corp., a special purpose subsidiary which is treated
as a Securitization Trust under the Indenture. As of December 31, 1997,
approximately $105.4 million was outstanding under these agreements and an
additional $77.5 million was available for borrowing thereunder in accordance
with borrowing base requirements. The Indenture will permit additional
borrowings by the Company and its Subsidiaries under the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and other Credit Facilities in the future,
subject to certain restrictions, and unlimited additional borrowings under
Warehouse Facilities for the purpose of financing or refinancing the purchase or
origination of Receivables. In addition, the Special Purpose Finance
Subsidiaries also have outstanding Indebtedness secured by certain automobile
receivables. As of December 31, 1997, the Indebtedness of the Special Purpose
Finance Subsidiaries amounted to approximately $14.1 million. See "Description
of Other Debt." The Company's and its Subsidiaries' interests in Securitization
Trusts are also subordinated to the asset backed securities issued thereby. The
spread accounts (and the restricted cash therein) maintained by a Restricted
Subsidiary of the Company as well as the capital stock of such Restricted
Subsidiary (which also owns the excess servicing receivable recorded on the
Company's consolidated balance sheet) are also subject to Liens in favor of
Financial Security Assurance Inc. pursuant to Credit Enhancement Agreements. As
of December 31, 1997, the Company and its Subsidiaries had approximately $76.2
million of restricted cash in such spread accounts. See "Risk Factors--Holding
Company Structure; Effective Subordination."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. All of the
Company's current and future Restricted Subsidiaries, other than AFS Funding
Corp. and CP Funding Corp. and the Special Purpose Finance Subsidiaries, will
guarantee the Company's payment obligations under the Notes on a senior
unsecured basis. AFS Funding Corp., CP Funding Corp. and the Special Purpose
Finance Subsidiaries hold substantial assets. See "Risk Factors--Holding Company
Structure; Effective Subordination."
59
<PAGE>
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $50.0 million and will
mature on February 1, 2004. Interest on the Notes will accrue at the rate of 9
1/4% per annum and will be payable semi-annually in arrears on February 1 and
August 1, commencing on August 1, 1998, to Holders of record on the immediately
preceding January 15 and July 15. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
interest and Liquidated Damages on the Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders of the Notes at their
respective addresses set forth in the register of Holders of Notes; provided
that all payments of principal, premium, interest and Liquidated Damages with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed on a senior unsecured basis (the "Subsidiary Guarantees")
by the Guarantors. The Subsidiary Guarantees will rank pari passu with the
Original Guarantees. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, "Risk Factors--Fraudulent Conveyance Statutes."
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Company would be
permitted by virtue of the Company's pro forma Consolidated Leverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of its obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to February 1,
2001. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
60
<PAGE>
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................... 104.625%
2002.......................... 102.313%
2003 and thereafter........... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after January 30,
1997, the Company may on any one or more occasions redeem up to an aggregate of
$16.7 million in principal amount of Notes at a redemption price of 109.25% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
public offering of common stock of the Company; provided that at least $33.3
million in aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 45 days of the date of the closing of such public
offering.
Notwithstanding the preceding two paragraphs, the Company will not be
permitted to redeem any portion of the Original Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of Notes (rounded to the nearest integral multiple of $1,000) equal to
the product of (1) a fraction, the numerator of which is the aggregate principal
amount of Original Notes to be so redeemed and the denominator of which is the
aggregate principal amount of Original Notes outstanding immediately prior to
such proposed redemption, and (2) the aggregate principal amount of Notes
outstanding immediately prior to such proposed redemption. The Company will also
not be permitted to redeem any portion of the Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of Original Notes (rounded to the nearest integral multiple 1,000) equal
to the product of (1) a fraction, the numerator of which is the aggregate
principal amount of Notes outstanding immediately prior to such proposed
redemption, and (2) the aggregate principal amount of Original Notes outstanding
immediately prior to such proposed redemption.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful,
(1) accept for payment all Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company's other senior Indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the Holders of Notes of their right to require the Company to repurchase the
Notes could cause a default under such other senior Indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchases on the Company. Finally, the Company's ability to pay cash to the
Holders of Notes upon a repurchase may be limited by the Company's then existing
financial resources. See "Risk Factors--Potential Inability to Fund a Change of
Control Offer."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than in the ordinary course of business; (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors; or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the
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Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); provided, however, that this clause (v)
shall not apply to any such consolidation or merger if, immediately after the
consummation of such transaction and after giving effect thereto, the ratings
assigned to the Notes by Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group are equal to or higher than Baa3 (or the equivalent) and BBB- (or
the equivalent), respectively.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 85% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash; provided that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation Agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds (a) to permanently reduce Specified Senior
Indebtedness of the Company and its Restricted Subsidiaries including the
Original Notes; provided, however, that such Net Proceeds shall be applied to
all Specified Senior Indebtedness of the Company and its Restricted Subsidiaries
on a pro rata basis, or (b) to an Investment, the making of a capital
expenditure or the acquisition of Receivables or other tangible assets, in each
case, in or with respect to a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce Indebtedness under
Credit Facilities and/or Warehouse Facilities or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
be required to make an offer to all Holders of Original Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Original Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set
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forth in the Original Indenture. To the extent that the aggregate amount of
Original Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company will be required to make an offer to all Holders of Notes
("Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to a Secondary Asset Sale Offer
is less than the remaining Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Original Notes or Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Original Notes or Notes
to be purchased on a pro rata basis. Upon completion of such offer to purchase
Notes, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company or other Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after giving
pro forma effect thereto, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the first paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Company and its Subsidiaries after February 4,
1997 (excluding Restricted Payments permitted by clause (ii) of the next
succeeding paragraph), is less than the sum of (i) 25% of the aggregate
cumulative Consolidated Net Income of the Company for the period (taken as one
accounting period) from and after March 31, 1997 to the end of the Company's
most recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale since February 4, 1997 of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (iii) to the extent that
any Restricted Investment that was made after February 4, 1997 is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted
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Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; and (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription Agreement or stock option Agreement in effect as of the date of the
Indenture; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction.
The Board of Directors of the Company may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default;
provided that in no event shall the business currently operated by AmeriCredit
Financial Services, Inc. be transferred to or held by an Unrestricted
Subsidiary. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greater of (y) the net book value of such Investments at the time
of such designation or (z) the fair market value of such Investments at the time
of such designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than 15 days after the end of any fiscal quarter during which any Restricted
Payment is made, the Company shall deliver to the Trustee an Officers'
Certificate stating that all Restricted Payments made during such fiscal quarter
were permitted and setting forth the basis upon which the calculations required
by the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and the Guarantors may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock or preferred
stock if the Consolidated Leverage Ratio of the Company, calculated on a pro
forma basis after giving effect to the incurrence or issuance of the additional
Indebtedness to be incurred or the Disqualified Stock or preferred stock to be
issued, would have been less than 2.0 to 1.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the existence of Credit Facilities and the Guarantees thereof by the
Guarantors and the incurrence by the Company and/or any of the Guarantors of
revolving credit Indebtedness pursuant to one or more Credit Facilities the
proceeds of which are applied to purchase or originate Receivables; provided
that the aggregate principal amount of all revolving credit Indebtedness
outstanding under all Credit Facilities after giving effect to such incurrence,
including all Permitted Refinancing Indebtedness incurred to refund, refinance,
defease, renew or replace any Indebtedness incurred pursuant to this clause (i)
and with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted Subsidiaries
thereunder, does not at any time exceed the amount of the Borrowing Base (any
such outstanding Indebtedness that exceeds the amount of the Borrowing Base as
of the close of any Business Day shall cease to be Permitted Debt pursuant to
this clause (i) as of the close of business on the third Business Day thereafter
and shall be deemed to be an incurrence of such Indebtedness that is not
permitted by this clause (i) by the Company or such Guarantor, as applicable, as
of such third Business Day);
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(ii) the existence of Warehouse Facilities, regardless of amount, and the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Warehouse Debt in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries thereunder)
not to exceed 100% of the aggregate principal amount (exclusive of Acquisition
Fees included therein) of all Eligible Receivables owned by the Company and its
Restricted Subsidiaries (or such Warehouse Facilities in the case of Permitted
Warehouse Debt in the form of repurchase agreements) at such time;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Original Notes and the Notes and the incurrence by the Guarantors of the
Original Subsidiary Guarantees and the Subsidiary Guarantees;
(v) obligations of the Company and its Restricted Subsidiaries under Credit
Enhancement Agreements;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance, defease, renew or replace any Indebtedness (other
than Permitted Warehouse Debt or intercompany Indebtedness) that was permitted
by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Notes and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Guarantor and
(B) any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Guarantor shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (vii);
(viii) the issuance by a Restricted Subsidiary of preferred stock to the
Company or to any of the Guarantors; provided, however, that any subsequent
event or issuance or transfer of any Capital Stock that results in the owner of
such preferred stock ceasing to be a Guarantor of the Company or any subsequent
transfer of such preferred stock to a Person other than the Company or any of
the Guarantors, shall be deemed to be an issuance of preferred stock by such
Restricted Subsidiary that was not permitted by this clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred (y) for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding or (z) for the
purpose of hedging, fixing or capping interest rate risk in connection with any
completed or pending Securitization;
(x) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to this
clause (xii), not to exceed $5.0 million.
The Indenture will also provide that the Company will not, and will not permit
any Restricted Subsidiary of the Company to, incur any Indebtedness that is
contractually subordinated to any Indebtedness of the Company or any such
Restricted Subsidiary unless such Indebtedness is also contractually
subordinated to the Notes, or the Subsidiary Guarantee of such Restricted
Subsidiary (as applicable), on substantially identical terms; provided, however,
that no Indebtedness shall be deemed to be contractually subordinated to any
other Indebtedness solely by virtue of being unsecured.
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For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind (other than Permitted
Liens) upon any of their property or assets, now owned or hereafter acquired,
unless all payments due under the Indenture and the Notes are secured on an
equal and ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Indenture
and the Notes, (b) applicable law, (c) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (d) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (e) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (f) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, (g) the
requirements of any Securitization that are exclusively applicable to any
bankruptcy remote special purpose Restricted Subsidiary of the Company formed in
connection therewith, (h) the requirements of any Credit Enhancement Agreement,
or (i) in the case of clause (iii) above, restrictions contained in security
agreements securing Indebtedness of Guarantors relating to the properties or
assets of Guarantors subject to the Liens created thereby, provided that such
Liens were otherwise permitted to be incurred under the Indenture.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately before and
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly-Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the
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Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the end of the applicable fiscal
quarter, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Leverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, Agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that (x) any employment Agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (y) transactions between or among the Company and/or its Restricted
Subsidiaries and (z) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "--Restricted Payments," in each
case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly-Owned Restricted
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit any
Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Capital Stock of any Wholly-Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly-
Owned Restricted Subsidiary of the Company that is a Guarantor), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "--Asset Sales,"
and (ii) will not permit any Wholly-Owned Restricted Subsidiary of the Company
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly-Owned Restricted Subsidiary of the Company.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Subsidiary after the date of the Indenture, then such
newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and
deliver an opinion of counsel, in accordance with the terms of the Indenture;
provided, that the foregoing shall not apply to Subsidiaries that (i) have
properly been designated as Unrestricted Subsidiaries in accordance with the
Indenture for so long as they continue to constitute Unrestricted Subsidiaries
or (ii) qualify as Securitization Trusts for so long as they continue to
constitute Securitization Trusts.
Business Activities
The Indenture provides that the Company will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Subsidiaries taken
as a whole.
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Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or Agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separately from the financial condition and results of operations
of the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Company and the
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
Limitation on Investment Company Status
The Indenture provides that the Company and its Subsidiaries shall not take
any action, or otherwise permit to exist any circumstance, that would require
the Company to register as an "investment company" under the Investment Company
Act of 1940, as amended.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with its obligations in the
covenants or other agreements described above under the captions "--Repurchase
at the Option of Holders," "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," or "--Dividend and Other Payment Restrictions
Affecting Subsidiaries;" (iv) failure by the Company or any of its Subsidiaries
for 30 days after notice from the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding to comply with any of
the other covenants or agreements in the Indenture; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $2.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted by
the Indenture, any Subsidiary Guarantee shall be held in an judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full
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force and effect or any Guarantor, or any Person acting in behalf of any
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to February 1,
2001 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to February 1, 2001, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company, as
such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or the Registration Rights Agreement or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation
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and insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material Agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption "--
Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to AmeriCredit Corp.,
200 Bailey Drive, Fort Worth, Texas 76107, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of consummation of
the Exchange Offer (the "Closing Date") with, or on behalf of, The Depository
Trust Company (the "Depository") and registered in the name of Cede & Co., as
nominee of the Depository (such nominee being referred to herein as the "Global
Note Holder").
Notes that were issued as described below under "Certificated Securities,"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer to a qualified institutional buyer
of Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities may, unless the Global Note has
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previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depository's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only thorough the Depository's
Participants or the Depository's Indirect Participants.
The Company expects that pursuant to procedures established by the Depository
(i) upon deposit of the Global Note, the Depository will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Note and (ii) ownership of the Notes evidenced by the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect to the
interests of the Depository's Participants), the Depository's Participants and
the Depository's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain Persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depository or for maintaining, supervising or reviewing
any records of the Depository relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the Persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depository to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depository. Payments by the Depository's Participants and the Depository's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depository's Participants or the Depository's Indirect Participants.
Certificated Securities
Subject to certain conditions, any Person having a beneficial interest in the
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of, and
cause the same to be delivered to, such Person or Persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing that
the Depository is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each Person that the Global Note Holder and
the Depository identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the Global
Note Holder or the Depository in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or the Depository for all
purposes.
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Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
(same day) funds to the accounts specified by the Global Note Holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available (same day) funds to the accounts specified by
the Holders thereof or, if no such account is specified, by mailing a check to
each such Holder's registered address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Acquisition Fees" means, with respect to any Eligible Receivables as of any
date, the discount or cash payments received by the Company from dealers and
other Persons with respect to the Eligible Receivables purchased from such
dealer or other Person and owned by the Company or its Restricted Subsidiaries
as of such date.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by Agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of any
assets or rights (including, without limitation, by way of a sale and leaseback)
other than sales of Receivables in connection with Securitizations, Warehouse
Facilities or Credit Facilities in the ordinary course of business consistent
with past practices (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $500,000 or (b) for net proceeds in excess
of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the
Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a Restricted
Payment that is permitted by the covenant described above under the caption "--
Restricted Payments" will not be deemed to be Asset Sales.
"Board of Directors" means the Board of Directors or other governing body
charged with the ultimate management of any Person, or any duly authorized
committee thereof.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i) 80%
of the aggregate amount of Receivables (other than loans secured by residential
mortgages) owned by the Company and its Wholly-Owned Restricted Subsidiaries as
of such date that are not in default, excluding (A) any Receivables that were
acquired or originated with Permitted Warehouse Debt, (B) any Receivables that
are held by a Securitization Trust, and (C) any Receivables that are subject to
Liens other than Liens securing Obligations under Credit Facilities; (ii) 60% of
the book value (determined on a consolidated basis in accordance with GAAP) of
interests in portfolios of securitized Receivables that are owned by the
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Company and its Wholly-Owned Restricted Subsidiaries as of such date and that
are not subject to any Liens other than Liens to secure Obligations under Credit
Facilities; and (iii) 98% of the aggregate amount of Receivables that consist of
loans secured by residential mortgages owned by the Company and its Wholly-Owned
Restricted Subsidiaries as of such date that are not in default, excluding (A)
any such loans that were acquired or originated with Permitted Warehouse Debt,
(B) any such loans that are held by a Securitization Trust, and (C) any such
loans that are subject to Liens other than Liens securing Obligations under
Credit Facilities.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and Eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"Consolidated Indebtedness" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Leverage Ratio" means, with respect to any Person, as of any
date of determination, the ratio of (i) the Consolidated Indebtedness of such
Person as of such date, excluding, however, all (A) borrowings under Credit
Facilities that constitute Permitted Debt, (B) Permitted Warehouse Debt and (C)
Hedging Obligations that constitute Permitted Debt to (ii) the Consolidated Net
Worth of such Person as of such date.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP)
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any Agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date, the
sum of (i) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with respect to any
series of preferred stock (other than
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Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Credit Agreement" means the Second Restated Revolving Credit Agreement, dated
as of October 7, 1996, by and among the Company, certain of its Restricted
Subsidiaries and the several banks named therein, providing for up to $240
million of revolving credit borrowings, including all related notes, Guarantees,
security agreements, collateral documents, and other instruments and agreements
executed in connection therewith.
"Credit Enhancement Agreements" means, collectively, any documents,
instruments or agreements entered into by the Company, any of its Restricted
Subsidiaries or any of the Securitization Trusts exclusively for the purpose of
providing credit support for the Securitization Trusts or any of their
respective Indebtedness or asset-backed securities.
"Credit Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Credit Agreement) with banks or other institutional lenders
providing for revolving credit loans; provided that in no event will any such
facility that constitutes a Warehouse Facility be deemed to qualify as a Credit
Facility.
"Default" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means, at any time, all Receivables owned by the
Company or any of its Restricted Subsidiaries that meet the sale or loan
eligibility criteria set forth in the Warehouse Facility pursuant to which the
applicable Receivables were financed; excluding, however, any Receivables that
are pledged to secure, or were acquired or originated with, borrowings under a
Credit Facility and excluding any such Receivables held by a Securitization
Trust.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $39.5 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement, the Original Notes and the Original
Guarantees) in existence on February 4, 1997, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time and consistently applied.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) AmeriCredit Financial Services, Inc., a
Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation,
ACF Investment Corp., a Delaware corporation, Americredit Corporation of
California, f/k/a Rancho Vista Mortgage Corporation, a California corporation
and AmeriCredit Premium Finance,
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Inc., a Delaware corporation, and (ii) any other subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention Agreement, any lease in the nature
thereof, any option or other Agreement to sell or give a security interest in
and any filing of or Agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, Agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Original Guarantees" means each of the Guarantees of the Original Notes by
the Guarantors pursuant to the Original Indenture.
"Original Indenture" means the Indenture, dated as of February 4, 1997, among
the Company, Bank One, Columbus, NA, as trustee, and the Guarantors, with
respect to the Original Notes and the Original Guarantees.
"Original Notes" means the $125,000,000 in aggregate principal amount of the
Company's 9 1/4% Senior Notes due 2004, issued pursuant to the Original
Indenture on February 4, 1997.
"Permitted Business" means the business of purchasing, originating, brokering
and marketing, pooling and selling, securitizing and servicing Receivables, and
entering into agreements and engaging in transactions incidental to the
foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a
Guarantor that is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly-Owned
Restricted Subsidiary of the Company that is a Guarantor and that is engaged in
a Permitted Business; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales;" (e) any acquisition of assets
solely in exchange for the issuance of Equity Interests (other than Disqualified
Stock) of the Company; (f) Investments by the Company or any of its Subsidiaries
in Securitization Trusts in the ordinary course of business in connection with
or arising out of Securitizations; (g) purchases of all remaining outstanding
asset-backed securities of any Securitization Trust for the purpose of relieving
the Company or a Subsidiary of the Company of the administrative expense of
servicing such Securitization Trust, but only if 90% or more of the aggregate
principal amount of the original asset-backed securities of such Securitization
Trust have previously been retired; and (h) other Investments by the Company or
any of its Subsidiaries in any Person (other than an Affiliate of the Company
that is not also a Subsidiary of the Company) that do not exceed $5.0 million in
the aggregate at any one time outstanding (measured as of the date made and
without giving effect to subsequent changes in value).
"Permitted Liens" means (i) Liens existing on the date of the Indenture; (ii)
Liens on Eligible Receivables and the proceeds thereof to secure Permitted
Warehouse Debt or permitted Guarantees thereof; (iii) Liens to secure revolving
credit borrowings under Credit Facilities, provided that such borrowings were
permitted by the Indenture to be incurred; (iv) Liens on Receivables and the
proceeds thereof incurred in connection with Securitizations or permitted
Guarantees thereof; (v) Liens on spread accounts and excess servicing
receivable, Liens on the stock of Restricted Subsidiaries of the Company
substantially all of the assets of which are spread accounts and excess
servicing receivable and Liens on interests in Securitization Trusts, in each
case incurred in connection with Credit Enhancement Agreements; (vi) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (vii) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
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Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (viii) Liens securing Indebtedness
incurred to finance the construction or purchase of property of the Company or
any of its Wholly-Owned Restricted Subsidiaries (but excluding Capital Stock of
another Person); provided, however, that any such Lien may not extend to any
other property owned by the Company or any of its Restricted Subsidiaries at the
time the Lien is incurred, and the Indebtedness secured by the Lien may not be
incurred more than 180 days after the latter of the acquisition or completion of
construction of the property subject to the Lien; provided, further, that the
Amount of Indebtedness secured by such Liens do not exceed the fair market value
(as evidenced by a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate delivered to the Trustee) of the property purchased
or constructed with the proceeds of such Indebtedness; (ix) Liens to secure any
Permitted Refinancing Indebtedness incurred to refinance any Indebtedness
secured by any Lien referred to in the foregoing clauses (i) through (viii),
provided, however, that such new Lien shall be limited to all or part of the
same property that secured the original Lien and the Indebtedness secured by
such Lien at such time is not increased to any amount greater than the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (i) through (viii), as the case may be, at
the time the original Lien became a permitted Lien; (x) Liens in favor of the
Company; (xi) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that do
not exceed $1.0 million in the aggregate at any one time outstanding; (xii)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business (including, without limitation, landlord Liens on
leased properties); (xiii) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor; (xiv) Liens on assets of
Guarantors to secure Senior Guarantor Debt of such Guarantors that was permitted
by the Indenture to be incurred; and (xv) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
Permitted Warehouse Debt or intercompany Indebtedness); provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Warehouse Debt" means Indebtedness of the Company or a Restricted
Subsidiary of the Company outstanding under one or more Warehouse Facilities;
provided, however, that (i) the assets purchased with proceeds of such warehouse
debt are or, prior to any funding under the Warehouse Facility with respect to
such assets, were eligible to be recorded as held for sale on the consolidated
balance sheet of the Company in accordance with GAAP, (ii) such warehouse debt
will be deemed Permitted Warehouse Debt (a) in the case of a Purchase Facility,
only to the extent the holder of such warehouse debt has no contractual recourse
to the Company and/or its Restricted Subsidiaries to satisfy claims in respect
of such warehouse debt in excess of the realizable value of the Receivables
financed thereby, and (b) in the case of any other Warehouse Facility, only to
the lesser of (A) the amount advanced by the lender with respect to the
Receivables financed under such Warehouse Facility, and (B) the principal amount
of such Receivables and (iii) any such Indebtedness has not been outstanding in
excess of 364 days.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust, joint venture, or a governmental
agency or political subdivision thereof.
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"Purchase Facility" means any Warehouse facility in the form of a purchase and
sale facility pursuant to which the Company or any of its Subsidiaries sells
Receivables to a financial institution and retains the right of first refusal
upon the subsequent resale of such Receivables by such financial institution.
"Receivables" means (i) consumer installment sale contracts and loans
evidenced by promissory notes secured by new and used automobiles and light
trucks, (ii) other consumer installment sale contracts or lease contracts and
(iii) loans secured by residential mortgages, in the case of each of the clauses
(i), (ii) and (iii), that are purchased or originated in the ordinary course of
business by the Company or any Restricted Subsidiary of the Company; provided,
however, that for purposes of determining the amount of a Receivable at any
time, such amount shall be determined in accordance with GAAP, consistently
applied, as of the most recent practicable date.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Securitization" means a public or private transfer of Receivables in the
ordinary course of business and by which the Company or any of its Restricted
Subsidiaries directly or indirectly securitizes a pool of specified Receivables
including any such transaction involving the sale of specified Receivables to a
Securitization Trust.
"Securitization Trust" means any Person (whether or not a Subsidiary of the
Company) established exclusively for the purpose of issuing securities in
connection with any Securitization, the obligations of which are without
recourse to the Company or any of the Guarantors (including, without limitation,
any special purpose Subsidiary of the Company formed exclusively for the purpose
of satisfying the requirements of Credit Enhancement Agreements and regardless
of whether such Subsidiary is an issuer of securities), provided that such
Person is not an obligor with respect to any Indebtedness of the Company or any
Guarantor other than under Credit Enhancement Agreements. As of the date of the
Indenture, AFS Funding Corp. and CP Funding Corp. shall be deemed to satisfy the
requirements of the foregoing definition.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Special Purpose Finance Subsidiaries" means AmeriCredit Receivables Finance
Corp. and AmeriCredit Receivables Finance Corp. 1995-A.
"Specified Senior Indebtedness" means (i) the Indebtedness of any Person,
whether outstanding on the date of the Indenture or thereafter incurred and (ii)
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to such Person to
the extent post filing interest is allowed in such proceeding) in respect of (A)
Indebtedness of such Person for money borrowed and (B) Indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable unless, in the case of either clause (i) or
(ii), in the instrument creating or evidencing the same pursuant to which the
same is outstanding, it is provided that such obligations are subordinate in
right of payment to the Notes; provided, however, that Specified Senior
Indebtedness shall not include (1) any obligation of such Person to any
Subsidiary of such Person, (2) any liability for Federal, state, local or other
taxes owed or owing by such Person, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
obligations in respect of Capital Stock of such Person or (5) that portion of
any Indebtedness which at the time of incurrence is incurred in violation of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly
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or indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any Agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such Agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments." If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Consolidated Leverage
Ratio test set forth in the first paragraph of the covenant described under the
caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the end of the applicable fiscal quarter, and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser to the extent (and only to the extent)
funding thereunder is used exclusively to finance or refinance the purchase or
origination of Receivables by the Company or a Restricted Subsidiary of the
Company for the purpose of (i) pooling such Receivables prior to Securitization
or (ii) sale, in each case in the ordinary course of business, including
Purchase Facilities.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Jenkens & Gilchrist, a Professional Corporation, the
following are the material U.S. federal income tax consequences of exchanging
Old Notes for New Notes pursuant to the Exchange Offer. The following opinion
is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed regulations thereunder, Internal Revenue Service ("IRS") rulings
and pronouncements, reports of congressional committees, judicial decisions and
current administrative rulings and practice, all as in effect on the date
hereof, all of which are subject to change at any time, and any such change may
be applied retroactively in a manner that could adversely affect the tax
consequences described below.
This opinion applies only to Notes held as "capital assets" within the meaning
of section 1221 of the Code (generally property held for investment and not for
sale to customers in the ordinary course of a trade or business) by holders who
or which are (i) citizens or residents of the United States, (ii) domestic
corporations, partnerships or other entities or (iii) otherwise subject to U.S.
federal income taxation on a net income basis in respect of income and gain from
the Notes. This opinion does not address aspects of U.S. federal income taxation
that may be applicable to holders that are subject to special tax rules, such as
certain financial institutions, tax-exempt organizations, insurance companies,
dealers in securities, foreign corporations and nonresident alien individuals.
Moreover, this summary does not address any of the U.S. federal income tax
consequences of holders that do not acquire New Notes pursuant to the Exchange
Offer, nor does it address the applicability or effect of any state, local or
foreign tax laws.
The Company has not sought and will not seek any rulings from the IRS with
respect to the position of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of exchanging Old Notes for New Notes.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for U.S. federal income tax purposes because the
New Notes will not be considered to differ materially in kind or extent from the
Old Notes. New Notes received by a holder of Old Notes will be treated as a
continuation of the Old Notes in the hands of such holder. Accordingly, there
will not be any U.S. federal income tax consequences to holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer. A holder's holding period
of New Notes will include the holding period of the Old Notes exchanged
therefor.
POTENTIAL CONTINGENT PAYMENTS
Holders of New Notes should be aware that it is possible that the IRS could
assert that the Liquidated Damages which the Company would have been obligated
to pay if the Exchange Offer registration statement had not been filed or is not
declared effective within the time periods set forth herein (or certain other
actions are not taken) (as described above under "Termination of Certain
Rights") are "contingent payments" for U.S. federal income tax purposes. If so
treated, the New Notes would be treated as contingent payment debt instruments
and a holder of a New Note would be required to accrue interest income over the
term of such New Note under the "noncontingent bond method" set forth in the
U.S. Treasury Regulations issued by the IRS (the "Contingent Debt Regulations").
Under the Contingent Debt Regulations, any gain recognized by a holder on the
sale, exchange or retirement of a New Note could be treated as interest income.
However, the Contingent Debt Regulations provide that, for purposes of
determining whether a debt instrument is a contingent payment debt instrument,
remote or incidental contingencies are ignored.
On the date of issue, the Company believed and has represented that to the
best knowledge of the Company, prior to and on the date the New Notes are
issued, the possibility of the payment of Liquidated Damages on the Old Notes is
remote. Assuming this representation, counsel is of the opinion that the Old
Notes will not be treated as contingent payment debt instruments. Accordingly,
based on this representation, the Old Notes should not be treated as contingent
payment debt instruments.
82
<PAGE>
EACH HOLDER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
83
<PAGE>
DESCRIPTION OF OTHER DEBT
THE CREDIT AGREEMENT
AmeriCredit, AmeriCredit Financial Services, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, and AmeriCredit Operating Co., Inc., a
Delaware corporation and wholly-owned subsidiary of the Company are the
borrowers under the Credit Agreement, pursuant to which the borrowers may borrow
up to $310 million on a revolving basis for the acquisition of automobile
finance contracts, working capital and general corporate purposes, subject to a
borrowing base limitation based on a percentage of the aggregate eligible
finance receivables owned by AmeriCredit and certain of its subsidiaries.
Borrowings under the Credit Agreement are guaranteed by certain subsidiaries of
AmeriCredit and are secured by certain of the assets of the borrowers and the
Company's principal operating subsidiaries and the pledge by AmeriCredit of all
of its equity interests in and loans to its subsidiaries, except for the Special
Purpose Finance Subsidiaries and certain other subsidiaries. The Credit
Agreement matures in October 1998. As of December 31, 1997, outstanding
borrowings under the Credit Agreement aggregated $2.1 million and approximately
$77.5 million was available for borrowing under the Credit Agreement pursuant to
the terms of such Agreement in accordance with borrowing base requirements.
Amounts outstanding under the Credit Agreement bear interest, at the Company's
option, at either: (i) the higher of (a) the Wells Fargo Bank, N.A. prime rate
or (b) the federal funds rate plus 0.50% per annum or (ii) reserve adjusted
LIBOR plus 1.25% to 1.55% per annum based on the rating of the Credit Agreement
given by one of various rating agencies. The borrowers are also required to pay
an annual commitment fee equal to 0.25% per annum of the unused portion of the
Credit Agreement.
The Credit Agreement contains covenants and provisions that will restrict,
among other things, any of the borrowers' ability to: (i) merge or consolidate
with another entity; (ii) incur liens on its property other than Permitted Liens
(as defined in the Credit Agreement); (iii) engage in certain asset sales or
other dispositions; (iv) engage in material acquisitions and other investments;
(v) pay dividends, repurchase stock or make other restricted payments; (vi)
engage in certain transactions with affiliates; (vii) make certain changes in
its line of business and (viii) enter into any negative pledges. The Credit
Agreement also requires the satisfaction of certain financial performance
criteria, including: (i) that the ratio of recourse indebtedness to tangible net
worth not exceed 2.5 to 1.0; (ii) that the sum of EBIT (as defined in the Credit
Agreement) and the amortization of excess servicing receivable less the gain on
sale of receivables divided by interest expense on a trailing 12-month basis not
be less than 2.2 to 1.0; (iii) that AmeriCredit not incur a net loss on a
consolidated basis during any calendar quarter; (iv) that the ratio of Net
Credit Losses (as defined in the Credit Agreement) for any 12-month period to
the sum of month end balances of Net Indirect Loans (as defined in the Credit
Agreement) over the prior 13 months divided by 13 be less than 0.10 to 1.0; and
(v) that the ratio of Delinquent and Repossessed Loans (as defined in the Credit
Agreement) to Net Indirect Loans be less than 0.075 to 1.0. Additional
borrowings under the Credit Agreement are subject to the absence of a default
under such covenants.
Events of default under the Credit Agreement include, among other things: (i)
any failure of the borrowers to pay principal, interest or fees thereunder when
due; (ii) payment default or other default under other Indebtedness; (iii)
noncompliance with or breach of certain covenants contained in the Credit
Agreement and certain related documents; (iv) material inaccuracy of any
representation or warranty when made by borrowers in the Credit Agreement and
certain related documents; (v) certain events of bankruptcy or insolvency; and
(vi) imposition of judgment or ERISA liens.
THE WAREHOUSE FACILITY
In October 1997 the Company established a $245 million warehouse facility (the
"Warehouse Facility") which expires in October 1998. Under the Warehouse
Facility, AmeriCredit Financial Services, Inc., a subsidiary of the Company
sells auto receivables to CP Funding Corp., a special purpose subsidiary which
is treated as a Securitization Trust under the Indenture. AmeriCredit Financial
Services, Inc., in turn agrees to manage, service, administer and make
collections on such auto receivables. CP Funding Corp. finances the purchase of
the auto receivables with borrowings under the Warehouse Facility.
The amount of financing available under the Warehouse Facility is governed by
an advance formula equal to 88% of the principal amount of the receivables
financed thereby subject to downward adjustment upon certain defined financial
84
<PAGE>
performance ("Trigger Events"). Aggregate borrowings of $96.0 million were
outstanding as of December 31, 1997. All financings under the Warehouse Facility
are secured by a first priority lien on the receivables and related assets held
by CP Funding Corp. and bear interest at rates based on the funding source plus
specified fees. While CP Funding Corp. is a consolidated subsidiary of the
Company, CP Funding Corp. is a separate legal entity and the auto receivables
sold to CP Funding Corp. and the other assets of CP Funding Corp. are legally
owned by CP Funding Corp. and are not available to satisfy the claims of
creditors of AmeriCredit or its other subsidiaries.
THE MORTGAGE SUBSIDIARY CREDIT AGREEMENT
The Company's subsidiary, AMS, has a credit Agreement (the "Mortgage
Subsidiary Credit Agreement") with a bank, which provides AMS with revolving
credit borrowings of up to $75.0 million, subject to specified borrowing base
requirements, to fund AMS's origination and acquisition of sub-prime residential
mortgage loans until those loans are sold in the secondary market. Borrowings by
AMS under this facility are collateralized by a first lien security interest on
the mortgage loans and related assets originated or acquired by AMS, and are
guaranteed by the Company and certain of the Company's Subsidiaries. Aggregate
borrowings of $7.3 million were outstanding as of December 31, 1997. Borrowings
under the facility bear interest, at AMS's option, at either: (i) a base rate
established by the lender, or (ii) LIBOR plus 1.00%, and require AMS to pay an
annual commitment fee of 1/8% of the unused portion of the facility. The
facility expires in February 1999.
The Mortgage Subsidiary Credit Agreement contains covenants and provisions
typical of a revolving credit facility, including restrictions on AMS's ability
to: (i) incur additional indebtedness, including guarantees, (ii) incur liens on
its properties, (iii) make loans and advances to and investments in entities
other than affiliates, (iv) pay dividends and other distributions to entities
other than affiliates, (v) merge or consolidate, (vi) liquidate or otherwise
dispose of its assets, (vii) engage in transactions with affiliates, or (viii)
engage in any new business. The Mortgage Subsidiary Credit Agreement also
contains covenants which require AMS to satisfy certain financial criteria.
ASSET-BACKED SECURITIES
At the date of this Prospectus, the Special Purpose Finance Subsidiaries of
the Company have one issue of automobile receivables-backed notes outstanding,
the Series 1995-A notes. The Series 1995-A notes were issued in June 1995 and
initially aggregated $99,170,000. The Series 1995-A notes were issued by a
wholly-owned Special Purpose Finance Subsidiary which holds the related finance
receivables. Principal and interest on the Series 1995-A notes are payable
monthly from cash collections on the pool of finance receivables which are
collateral for the notes.
As of December 31, 1997, $14.1 million was outstanding on the Series 1995-A
notes.
FINANCIAL GUARANTEE INSURANCE POLICIES
The Company has procured financial guarantee insurance policies from FSA for
the benefit of the holders of the asset-backed securities issued in Company-
sponsored securitizations in order to reduce the cost of such securitizations by
enhancing their credit ratings. The Company has agreed to reimburse FSA, on a
limited recourse basis, for amounts paid by FSA under such financial guarantee
insurance policies. In order to secure such reimbursement obligations, the
Company has granted to FSA a lien on the capital stock of, and certain assets
of, AFS Funding Corp., most notably the spread accounts and the restricted cash
required to be deposited therein and on the capital stock of the Special Purpose
Finance Subsidiaries. The Company's obligations to FSA with respect to each
individual securitization are cross-collateralized to all of the collateral
pledged to FSA. As a result, the restricted cash in the spread accounts from all
of the Company-sponsored securitizations, as well as the capital stock of AFS
Funding Corp. (which owns all of the spread accounts and all of the excess
servicing receivable associated with all such securitizations) is available to
reimburse FSA in connection with any individual Company-sponsored
securitizations.
In addition, AFS Funding Corp. is a limited purpose corporation established by
the Company to facilitate Company-sponsored securitizations and the credit
enhancement thereof and its ability to pay dividends is effectively restricted
to a substantial degree by the terms of the Company-sponsored securitizations
and the FSA financial guarantee arrangements.
85
<PAGE>
Specifically, AFS Funding Corp. has agreed to be last in the order of payment
priority with respect to cash distributions from Company-sponsored
securitizations and is not entitled to receive any cash from Company-sponsored
securitizations or access restricted cash in the spread accounts until the
asset-backed security holders, FSA and others have received all amounts due to
them and the spread accounts have the requisite amounts of restricted cash
deposited therein. FSA will have claims that are prior to the claims of the
holders of the Notes with respect to the assets securing its reimbursement
rights and the Notes will be effectively subordinated to all such reimbursement
rights. As of December 31, 1997, restricted cash was approximately $76.2 million
(all of which was held in spread accounts owned by AFS Funding Corp.) and AFS
Funding Corp.'s other principal asset, excess servicing receivable, was $179.8
million. See "Risk Factors--Holding Company Structure; Effective Subordination."
ORIGINAL NOTES
On February 4, 1997, the Company issued $125 million in aggregate principal
amount of Original Notes pursuant to the Original Indenture, among the Company,
the Guarantors and Bank One, N.A., as trustee. The Original Notes are
guaranteed on a senior unsecured basis by each of the Guarantors. The terms of
the Notes and Guarantees offered hereby will be substantially similar to the
terms of the Original Notes and Original Guarantees except that the Company must
offer to repurchase Original Notes with Excess Proceeds (as defined in the
Indenture) resulting from an "Asset Sale" (as defined in the Indenture) prior to
making any such offer with respect to the Notes. In addition, holders of Notes
and holders of Original Notes shall constitute separate classes with respect to
acting under an Event of Default (as defined in the Indenture) and with respect
to amendments, supplements and waivers.
CAPITALIZED EQUIPMENT LEASES
The Company has, from time to time, financed the acquisition of data
processing and telecommunications equipment with capitalized equipment leases.
As of December 31, 1997, such leases totaled $4.5 million.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _________, 1998, all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sales of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in
86
<PAGE>
the Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the holders of
the Notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
Smith Barney Inc. acted as one of the Initial Purchasers of the Original Notes
issued in February 1997.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Company
and the Guarantors by Jenkens & Gilchrist, a Professional Corporation, Dallas,
Texas, who will rely on the opinion of Latham & Watkins as to matters of New
York law. Certain legal matters in connection with the Prior Offering will be
passed upon for the Initial Purchasers by Latham & Watkins, New York, New York.
EXPERTS
The consolidated balance sheets as of June 30, 1996 and 1997 and the
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended June 30, 1997, included in this
Registration Statement, have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
87
<PAGE>
AMERICREDIT CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants .................................................................. F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 ........................................... F-3
Consolidated Statements of Income for the years ended June 30, 1995, 1996 and 1997 ................. F-4
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1996 and 1997 ... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1996 and 1997 ............. F-6
Notes to Consolidated Financial Statements ......................................................... F-7
Report of Independent Accountants on Supplementary Information....................................... F-21
Consolidating Balance Sheets as of June 30, 1996 and 1997............................................ F-23
Consolidating Income Statements for the years ended June 30, 1995, 1996 and 1997..................... F-25
Consolidating Statements of Cash Flow for the years ended June 30, 1995, 1996 and 1997............... F-28
Consolidated Balance Sheets as of June 30, 1997 and December 31, 1997 (unaudited) .................. F-31
Consolidated Statements of Income for the six months ended December 31, 1996 and 1997 (unaudited) .. F-32
Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1997
(unaudited) ..................................................................................... F-33
Notes to Consolidated Financial Statements (unaudited) ............................................. F-34
Consolidating Balance Sheet as of December 31, 1997 (unaudited) ..................................... F-38
Consolidating Income Statements for the six months ended December 31, 1996 and 1997 (unaudited) ..... F-39
Consolidating Statements of Cash Flows for the six months ended December 31, 1996 and 1997
(unaudited) ......................................................................................... F-41
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
AmeriCredit Corp.
We have audited the accompanying consolidated balance sheets of AmeriCredit
Corp. as of June 30, 1997 and 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AmeriCredit Corp.
as of June 30, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30, 1997, in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, in 1997,
AmeriCredit Corp. changed its method of accounting for transfers and servicing
of financial assets and extinguishment of liabilities.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
August 6, 1997
F-2
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................ $ 2,145 $ 6,027
Investment securities................................................................ 6,558 6,500
Finance receivables, net............................................................. 250,484 266,657
Excess servicing receivable.......................................................... 33,093 114,376
Restricted cash...................................................................... 15,304 67,895
Property and equipment, net.......................................................... 7,670 13,884
Goodwill............................................................................. 7,260
Deferred income taxes................................................................ 9,995
Other assets......................................................................... 4,910 10,854
-------- --------
Total assets.............................................................. $330,159 $493,453
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit ......................................................... $ 86,000 $ 71,700
Mortgage warehouse facility................................................... 345
Automobile receivables-backed notes ......................................... 67,847 23,689
9 1/4% Senior Notes........................................................... 125,000
Notes payable ............................................................... 418 3,517
Accrued taxes and expenses .................................................. 12,669 39,362
Deferred income taxes ....................................................... 13,304
-------- --------
Total liabilities ....................................................... 166,934 276,917
-------- --------
Commitment and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none
issued......................................................................
Common stock, $.01 par value per share, 120,000,000 shares authorized;
32,640,963 and 33,255,173 shares issued ................................... 326 333
Additional paid-in capital .................................................. 190,005 203,544
Unrealized gain or excess servicing receivables, net of income taxes ........ 2,954
Retained earnings (deficit) ................................................. (5,233) 33,466
-------- --------
185,098 240,297
Treasury stock, at cost (4,120,483 and 3,959,071 shares) ......................... (21,873) (23,761)
-------- --------
Total shareholders' equity ................................................... 163,225 216,536
-------- --------
Total liabilities and shareholders' equity .............................. $330,159 $493,453
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
REVENUE JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Finance charge income.......................... $ 30,249 $ 51,706 $ 44,910
Gain on sale of receivables.................... 22,873 67,256
Servicing fee income........................... 3,712 21,024
Investment income.............................. 1,284 1,075 2,909
Other income................................... 1,551 1,612 1,648
----------- ----------- -----------
33,084 80,978 137,747
----------- ----------- -----------
COSTS AND EXPENSES
Operating expenses............................. 14,773 25,681 51,915
Provision for losses........................... 4,278 7,912 6,595
Interest expense............................... 4,015 13,129 16,312
----------- ----------- -----------
23,066 46,722 74,822
----------- ----------- -----------
Income before income taxes..................... 10,018 34,256 62,925
Income tax provision (benefit)................. (18,875) 12,665 24,226
----------- ----------- -----------
Net income..................................... $ 28,893 $ 21,591 $ 38,699
=========== =========== ===========
Earnings per share............................. $0.95 $0.71 $1.26
=========== =========== ===========
Weighted average shares and share equivalents.. 30,380,749 30,203,298 30,782,471
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED RETAINED
COMMON STOCK PAID-IN CAPITAL GAIN EARNINGS TREASURY STOCK
------------------ --------------- ----------- --------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994 31,757,333 $318 183,588 $(55,717) 3,008,360 $ (8,688)
Common stock issued on exercise of
options.............................. 359,868 3 1,302
Income tax benefit from exercise of
options.............................. 683
Purchase of treasury stock.............. 433,200 (3,412)
Common stock issued for employee
benefit plans........................ (41,521) 256
Net income.............................. 28,893
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1995................ 32,117,201 321 185,573 (26,824) 3,400,039 (11,844)
Common stock issued on exercise of
options.............................. 523,762 5 3,045
Income tax benefit from exercise of
options.............................. 1,387
Purchase of treasury stock.............. 829,000 (10,710)
Common stock issued for employee
benefit plans........................ (108,556) 681
Net income.............................. 21,591
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1996................ 32,640,963 326 190,005 (5,233) 4,120,483 (21,873)
Common stock issued on exercise of
options.............................. 614,210 7 5,646
Common stock issued for acquisition..... 4,700 (400,000) 2,400
Income tax benefit from exercise of
options.............................. 2,652
Purchase of treasury stock.............. 315,200 (4,387)
Unrealized gain on excess of servicing
receivable, net of income taxes
of $1,848............................ $ 2,954
Common stock issued for employee........ 541 (76,612) 99
benefit plans
Net income.............................. 38,699
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1997................ 33,255,173 $333 $203,544 $ 2,954 $ 33,466 3,959,071 $(23,761)
========== ==== ======== ========= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 28,893 $ 21,591 $ 38,699
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,317 1,528 2,203
Provision for losses...................................... 4,278 7,912 6,595
Deferred income taxes..................................... (18,954) 11,681 24,428
Gain on sale of auto receivables.......................... (22,873) (64,338)
Amortization of excess servicing receivable............... 6,636 34,393
Changes in assets and liabilities:
Other assets.......................................... (1,834) (984) (2,341)
Accrued taxes and expenses............................ 937 9,406 26,493
--------- --------- ---------
Net cash provided by operating activities................. 14,637 34,897 66,132
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................................. (225,350) (417,235) (896,711)
Originations of mortgage receivables.......................... (53,770)
Principal collections and recoveries on receivables........... 71,334 94,948 64,389
Net proceeds from sale of auto receivables.................... 268,923 767,571
Net proceeds from sale of mortgage receivables................ 52,489
Purchases of property and equipment........................... (1,730) (3,162) (4,511)
Proceeds from sales and maturities of investment securities... 16,241 3,707 58
Increase in restricted cash................................... (5,007) (10,297) (52,591)
--------- --------- ---------
Net cash used by investing activities..................... (144,512) (63,116) (123,076)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............................. 83,900 342,600 745,500
Payments on bank line of credit............................... (83,900) (256,600) (759,800)
Net increase in mortgage warehouse facility................... (2,964)
Proceeds from issuance of 9 1/4% Senior Notes................. 120,894
Proceeds from issuance of automobile receivables-backed notes. 150,170
Payments on automobile receivables-backed notes............... (15,650) (66,673) (44,158)
Payments on notes payable..................................... (236) (298) (552)
Proceeds from issuance of common stock........................ 1,561 3,731 6,293
Purchase of treasury stock.................................... (3,412) (10,710) (4,387)
--------- --------- ---------
Net cash provided by financing activities................. 132,433 12,050 60,826
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........... 2,558 (16,169) 3,882
Cash and cash equivalents at beginning of year................. 15,756 18,314 2,145
--------- --------- ---------
Cash and cash equivalents at end of year....................... $ 18,314 $ 2,145 $ 6,027
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Operations
AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since
September 1992, has been in the business of purchasing, securitizing and
servicing automobile sales finance contracts. The Company operated 85 auto
lending branch offices in 30 states as of June 30, 1997. The Company also
acquired a subsidiary in November 1996 which originates and sells home equity
loans.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities and the disclosures
of contingent assets and liabilities as of the date of the financial statements
and the amount of revenue and costs and expenses during the reporting periods.
Actual results could differ from those estimates. These estimates include, among
other things, anticipated prepayments and credit losses on finance receivables
sold in securitization transactions and the determination of the allowance for
losses on finance receivables.
Cash Equivalents
Investments in highly liquid securities with original maturities of 90 days or
less are included in cash and cash equivalents.
Investment Securities
Investment securities are classified as held-to-maturity and are carried at
amortized cost.
Finance Receivables
Finance charge income related to finance receivables is recognized using the
interest method. Accrual of finance charge income is suspended on finance
contracts which are more than 60 days delinquent. Fees and commissions received
and direct costs of originating loans are deferred and amortized over the term
of the related finance contracts also using the interest method.
Provisions for losses are charged to operations in amounts sufficient to
maintain the allowance for losses at a level considered adequate to cover
estimated losses in the finance receivables portfolio owned by the Company.
Automobile finance sales contracts are typically purchased by the Company for a
non-refundable acquisition fee on a non-recourse basis, and such acquisition
fees are also added to the allowance for losses. The Company reviews historical
origination and charge-off relationships, charge-off experience factors,
collection data, delinquency reports, estimates of the value of the underlying
collateral, economic conditions and trends and other information in order to
make the necessary judgments as to the appropriateness of the provision for
losses and the allowance for losses. Finance contracts are charged-off to the
allowance for losses when the Company repossesses and disposes of the collateral
or the account is otherwise deemed uncollectible.
F-7
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Excess Servicing Receivable
The Company periodically sells finance receivables to certain special purpose
financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed
securities to investors. The Company retains an interest in the finance
receivables sold in the form of a residual or interest-only strip and may also
retain other subordinated interests in the Trusts. The residual or interest-
only strips represent the present value of future excess cash flows resulting
from the difference between the finance charge income received from the obligors
on the finance receivables and the interest paid to the investors in the asset-
backed securities, net of credit losses, servicing fees and other expenses.
Upon the transfer of finance receivables to the Trusts, the Company removes
the net book value of the finance receivables sold from its consolidated balance
sheets and allocates such carrying value between the assets transferred and the
interests retained, based upon their relative fair values at the settlement
date. The difference between the sales proceeds, net of transaction costs, and
the allocated basis of the assets transferred is recognized as a gain on sale of
receivables.
The allocated basis of the interests retained, including the residual or
interest-only strip is recognized as excess servicing receivable in the
Company's consolidated balance sheets. Since such asset can be contractually
prepaid or otherwise settled in such a way that the holder would not recover all
of its recorded investment, excess servicing receivable is classified as
available for-sale and is measured at fair value. Unrealized holding gains or
temporary holding losses are reported net of income tax effects as a separate
component of shareholders' equity until realized. If a decline in fair value
were deemed other than temporary, excess servicing receivable would be written
down through a charge to operations.
The fair value of excess servicing receivable is estimated by calculating the
present value of the future excess cash flows related to such interests using a
discount rate commensurate with the risks involved. Such calculations include
estimates of future credit losses and prepayment rates for the remaining term of
the finance receivables transferred to the Trusts since these factors impact the
amount and timing of future excess cash flows. If future credit losses and
prepayment rates exceed the Company's original estimates, excess servicing
receivable would be written down through a charge to operations. Favorable
credit loss and prepayment experience compared to the Company's original
estimates would result in additional earnings when realized.
Restricted Cash
A financial guaranty insurance company (the "Insurer") has provided a
financial guaranty insurance policy for the benefit of the investors in each
series of asset-backed securities issued by the Trusts or special purpose
financing subsidiaries of the Company. In connection with the issuance of the
policies, the Company was required to establish a separate cash account with a
trustee for the benefit of the Insurer for each series of securities and related
finance receivables pools. Monthly collections and recoveries from the pools of
finance receivables in excess of required principal and interest payments on the
securities and servicing fees and other expenses are either added to the
restricted cash accounts or used to repay the outstanding securities on an
accelerated basis, thus creating additional credit enhancement for the Insurer.
When the credit enhancement levels reach specified percentages of the pools of
finance receivables, excess cash flows are distributed to the Company. In the
event that monthly collections and recoveries from any pool of finance
receivables are insufficient to make required principal and interest payments to
the investors and pay servicing fees and other expenses, any shortfall would be
drawn from the restricted cash accounts.
Certain agreements with the Insurer provide that if delinquency, default and
net loss ratios in the pools of finance receivables supporting the asset-backed
securities exceed certain amounts, the specified levels of credit enhancement
would be increased and, in certain cases, the Company would be removed as
servicer of the finance receivables.
F-8
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Property and Equipment
Property and equipment are carried at cost. Depreciation is generally
provided on a straight-line basis over the estimated useful lives of the assets.
The cost of assets sold or retired and the related accumulated depreciation
are removed from the accounts at the time of disposition, and any resulting gain
or loss is included in operations. Maintenance, repairs, and minor replacements
are charged to operations as incurred; major replacements and betterments are
capitalized.
Off Balance Sheet Financial Instruments
The Company periodically enters into hedging arrangements to manage the
gross interest rate spread on its securitization transactions. The Company's
hedging strategies include the use of Forward U.S. Treasury Rate Lock and
Interest Rate Swap Agreements. The face amount and terms of the Forward U.S.
Treasury Rate Lock Agreements generally correspond to the principal amount and
average maturities of finance receivables expected to be sold to the Trusts and
the related securities to be issued by the Trusts. Gains or losses on these
agreements are deferred and recognized as a component of the gain on sale of
receivables at the time that finance receivables are transferred to the Trusts.
The Interest Rate Swap Agreements are used to convert the interest rates on
floating rate securities issued by the Trusts in securitization transactions to
a fixed rate. The notional amount of these agreements approximates the
outstanding balance of the floating rate securities. The estimated differential
payments required under these agreements are recognized as a component of the
gain on sale of receivables at the time that finance receivables are transferred
to the Trusts.
Income Taxes
Deferred income taxes are provided in accordance with the asset and
liability method of accounting for income taxes to recognize the tax effects of
temporary differences between financial statement and income tax accounting.
Earnings Per Share
Earnings per share is based upon the weighted average number of shares
outstanding during each year, adjusted for any dilutive effect of options using
the treasury stock method.
Recent Accounting Developments
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125
establishes accounting and reporting standards for transfers of financial assets
and applies to the Company's periodic sales of finance receivables to the
Trusts. Adoption of SFAS 125, which was applied prospectively to transactions
occurring subsequent to December 1996, resulted in increases of $4,802,000 in
excess servicing receivable, $1,848,000 in deferred income taxes and $2,954,000
in shareholders' equity as of June 30, 1997.
Effective July 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 establishes financial accounting and reporting standards for
stock-based compensation plans such as stock purchase plans and stock options.
The new standard allows companies either to continue to account for stock based
employee compensation plans under existing accounting standards or adopt a fair
value-based method of accounting for stock-based awards as compensation expense
over the service period, which is usually the vesting period. SFAS 123 requires
that if a company continues to account for stock options under existing
accounting standards, pro forma net income and earnings per share information
must be provided as if the new fair value approach had been adopted. The Company
has elected to continue to account for stock-based employee compensation under
existing accounting standards. Accordingly, no compensation expense has been
recognized for options granted under stock based employee compensation plans.
Had compensation expense for the Company's plans been determined
F-9
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
using the fair value-based method under SFAS 123, pro forma net income would
have been $15,224,000 and $33,217,000, and pro forma earnings per share would
have been $0.50 and $1.08, for the years ended June 30, 1996 and 1997,
respectively.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 establishes standards for computing and presenting earnings per
share, replacing existing accounting standards. The new standard requires dual
presentation of basic and diluted earnings per share and a reconciliation
between the two amounts. Basic earnings per share excludes dilution and diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997. The Company's basic earnings per share
computed pursuant to the new standard would have been $1.01, $0.76 and $1.34 for
the years ended June 30, 1995, 1996 and 1997, respectively. Diluted earnings
per share computed pursuant to the new standard would not be materially
different from earnings per share presented in the consolidated statements of
income.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting comprehensive income and its components in a full set of
financial statements. The new standard requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income, including an amount representing total comprehensive
income, be reported in a financial statement that is displayed with the same
prominence as other financial statements. Pursuant to SFAS 130, the Company will
be required to display total comprehensive income, including net income and
changes in the unrealized gain on excess servicing receivable, in its
consolidated financial statements for the year ended June 30, 1999 and
thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way companies report
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
financial reports. The new pronouncement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The statement is effective for financial statements for periods beginning after
December 15, 1997. The disclosures required by SFAS 131 would generally not be
applicable since the Company currently operates in only one reportable segment.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of
June 30, 1996, by issuer type, are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Government obligations........ $5,000 $ $304 $4,696
Mortgage-backed securities......... 1,558 ------ 1,558
------ ---- ------
$6,558 $ $304 $6,254
====== ====== ==== ======
</TABLE>
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by issuer type, are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Government obligations........ $5,000 $ $ 75 $4,925
Mortgage-backed securities......... 1,500 ------ 62 1,438
------ ---- ------
$6,500 $ $137 $6,363
====== ====== ==== ======
</TABLE>
F-10
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
<S> <C> <C>
Due within one year................................. $5,000 $4,925
Mortgage-backed securities.......................... 1,500 1,438
------ ------
$6,500 $6,363
====== ======
</TABLE>
3. FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
<S> <C> <C>
Auto receivables.................................. $264,086 $275,249
Less allowance for losses......................... (13,602) (12,946)
-------- --------
Auto receivables, net............................. 250,484 262,303
Mortgage receivables.............................. 4,354
-------- --------
Finance receivables, net.......................... $250,484 $266,657
======== ========
</TABLE>
Auto receivables are collateralized by vehicle titles and the Company has the
right to repossess the vehicle in the event that the consumer defaults on the
payment terms of the contract. Mortgage receivables are collateralized by
liens on real property and the Company has the right to foreclose in the event
that the consumer defaults on the payment terms of the contract.
The accrual of finance charge income has been suspended on $17,339,000 and
$12,704,000 of delinquent auto receivables as of June 30, 1996 and 1997,
respectively.
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
===============================
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
========= ========= =========
<S> <C> <C> <C>
Balance at beginning of year....................... $ 9,330 $ 19,951 $ 13,602
Provision for losses............................... 4,278 7,912 6,595
Acquisition fees................................... 13,908 18,097 30,688
Allowance related to receivables sold to Trusts.... (13,461) (20,974)
Net charge-offs-auto receivables................... (6,409) (18,322) (16,965)
Net charge-offs-other.............................. (1,156) (575)
------- -------- --------
Balance at end of year............................. $19,951 $ 13,602 $ 12,946
======= ======== ========
</TABLE>
F-11
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
4. EXCESS SERVICING RECEIVABLE
As of June 30, 1996 and 1997, the Company was servicing $259,895,000 and
$863,006,000, respectively, of auto receivables which have been sold to the
Trusts.
The components of excess servicing receivable are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Interest only strips............................................... $11,819 $ 59,933
Subordinated interests:
Retained asset-backed securities................................. 21,274 12,589
Excess of auto receivables in Trusts over........................ 41,854
asset-backed securities outstanding............................ -------- --------
$ 33,093 $114,376
======== ========
</TABLE>
Excess servicing receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- ---------
<S> <C> <C>
Estimated future excess cash flows before allowance for credit losses... $ 63,457 $200,869
Allowance for credit losses.............................................. (25,616) (74,925)
-------- --------
Estimated future excess cash flows....................................... 37,841 125,944
Discount to present value................................................ (4,748) (11,568)
-------- --------
$ 33,093 $114,376
======== ========
</TABLE>
A summary of excess servicing receivable is as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S>...................................................................... <C> <C>
Balance at beginning of year............................................. $ $ 33,093
Additions................................................................ 39,729 110,874
Increase in unrealized gain.............................................. 4,802
Amortization............................................................. (6,636) (34,393)
-------- --------
Balance at end of year................................................... $ 33,093 $114,376
======== ========
</TABLE>
5. ACQUISITION
In November 1996, the Company acquired AmeriCredit Mortgage Services
("AMS", formerly Rancho Vista Mortgage Corporation), which originates and sells
home equity loans. The purchase price of $7,434,000 consisted of 400,000 shares
of the Company's common stock and assumption of certain liabilities. The
acquisition has been accounted for as a purchase and the excess of the purchase
price over net assets acquired was assigned to goodwill. Goodwill is being
amortized over a 25 year period. The results of operations of AMS have been
included in the consolidated financial statements since the acquisition date.
F-12
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Land............................................. $ 600 $ 600
Buildings and improvements....................... 1,973 2,319
Equipment........................................ 6,994 12,869
Furniture and fixtures........................... 828 1,935
------- -------
10,395 17,723
Less accumulated depreciation and amortization (2,725) (3,839)
------- -------
$ 7,670 $13,884
======= =======
</TABLE>
7. DEBT
The Company has a revolving credit Agreement with a group of banks under
which the Company may borrow up to $240 million, subject to a defined borrowing
base. Aggregate borrowings of $86,000,000 and $71,700,000 were outstanding as of
June 30, 1996 and 1997, respectively. Borrowings under the credit Agreement are
collateralized by certain auto receivables and bear interest, based upon the
Company's option, at either the prime rate (8.50% as of June 30, 1997) or
various market London Interbank Offered Rates plus 1.25%. The Company is also
required to pay an annual commitment fee equal to 1/4% of the unused portion of
the credit Agreement. The credit Agreement, which expires in October 1997,
contains various restrictive covenants requiring certain minimum financial
ratios and results and placing certain limitations on the incurrence of
additional debt, capital expenditures, cash dividends and repurchase of common
stock.
The Company also has a mortgage warehouse facility with a bank under which
the Company may borrow up to $75 million, subject to a defined borrowing base.
Aggregate borrowings of $345,000 were outstanding as of June 30, 1997.
Borrowings under the facility are collateralized by certain mortgage receivables
and bear interest, based upon the Company's option, at either the prime rate or
LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee
equal to 1/8% of the unused portion of the facility. The facility expires in
February 1998.
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes
which are due in February 2004. Interest on the notes is payable semi-annually,
commencing in August 1997. The notes, which are unsecured, may be redeemed at
the option of the Company after February 2001 at a premium declining to par in
February 2003. The Indenture pursuant to which the notes were issued contains
restrictions including limitations on the Company's ability to incur additional
indebtedness other than certain secured indebtedness, pay cash dividends and
repurchase common stock. Original debt issuance costs of $4,106,000 are being
amortized over the term of the 9 1/4% Senior Notes and are included in other
assets in the consolidated balance sheets.
Automobile receivables-backed notes consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Series 1995-A notes, interest at 6.55%, collateralized by certain auto
receivables in the principal amount of $23,589, final maturity in
September 2000................................................... $ 54,176 $ 23,689
Series 1994-A notes, paid in full in April 1997...................... 13,671
-------- --------
$ 67,847 $ 23,689
======== ========
</TABLE>
F-13
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Maturities of the automobile receivables-backed notes, based on the
contractual maturities of the underlying auto receivables, for years ending June
30 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $16,585
1999........................................................ 6,015
2000........................................................ 1,089
-------
$23,689
=======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Branch lending offices are generally leased for terms of up to five years
with certain rights to extend for additional periods. The Company also leases
office space for its loan servicing facilities under leases with terms up to 10
years with renewal options. Lease expense was $422,000, $875,000 and $2,132,000
for the years ended June 30, 1995, 1996 and 1997, respectively. Lease
commitments for years ending June 30 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 2,935
1999........................................................ 2,691
2000........................................................ 2,244
2001........................................................ 1,897
2002........................................................ 1,061
Thereafter.................................................. 3,085
-------
$13,913
=======
</TABLE>
As of June 30, 1997, the Company had Forward U.S. Treasury Rate Lock
Agreements to sell $200 million of U.S. Treasury Notes due May 1999 and $200
million of U.S. Treasury Notes due November 1999. The Agreements expire August
29, 1997 and November 26, 1997, respectively. Any gain or loss on these hedging
positions will be recognized as a component of the gain on sale of receivables
upon transfers of receivables to the Trusts subsequent to June 30, 1997.
As of June 30, 1996, the Company had a Forward U.S. Treasury Rate Lock
Agreement to sell $100 million of U.S. Treasury Notes which was settled in
August 1996.
The Company services auto receivables for its own account and for the
Trusts. These contracts are with consumers residing throughout the United
States, with borrowers located in Texas and California accounting for 13% and
12%, respectively, of the total managed auto receivables portfolio as of June
30, 1997. Borrowers located in Texas accounted for 18% of total managed auto
receivables as of June 30, 1996. No other state accounted for more than 10% of
total managed auto receivables.
In the normal course of its business, the Company is named as defendant in
legal proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. Two unrelated
proceedings in which the Company is a defendant have been brought as putative
class actions and are pending in federal district courts in Connecticut and
Illinois, respectively. Classes have not been certified in either case and the
Company has filed motions to dismiss in both cases which are presently pending.
In the opinion of management, the resolution of these proceedings will not have
a material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
F-14
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
9. STOCK OPTIONS
General
-------
The Company has certain stock-based compensation plans for employees, non-
employee directors and key executive officers.
A total of 6,000,000 shares are authorized for grants of options under the
employee plans, including 2,000,000 shares available for grants of options or
other equity instruments. The exercise price of each option must equal the
market price of the Company's stock on the date of grant and the maximum term of
each option is ten years. The vesting period is typically four years. Option
grants, vesting periods and the term of each option are determined by a
committee of the Company's board of directors.
A total of 2,100,000 shares are authorized for grants of options under the
non-employee director plans. The exercise price of each option must equal the
market price of the Company's stock on the date of grant and the maximum term of
each option is ten years. Option grants, vesting periods and the term of each
option are established by the terms of the plans.
A total of 850,000 shares are authorized for grants of options under the
key executive officer plan. The exercise price of each option under this plan is
$16 per share and the term of each option is seven years. These options vest
upon the earlier of seven years from the date of grant or the time that the
Company's common stock trades above certain targeted price levels.
The following tables present information related to the Company's stock-
based compensation plans. The fair value of each option grant was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-----------------------------------
<S> <C> <C> <C>
Expected dividends.................. 0 0 0
Expected volatility................. 20% 20% 20%
Risk-free interest rate............. 5.87% 5.87% 5.87%
Expected life....................... 5 Years 5 Years 5 Years
</TABLE>
F-15
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Employee Plans
--------------
A summary of stock option activity under the Company's employee plans is as
follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-------------------- ---------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year... 2,681 $4.20 3,410 $ 5.00 3,664 $ 7.22
Granted............................ 1,080 8.20 672 13.59 1,251 15.47
Exercised.......................... (189) 4.27 (373) 5.22 (423) 7.91
Forfeited.......................... (162) 7.76 (45) 6.96 (116) 11.68
----- ----- ----- ------ ----- ------
Outstanding at end of year......... 3,410 $5.00 3,664 $ 7.22 4,376 $ 9.35
===== ===== ===== ====== ===== ======
Options exercisable at end of year. 2,132 $4.50 2,811 $ 4.51 3,161 $ 7.77
===== ===== ===== ====== ===== ======
Weighted average fair value of
options granted during year..... $2.24 $ 3.72 $ 4.21
===== ====== ======
</TABLE>
A summary of options outstanding under employee plans as of June 30, 1997
is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- ----------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.50 to 4.63 1,183 4.21 $ 3.44 1,113 $ 3.46
$5.50 to 9.13 1,337 7.33 7.24 1,207 7.24
$11.00 to 15.75 1,357 8.55 14.01 697 13.80
$16.38 to 18.38 499 9.49 16.93 144 16.79
----- -----
4,376 3,161
===== =====
</TABLE>
Non-employee Director Plans
---------------------------
A summary of stock option activity under the Company's non-employee
director plans is as follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 1,079 $2.80 946 $ 2.80 913 $ 3.60
Granted................................. 30 6.50 40 12.88 40 18.75
Exercised............................... (163) 2.80 (73) 2.80 (99) 2.80
----- ----- --- ------ --- ------
Outstanding at end of year.............. 946 $2.80 913 $ 3.60 854 $ 4.41
===== ===== === ====== === ======
Options exercisable at end of year...... 886 $2.80 873 $ 3.53 854 $ 4.41
===== ===== === ====== === ======
Weighted average fair value of options
granted during year.................. $1.78 $ 3.53 $ 5.14
===== ====== ======
</TABLE>
F-16
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
A summary of options outstanding under non-employee director plans as of
June 30, 1997 is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------- ---------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.80 to 6.50 774 4.07 $ 3.22 774 $ 3.22
$12.88 to 18.75 80 8.90 15.86 80 15.86
--- ---
854 854
=== ===
</TABLE>
Key Executive Officer Plan
--------------------------
A summary of stock option activity under the Company's key executive
officer plan is as follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
JUNE 30, JUNE 30,
1996 1997
----------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............................ 850 $16.00
Granted..................................................... 850 $16.00
--- ------ --- ------
Outstanding at end of year (none exercisable)............... 850 $16.00 850 $16.00
=== ====== === ======
Weighted average fair value of options granted during year.. $ 4.38
======
</TABLE>
A summary of options outstanding under the key executive officer plan at
June 30, 1997 is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
----------------- ----------- ---------------- --------------
<S> <C> <C> <C>
$16.00 850 5.81 $16.00
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution retirement plan covering
substantially all employees. The Company's contributions to the plan, which were
made in Company common stock, were $99,000, $133,000 and $201,000 for the years
ended June 30, 1995, 1996 and 1997, respectively.
The Company also has an employee stock purchase plan that allows
participating employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates. A
total of 500,000 shares have been reserved for issuance under the plan. Shares
purchased under the plan were 31,361, 97,143 and 104,215 for the years ended
June 30, 1995, 1996 and 1997, respectively.
F-17
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
11. INCOME TAXES
The income tax provision (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
---------- -------- ---------
<S> <C> <C> <C>
$ 79 $ 984 $ (202)
Current................................ (18,954) 11,681 24,428
Deferred............................... -------- ------- -------
$(18,875) $12,665 $24,226
======== ======= =======
</TABLE>
The Company's effective income tax rate on income before income taxes
differs from the U.S. statutory tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate................... 35% 35% 35%
Change in valuation allowance............. (226)
Other..................................... 3 2 3
----- ---- ----
(188)% 37% 38%
===== ==== ====
</TABLE>
The deferred income tax provision (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------------------------
<S> <C> <C> <C>
Net operating loss carry forward.......... $ 2,266 $ 8,387 $ 5,501
Gain on sale of receivables............... 14,824
Change in valuation allowance............. (22,615) (320)
Allowance for losses...................... 32 1,556 (1,046)
Other..................................... 1,363 2,058 5,149
-------- ------- -------
$(18,954) $11,681 $24,428
======== ======= =======
</TABLE>
F-18
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------------------
Deferred tax liabilities:
<S> <C> <C>
Gain on sale of receivables..................... $ $14,824
Unrealized gain on excess servicing receivable.. 1,848
Allowance for losses............................ 405
Other........................................... 707 2,614
-------- -------
1,112 19,286
-------- -------
Deferred tax assets:
Net operating loss carry forward................ (8,969) (3,468)
Alternative minimum tax credits................. (1,548) (1,873)
Allowance for losses............................ (641)
Other........................................... (590)
-------- -------
(11,107) (5,982)
-------- -------
Net deferred tax liability (asset) ............... $ (9,995) $13,304
======== =======
</TABLE>
As of June 30, 1997, the Company has a net operating loss carryforward of
approximately $3,000,000 for federal income tax reporting purposes which expires
between 2007 and 2009 and an alternative minimum tax carryforward of
approximately $1,900,000 with no expiration date.
12. SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
----------------------------
<S> <C> <C> <C>
Interest costs (none capitalized).............. $5,167 $12,179 $15,196
Income taxes................................... 151 1,447 599
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair
value information about financial instruments, whether or not recognized in the
Company's consolidated balance sheets. Fair values are based on estimates using
present value or other valuation techniques in cases where quoted market prices
are not available. Those techniques are significantly affected by the
assumptions used, including the discount rate and the estimated timing and
amount of future cash flows. Therefore, the estimates of fair value may differ
substantially from amounts which ultimately may be realized or paid at
settlement or maturity of the financial instruments. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
F-19
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments as of June 30, 1996 and 1997
are set forth below (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ----------- -------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents and restricted cash (a)............. $ 17,449 $ 17,449 $ 73,922 $ 73,922
Investment securities (b)..................................... 6,558 6,254 6,500 6,363
Finance receivables (c)....................................... 250,484 283,760 266,657 283,386
Excess servicing receivable (d)............................... 33,093 35,009 114,376 114,376
Financial liabilities:
Bank line of credit and mortgage warehouse facility(e)........ 86,000 86,000 72,045 72,045
Automobile receivables-backed notes (f)....................... 67,847 68,055 23,689 24,782
9 1/4% Senior Notes (g)....................................... 125,000 123,825
Interest rate swaps (h)......................................... 735 236
Unrecognized financial instruments:
Forward U.S. Treasury Note sales (i).......................... (700) 164
</TABLE>
_______________
(a) The carrying value of cash and cash equivalents and restricted cash is
considered to be a reasonable estimate of fair value.
(b) The fair value of investment securities is estimated based on market prices
for similar securities.
(c) Since the Company periodically sells its finance receivables, fair value is
estimated by discounting future net cash flows expected to be realized from
the finance receivables using interest rate, prepayment and credit loss
assumptions similar to the Company's historical experience.
(d) The fair value of excess servicing receivable is estimated by discounting
the associated future net cash flows using discount rate, prepayment and
credit loss assumptions similar to the Company's historical experience.
(e) The bank line of credit and mortgage warehouse facility have variable rates
of interest and maturities of less than one year. Therefore, carrying value
is considered to be a reasonable estimate of fair value.
(f) The fair value of automobile receivables-backed notes is estimated based on
rates currently available for debt with similar terms and remaining
maturities.
(g) The fair value of the 9 1/4% Senior Notes is based on the quoted market
price.
(h) The fair value of the interest rate swap is based on the quoted termination
cost.
(i) The fair value of the forward U.S. Treasury Note sales are estimated based
upon market prices for similar financial instruments.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION
Board of Directors and Shareholders
AmeriCredit Corp.
Our report on the audits of the consolidated financial statements of AmeriCredit
Corp. as of June 30, 1997 and June 30, 1996, and for the three years ended June
30, 1997, 1996 and 1995 have been included by reference in this Form 10-K from
page 30 of the 1997 Annual Report to Shareholders of AmeriCredit Corp. These
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The related financial statement schedules
are presented for purposes of additional analysis and are not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the
financial statements taken as a whole.
/s/ COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
August 6, 1997
F-21
<PAGE>
AMERICREDIT CORP.
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 supplementary schedules present consolidating financial
information for (i) the Company (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 as of June 30, 1996 and 1997 and for the
three years in the period ended June 30, 1997.
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.
F-22
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ (4,913) $ (87) $ 7,145 $ 2,145
Investment securities.................. $ 6,558 6,558
Finance receivables, net............... 183,023 67,461 250,484
Excess servicing receivable............ 16,856 16,237 33,093
Restricted cash........................ 15,304 15,304
Property and equipment, net............ 83 7,587 7,670
Deferred income taxes.................. 6,360 3,635 9,995
Other assets........................... 1,761 2,221 928 4,910
Due (to) from affiliates............... 124,527 (106,986) (17,541)
Investment in affiliates............... 32,320 $ (32,320)
-------- --------- -------- --------- --------
Total assets........................ $166,696 $ 106,249 $ 89,534 $ (32,320) $330,159
======== ========= ======== ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit.................. $ 86,000 $ 86,000
Automobile receivables-backed notes.. $ 67,847 67,847
Notes payable........................ $ 418 418
Accrued taxes and expenses........... 3,053 9,709 (93) 12,669
-------- --------- -------- --------- --------
Total liabilities................... 3,471 95,709 67,754 166,934
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock......................... 326 175 3 $ (178) 326
Additional paid-in capital........... 190,005 112,112 (112,112) 190,005
Retained earnings (deficit).......... (5,233) (101,747) 21,777 79,970 (5,233)
-------- --------- -------- --------- --------
185,098 10,540 21,780 (32,320) 185,098
Treasury stock......................... (21,873) (21,873)
-------- --------- -------- --------- --------
Total shareholders' equity............. 163,225 10,540 21,780 (32,320) 163,225
-------- --------- -------- --------- --------
Total liabilities and shareholders'
equity............................ $166,696 $ 106,249 $ 89,534 $ (32,320) $330,159
======== ========= ======== ========= ========
</TABLE>
F-23
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
ASSETS
<S> <C> <C> <C> <C> <C>
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........ 2,954 2,954 (2,954) 2,954
receivable
Retained earnings (deficit)................ 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'.......... $344,439 $ 85,652 $120,126 $(56,764) $493,453
equity.................................. ======== ========= ======== ======== ========
</TABLE>
F-24
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $25,048 $5,201 $ 30,249
Investment income................ $ 12,264 96 224 $(11,300) 1,284
Servicing fee income............. 844 (844)
Other income..................... 1,019 (1,232) 1,764 1,551
Equity in income of affiliates... 1,596 (1,596)
-------- ------- ------ -------- --------
14,879 24,756 7,189 (13,740) 33,084
-------- ------- ------ -------- --------
COSTS AND EXPENSES
Operating expenses.............. 2,627 12,143 847 (844) 14,773
Provision for losses............ 4,278 4,278
Interest expense................ 1,532 10,561 3,222 (11,300) 4,015
-------- ------- ------ -------- --------
4,159 26,982 4,069 (12,144) 23,066
-------- ------- ------ -------- --------
Income before income taxes........ 10,720 (2,226) 3,120 (1,596) 10,018
Provision for income taxes........ (18,173) (702) (18,875)
-------- ------- ------ -------- --------
Net income..................... $ 28,893 $(1,524) $3,120 $ (1,596) $ 28,893
======== ======= ====== ======== ========
</TABLE>
F-25
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income........... $32,050 $19,656 $51,706
Gain on sale of receivables..... 12,449 10,424 22,873
Servicing fee income............ 26,329 50 $(22,667) 3,712
Investment income............... $11,395 337 643 (11,300) 1,075
Other income.................... 104 1,489 19 1,612
Equity in income of affiliates.. 25,914 (25,914)
------- ------- ------- -------- -------
37,413 72,654 30,792 (59,881) 80,978
------- ------- ------- -------- -------
COSTS AND EXPENSES
Operating expenses............. 3,700 41,359 3,289 (22,667) 25,681
Provision for losses........... 7,912 7,912
Interest expense............... 371 15,212 8,846 (11,300) 13,129
------- ------- ------- -------- -------
4,071 64,483 12,135 (33,967) 46,722
------- ------- ------- -------- -------
Income before income taxes....... 33,342 8,171 18,657 (25,914) 34,256
Provision for income taxes....... 11,751 914 12,665
------- ------- ------- -------- -------
Net income.................... $21,591 $ 7,257 $18,657 $(25,914) $21,591
======= ======= ======= ======== =======
</TABLE>
F-26
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ 36,633 $ 8,277 $ 44,910
Gain on sale of receivables...... $ (855) 2,939 65,172 67,256
Servicing fee income............. 55,994 4,111 $(39,081) 21,024
Investment income................ 18,262 147 2,411 (17,911) 2,909
Other income..................... 86 1,344 218 1,648
Equity in income of affiliates... 33,374 (33,374)
------- -------- ------- -------- --------
50,867 97,057 80,189 (90,366) 137,747
------- -------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses............... 5,282 83,997 1,717 (39,081) 51,915
Provision for losses............. 6,595 6,595
Interest expense................. 5,116 17,202 11,905 (17,911) 16,312
------- -------- ------- -------- --------
10,398 107,794 13,622 (56,992) 74,822
------- -------- ------- -------- --------
Income before income taxes......... 40,469 (10,737) 66,567 (33,374) 62,925
Provision for income taxes......... 1,770 (3,217) 25,673 24,226
------- -------- ------- -------- --------
Net income..................... $38,699 $ (7,520) $40,894 $(33,374) $ 38,699
======= ======== ======= ======== ========
</TABLE>
F-27
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 28,893 $ (1,524) $ 3,120 $ (1,596) $ 28,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 161 1,156 1,317
Provision for losses........................ 4,278 4,278
Deferred income taxes....................... (18,252) (702) (18,954)
Equity in income of affiliates.............. (1,596) 1,596
Changes in assets and liabilities
Other assets.............................. (795) 400 (1,439) (1,834)
Accrued taxes and expenses................ 170 387 380 937
-------- --------- --------- --------- ---------
Net cash provided by operating activities..... 8,581 3,995 2,061 14,637
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (225,350) (148,452) 148,452 (225,350)
Principal collections and recoveries on
receivables.............................. 53,210 18,124 71,334
Net proceeds from sale of auto receivables.. 148,452 (148,352)
Purchase of property and equipment.......... 947 (2,677) (1,730)
Proceeds from sales and maturities of
investment securities.................... 16,241 16,241
Increase in restricted cash................. (5,007) (5,007)
Net change in investment in affiliates...... (7,126) 7,126
-------- --------- --------- --------- ---------
Net cash used by investment activities.... 10,062 (19,239) (135,335) (144,512)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 83,900 83,900
Payments on bank line of credit............. (83,900) (83,900)
Proceeds from issuance of automobile
receivables-backed notes................. 150,170 150,170
Payments on automobile receivables-
backed notes............................. (15,650) (15,650)
Payments on notes payable................... (236) (236)
Net change in due (to) from affiliates...... (18,037) 11,762 6,275
Proceeds from issuance of common stock...... 1,561 1,561
Purchase of treasury stock.................. (3,412) (3,412)
-------- --------- --------- --------- ---------
Net cash provided by financing activities....... (20,124) 11,762 140,795 132,433
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (1,481) (3,482) 7,521 2,558
Cash and equivalents at beginning of year....... 18,668 (2,912) 15,756
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of year........ $ 17,187 $ (6,394) $ 7,521 $ $ 18,314
======== ========= ========= ========= =========
</TABLE>
F-28
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 21,591 $ 7,257 $ 18,657 $ (25,914) $ 21,591
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 49 1,479 1,528
Provision for losses........................ 7,912 7,912
Deferred income taxes....................... 14,113 (2,432) 11,681
Gain on sale of auto receivables............ (12,449) (10,424) (22,873)
Amortization of excess servicing
receivable................................ 6,636 6,636
Equity in income of affiliates.............. (25,914) 25,914
Changes in assets and liabilities
Other assets.............................. 362 (1,857) 511 (984)
Accrued taxes and expenses................ 1,273 8,606 (473) 9,406
-------- --------- --------- ---------- ---------
Net cash provided by operating activities... 11,474 15,152 8,271 34,897
-------- --------- --------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (417,235) (115,646) 115,646 (417,235)
Principal collections and recoveries on
receivables.............................. 37,894 57,054 94,948
Net proceeds from sale of auto receivables.. 268,923 115,646 (115,646) 268,923
Purchase of property and equipment.......... 2,536 (5,698) (3,162)
Proceeds from sales and maturities of
investment securities.................... 3,707 3,707
Increase in restricted cash................. (10,297) (10,297)
Net change in investment in affiliates.......... (2,746) 2,743 3
-------- --------- --------- ---------- ---------
Net cash used by investment activities.......... 3,497 (113,373) 46,760 (63,116)
-------- --------- --------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 342,600 342,600
Payments on bank line of credit............. (256,600) (256,600)
Payments on automobile receivables-
backed notes.............................. (66,673) (66,673)
Payments on notes payable................... (298) (298)
Net change in due (to) from affiliates.......... (29,794) 18,528 11,266
Proceeds from issuance of common stock...... 3,731 3,731
Purchase of treasury stock.................. (10,710) (10,710)
-------- --------- --------- ---------- ---------
Net cash provided by financing activities.. (37,071) 104,528 (55,407) 12,050
-------- --------- --------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (22,100) 6,307 (376) (16,169)
Cash and equivalents at beginning of year....... 17,187 (6,394) 7,521 18,314
-------- --------- --------- ---------- ---------
Cash and cash equivalents at end of year........ $ (4,913) $ (87) $ 7,145 $ $ 2,145
======== ========= ========= ========== =========
</TABLE>
F-29
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 38,699 $ (7,520) $ 40,894 $ (33,374) $ 38,699
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 28 2,175 2,203
Provision for losses........................ 6,595 6,595
Deferred income taxes....................... (1,180) (1,912) 27,520 24,428
Gain on sale of auto receivables............ (64,338) (64,338)
Amortization of excess servicing
receivable................................ 4,760 29,633 34,393
Equity in income of affiliates.............. (33,374) 33,374
Changes in assets and liabilities...........
Other assets.............................. 917 (3,083) (175) (2,341)
Accrued taxes and expenses................ 4,835 18,278 3,380 26,493
--------- --------- --------- --------- ---------
Net cash provided by operating activities... 9,925 19,293 36,914 66,132
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (896,711) (814,107) 814,107 (896,711)
Originations of mortgage receivables........ (53,770) (53,770)
Principal collections and recoveries on
receivables.............................. 22,672 41,717 64,389
Net proceeds from sale of auto receivables.. 814,107 767,571 (814,107) 767,571
Net proceeds from sale of mortgage
receivables.............................. 52,489 52,489
Purchase of property and equipment.......... (81) (4,430) (4,511)
Proceeds from sales and maturities of
investment securities.................... 58 58
Increase in restricted cash................. (52,591) (52,591)
Net change in investment in affiliates.......... 25,605 (22,981) (2,624)
--------- --------- --------- --------- ---------
Net cash used by investment activities.......... 25,582 (88,624) (60,034) (123,076)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 745,500 745,500
Payments on bank line of credit............. (759,800) (759,800)
Net increase in mortgage warehouse
facility.................................. (2,964) (2,964)
Proceeds from issuance of 9 1/4% Senior
Notes..................................... 120,894 120,894
Payments on automobile receivables-
backed notes.............................. (44,158) (44,158)
Payments on notes payable................... (552) (552)
Purchase of treasury stock.................. (4,387) (4,387)
Proceeds from issuance of common stock...... 6,293 6,293
Net change in due (to) from affiliates...... (152,842) 90,670 62,172
--------- --------- --------- --------- ---------
Net cash provided by financing activities... (30,594) 73,406 18,014 60,826
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 4,913 4,075 (5,106) 3,882
Cash and equivalents at beginning of year....... (4,913) (87) 7,145 2,145
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year........ $ $ 3,988 $ 2,039 $ $ 6,027
========= ========= ========= ========= =========
</TABLE>
F-30
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1997
---------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents..................................................... $ 6,027 $ 2,267
Investment securities......................................................... 6,500 6,500
Finance receivables, net...................................................... 266,657 257,791
Excess servicing receivable................................................... 114,376 179,788
Restricted cash............................................................... 67,895 76,170
Property and equipment, net................................................... 13,884 17,232
Goodwill...................................................................... 7,260 7,112
Other assets.................................................................. 10,854 15,435
-------- --------
Total assets........................................................... $493,453 $562,295
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit.................................................... $ 71,700 $ 2,100
Commercial paper warehouse facility.................................... 95,989
Mortgage warehouse facility............................................ 345 7,281
Automobile receivables-backed notes.................................... 23,689 14,138
9 1/4% Senior Notes.................................................... 125,000 125,000
Notes payable.......................................................... 3,517 4,458
Accrued taxes and expenses............................................. 39,362 38,619
Deferred income taxes.................................................. 13,304 19,764
-------- --------
Total liabilities................................................... 276,917 307,349
-------- --------
Shareholders' equity:
Common stock, $.01 par value per share; 120,000,000 shares authorized;
33,255,173 and 33,841,815 shares issued.............................. 333 338
Additional paid-in capital............................................. 203,544 213,890
Unrealized gain on excess servicing receivable, net of income taxes.... 2,954 3,410
Retained earnings...................................................... 33,466 60,841
-------- --------
240,297 278,479
Treasury stock, at cost (3,959,071 and 3,921,028 shares)............... (23,761) (23,533)
-------- --------
Total shareholders' equity.......................................... 216,536 254,946
-------- --------
Total liabilities and shareholders' equity............................. $493,453 $562,295
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
REVENUE
Finance charge income................................. $ 21,503 $ 26,190
Gain on sale of receivables........................... 28,151 53,775
Servicing fee income.................................. 8,242 19,191
Investment income..................................... 1,152 2,570
Other income.......................................... 622 502
----------- -----------
59,670 102,228
----------- -----------
COSTS AND EXPENSES
Operating expenses.................................... 21,747 41,916
Provision for losses.................................. 3,231 3,755
Interest expense...................................... 6,612 12,045
----------- -----------
31,590 57,716
----------- -----------
Income before income taxes.............................. 28,080 44,512
Income tax provision.................................... 10,810 17,137
----------- -----------
Net income............................................ $ 17,270 $ 27,375
=========== ===========
Earnings per share
Basic................................................. $ .61 $ .92
----------- -----------
Diluted............................................... $ .57 $ .85
----------- -----------
Weighted average shares outstanding..................... 28,513,145 29,684,960
----------- -----------
Weighted average shares and assumed incremental shares.. 30,398,569 32,199,267
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................................... $ 17,270 $ 27,375
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 904 1,914
Provision for losses.............................................................. 3,231 3,755
Deferred income taxes............................................................. 10,682 9,643
Gain on sale of auto receivables.................................................. (27,851) (51,531)
Amortization of excess servicing receivable....................................... 12,117 23,118
Changes in assets and liabilities:
Other assets................................................................... (2,134) (4,581)
Accrued taxes and expenses..................................................... 9,195 (743)
--------- ---------
Net cash provided by operating activities............................................ 23,414 8,950
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables........................................................ (354,448) (686,543)
Originations of mortgage receivables................................................. (7,748) (51,572)
Principal collections and recoveries on receivables.................................. 36,147 14,862
Net proceeds from sale of auto receivables........................................... 332,982 644,022
Net proceeds from sale of mortgage receivables....................................... 4,839 48,129
Purchases of property and equipment.................................................. (1,624) (3,571)
Proceeds from maturities of investment securities.................................... 55
Increase in restricted cash.......................................................... (31,023) (8,275)
--------- ---------
Net cash used by investing activities................................................ (20,820) (42,948)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit.................................................... 304,400 514,500
Payments on bank line of credit...................................................... (275,500) (584,100)
Net increase in commercial paper warehouse facility.................................. 95,989
Net increase in mortgage warehouse receivable........................................ 264 6,936
Payments on automobile receivables-backed notes...................................... (27,304) (9,551)
Payments on notes payable............................................................ (221) (602)
Proceeds from issuance of common stock............................................... 3,100 7,066
Purchase of treasury stock........................................................... (4,387)
--------- ---------
Net cash provided by financing activities............................................ 352 30,238
--------- ---------
Net (decrease) increase in cash and cash equivalents................................... 2,946 (3,760)
Cash and cash equivalents at beginning of period....................................... 2,145 6,027
--------- ---------
Cash and cash equivalents at end of period............................................. $ 5,091 $ 2,267
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<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 December 31, 1997 and for the
periods ended December 31, 1996 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. The results for interim periods are not necessarily indicative of
results for a full year.
The interim period financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. Such interim period financial statements should be read
in conjunction with the Company's consolidated financial statements which were
included in the Company's 1997 Annual Report to Shareholders.
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") effective for the periods
ended December 31, 1997. SFAS 128 establishes new standards for computing and
presenting earnings per share, replacing existing accounting standards. All
prior period earnings per share and related weighted average share amounts have
been restated to conform to the requirements of SFAS 128.
NOTE 2--FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Auto receivables................................... $275,249 $261,333
Less allowance for losses.......................... (12,946) (11,350)
-------- --------
Auto receivables, net.............................. 262,303 249,983
Mortgage receivables............................... 4,354 7,808
-------- --------
Finance receivables, net........................... $266,657 $257,791
======== ========
</TABLE>
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period ................... $ 13,602 $ 12,946
Provision for losses ............................. 3,231 3,755
Acquisition fees ................................. 12,809 22,046
Allowance related to auto receivables sold
to Trusts........................................ (8,404) (21,773)
Net charge-offs .................................. (9,065) (5,624)
-------- --------
Balance at end of period ......................... $ 12,173 $ 11,350
======== ========
</TABLE>
F-34
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE 3--EXCESS SERVICING RECEIVABLE
As of June 30, 1997 and December 31, 1997, the Company was servicing $863.0
million and $1,337.9 million, respectively, of auto receivables which have been
sold to certain special purpose financing trusts (the "Trusts").
<TABLE>
<CAPTION>
The components of excess servicing receivable are as follows (in thousands):
JUNE 30, DECEMBER 31,
1997 1997
--------- ------------
<S> <C> <C>
Interest-only strips.................................... $ 59,933 $ 101,357
Subordinated interests:
Retained asset-backed securities...................... 12,589 10,424
Excess of auto receivables in Trusts over asset-backed
securities outstanding............................. 41,854 68,007
--------- ---------
$ 114,376 $ 179,788
========= =========
<CAPTION>
Excess servicing receivable consists of the following (in thousands):
JUNE 30, DECEMBER 31,
1997 1997
--------- ------------
<S> <C> <C>
Estimated future excess cash flows before
allowance for credit losses.......................... $ 200,869 $ 311,354
Allowance for credit losses............................ (74,925) (112,294)
--------- ---------
Estimated future excess cash flows..................... 125,944 199,060
Discount to present value.............................. (11,568) (19,272)
--------- ---------
$ 114,376 $ 179,788
========= =========
<CAPTION>
A summary of excess servicing receivable is as follows (in thousands):
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period......................... $ 33,093 $ 114,376
Additions.............................................. 38,804 87,789
Increase in unrealized gain............................ 741
Amortization........................................... (12,117) (23,118)
--------- ---------
Balance at end of period............................... $ 59,780 $ 179,788
========= =========
</TABLE>
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 $71.7
million and $2.1 million were outstanding as of June 30, 1997 and December 31,
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
F-35
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
restrictive covenants requiring certain minimum financial ratios and results and
placing certain limitations on payment of cash dividends and repurchase of
common stock.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse financing
is available to the Company. Aggregate borrowings of $96.0 million were
outstanding as of December 31, 1997. Under the funding agreement, the Company
transfers auto receivables to CP Funding Corp. ("CPFC"), a special purpose
finance subsidiary of the Company, and CPFC in turn issues a note,
collateralized by such auto receivables, to the funding agent. The funding
agent provides funding under the note to CPFC pursuant to an advance formula and
CPFC forwards the funds to the Company in consideration for the transfer of auto
receivables. While CPFC is a consolidated subsidiary of the Company, CPFC is a
separate legal entity and the auto receivables transferred to CPFC and the other
assets of CPFC are legally owned by CPFC and not available to creditors of
AmeriCredit Corp. or its other subsidiaries. Advances under the note bear
interest at commercial paper, LIBOR or prime rates plus specified fees depending
upon the source of funds provided by the funding agent to CPFC. The funding
agreement, which expires in October 1998, contains various covenants requiring
certain minimum financial ratios and results.
The Company also has a mortgage warehouse facility with a bank under which the
Company may borrow up to $75 million, subject to a defined borrowing base.
Aggregate borrowings of $.3 million and $7.3 million were outstanding as of June
30, 1997 and December 31, 1997, respectively. Borrowings under the facility are
collateralized by certain mortgage receivables and bear interest at LIBOR plus
1%. The Company is also required to pay an annual commitment fee equal to 1/8%
of the unused portion of the facility. In February 1998, the Company extended
the maturity of the facility to February 1999.
NOTE 5--SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Interest costs (none capitalized).... $6,456 $12,661
Income taxes......................... 228 7,412
</TABLE>
During the six months ended December 31, 1996 and 1997, the Company entered
into capital lease obligations of $1,258,000 and $1,543,000, respectively, for
the purchase of certain equipment.
NOTE 6--GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's
9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are wholly-
owned consolidated subsidiaries of the Company and are jointly, severally and
unconditionally liable for the obligations represented by the 9 1/4% Senior
Notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the combined
Non-Guarantor Subsidiaries provide information that is more 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
F-36
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
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.
Investment 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.
F-37
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ $ (1,025) $ 3,292 $ $ 2,267
Investment securities............... 6,500 6,500
Finance receivables, net............ 125,421 132,370 257,791
Excess servicing receivable......... (1,560) 10,670 170,678 179,788
Restricted cash..................... 76,170 76,170
Property and equipment, net......... 137 17,095 17,232
Goodwill............................ 7,112 7,112
Other assets........................ 5,409 6,915 3,111 15,435
Due (to) from affiliates............ 267,917 (161,635) (106,282)
Investment in affiliates............ 95,361 13,921 2 (109,284)
-------- --------- --------- --------- --------
Total assets.................. $373,764 $ 18,474 $ 279,341 $(109,284) $562,295
======== ========= ========= ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit................. $ $ 2,100 $ $ $ 2,100
Mortgage warehouse facility......... 7,281 7,281
Commercial paper warehouse facility. 95,989 95,989
Automobile receivables-backed notes. 14,138 14,138
9 1/4% Senior Notes................. 125,000 125,000
Notes payable....................... 4,429 29 4,458
Accrued taxes and expenses.......... 9,341 27,398 1,880 38,619
Deferred income taxes............... (19,952) (11,034) 50,750 19,764
-------- --------- --------- --------- --------
Total liabilities............. 118,818 25,774 162,757 307,349
-------- --------- --------- --------- --------
Shareholders' equity:
Common stock........................ 338 203 3 (206) 338
Additional paid-in capital.......... 213,890 108,336 13,921 (122,257) 213,890
Unrealized gain on excess servicing
receivable....................... 3,410 3,410 (3,410) 3,410
Retained earnings (deficit)......... 60,841 (115,839) 99,250 16,589 60,841
-------- --------- --------- --------- --------
278,479 (7,300) 116,584 (109,284) 278,479
Treasury stock...................... (23,533) (23,533)
-------- --------- --------- --------- --------
Total shareholders' equity..... 254,946 (7,300) 116,584 (109,284) 254,946
-------- --------- --------- --------- --------
Total liabilities and shareholders'
equity......................... $373,764 $ 18,474 $ 279,341 $(109,284) $562,295
======== ========= ========= ========= ========
</TABLE>
F-38
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ $16,339 $ 5,164 $ $ 21,503
Gain on sale of receivables...... 300 27,851 28,151
Servicing fee income............. 24,032 1,625 (17,415) 8,242
Investment income................ 6,775 89 904 (6,616) 1,152
Other income..................... 28 260 334 622
Equity in income of affiliates... 13,593 (13,593)
------- ------- ------- -------- --------
20,396 41,020 35,878 (37,624) 59,670
------- ------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses.............. 2,144 35,885 1,133 (17,415) 21,747
Provision for losses............ 3,231 3,231
Interest expense................ 26 7,839 5,363 (6,616) 6,612
------- ------- ------- -------- --------
2,170 46,955 6,496 (24,031) 31,590
------- ------- ------- -------- --------
Income before income taxes.......... 18,226 (5,935) 29,382 (13,593) 28,080
Provision for income taxes.......... 956 139 9,715 10,810
------- ------- ------- -------- --------
Net income.................... $17,270 $(6,074) $19,667 $(13,593) $ 17,270
======= ======= ======= ======== ========
</TABLE>
F-39
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ $ 20,213 $ 5,977 $ $ 26,190
Gain on sale of receivables...... (4,903) 3,321 55,357 53,775
Servicing fee income............. 42,256 3,721 (26,786) 19,191
Investment income................ 14,920 127 2,211 (14,688) 2,570
Other income..................... 344 158 502
Equity in income of affiliates... 28,143 (28,143)
------- -------- ------- -------- --------
38,160 66,261 67,424 (69,617) 102,228
------- -------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses.............. 4,948 63,758 (4) (26,786) 41,916
Provision for losses............ 3,755 3,755
Interest expense................ 6,318 12,462 7,953 (14,688) 12,045
------- -------- ------- -------- --------
11,266 79,975 7,949 (41,474) 57,716
------- -------- ------- -------- --------
Income before income taxes.......... 26,894 (13,714) 59,475 (28,143) 44,512
Provision for income taxes.......... (481) (5,280) 22,898 17,137
------- -------- ------- -------- --------
Net income.................... $27,375 $ (8,434) $36,577 $(28,143) $ 27,375
======= ======== ======= ======== ========
</TABLE>
F-40
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 17,270 $ (6,074) $ 19,667 $ (13,593) $ 17,270
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 16 888 904
Provision for losses.......................... 3,231 3,231
Deferred income taxes......................... 3,718 (3,174) 10,138 10,682
Gain on sale of auto receivables.............. (27,851) (27,851)
Amortization of excess servicing receivable... 2,943 9,174 12,117
Equity in income of affiliates................ (13,593) 13,593
Changes in assets and liabilities:
Other assets.............................. (487) (119) (1,528) (2,134)
Accrued taxes and expenses................ (1,974) 11,037 132 9,195
-------- --------- --------- --------- ---------
Net cash provided by operating activities..... 4,950 8,732 9,732 23,414
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................. (354,448) (343,935) 343,935 (354,448)
Originations of mortgage receivables.......... (7,748) (7,748)
Principal collections and recoveries on
receivables................................. 13,484 22,663 36,147
Net proceeds from sale of auto receivables.... 343,935 332,982 (343,935) 332,982
Net proceeds from sale of mortgage
receivables.................................. 4,839 4,839
Purchase of property and equipment............ 1,273 (2,897) (1,624)
Proceeds from maturities of investment
securities................................. 55 55
Increase in restricted cash................... (31,023) (31,023)
Net change in investment in affiliates........ 942 (942)
-------- --------- --------- --------- ---------
Net cash provided (used) by investment
activities.................................. 2,270 (3,777) (19,313) (20,820)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............ 304,400 304,400
Payments on bank line of credit.............. (275,500) (275,500)
Net increase in mortgage warehouse facility.. 264 264
Payments on automobile receivables-
backed notes............................. (27,304) (27,304)
Payments on notes payable.................... (221) (221)
Net change in due (to) from affiliates....... (9,178) (25,570) 34,748
Proceeds from issuance of common stock....... 3,100 3,100
Purchase of treasury stock................... (4,387) (4,387)
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities................................... (10,686) 3,594 7,444 352
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (3,466) 8,549 (2,137) 2,946
Cash and cash equivalents at beginning of
period........................................ (4,913) (87) 7,145 2,145
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period...... $ (8,379) $ 8,462 $ 5,008 $ $ 5,091
======== ========= ========= ========= =========
</TABLE>
F-41
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 27,375 $ (8,434) $ 36,577 $ (28,143) $ 27,375
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 22 1,892 1,914
Provision for losses............................ 3,755 3,755
Deferred income taxes........................... (7,771) (5,487) 22,901 9,643
Gain on sale of auto receivables................ 4,903 (1,077) (55,357) (51,531)
Amortization of excess servicing receivable..... (4,120) 2,503 24,735 23,118
Equity in income of affiliates.................. (28,143) 28,143
Changes in assets and liabilities:
Other assets................................ (962) (1,611) (2,008) (4,581)
Accrued taxes and expenses.................. 1,253 (589) (1,407) (743)
-------- --------- --------- --------- ---------
Net cash provided by operating activities....... (7,443) (9,048) 25,441 8,950
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................... (686,543) (795,637) 795,637 (686,543)
Originations of mortgage receivables............ (51,572) (51,572)
Principal collections and recoveries on
receivables.................................... 6,085 8,777 14,862
Net proceeds from sale of auto receivables...... 795,637 644,022 (795,637) 644,022
Net proceeds from sale of mortgage
receivables.................................... 48,129 48,129
Purchase of property and equipment.............. (23) (3,548) (3,571)
Increase in restricted cash..................... (8,275) (8,275)
Net change in investment in affiliates.......... (9,998) (3,921) (2) 13,921
-------- --------- --------- --------- ---------
Net cash provided (used) by investment
activities..................................... (10,021) 104,267 (151,115) 13,921 (42,948)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............. 514,500 514,500
Payments on bank line of credit............... (584,100) (584,100)
Net increase in commercial paper
warehouse facility.......................... 95,989 95,989
Net increase in mortgage warehouse facility... 6,936 6,936
Payments on automobile receivables-
backed notes................................ (9,551) (9,551)
Payments on notes payable....................... (598) (4) (602)
Net change in due (to) from affiliates.......... 10,996 (37,564) 26,568
Proceeds from issuance of common stock.......... 7,066 13,921 (13,921) 7,066
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities....................................... 17,464 (100,232) 126,927 (13,921) 30,238
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... (5,013) 1,253 (3,760)
Cash and cash equivalents at beginning of
period........................................... 3,988 2,039 6,027
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period........ $ $ (1,025) $ 3,292 $ $ 2,267
======== ========= ========= ========= =========
</TABLE>
F-42
<PAGE>
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY HAND OR OVERNIGHT COURIER:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-5088 (OH)
or
(212) 240-8938 (NY)
Confirm by Telephone: (212) 240-8841 (NY)
1-800-346-5153
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier, or registered or certified mail)
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
OFFER TO EXCHANGE ALL OUTSTANDING 9 1/4%
SENIOR NOTES DUE 2004
($50,000,000 PRINCIPAL AMOUNT) FOR 9 1/4%
SENIOR NOTES DUE 2004
AMERICREDIT CORP.
----------------------
PROSPECTUS
----------------------
________________ __, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY FOR
MONETARY DAMAGES
(a) The Articles of Incorporation, as amended to date (the "Articles of
Incorporation"), of AmeriCredit Corp. (the "Company"), together with its Bylaws,
provide that the Company shall indemnify officers and directors, and may
indemnify its other employees and agents, to the fullest extent permitted by
law. The laws of the State of Texas permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are or
have been a party to or are threatened to be made a party to litigation against
judgements, fines, settlements and reasonable expenses under certain
circumstances.
(b) The Company has also adopted provisions in its Articles of
Incorporation that limit the liability of its directors to the fullest extent
permitted by the laws of the State of Texas. Under the Company's Articles of
Incorporation, and as permitted by the laws of the State of Texas, a director is
not liable to the Company or its shareholders for breach of fiduciary duty. Such
limitation does not affect liability for: (i) a breach of the director's duty of
loyalty to the Company or its shareholders or members; (ii) an act or omission
not in good faith that constitutes a breach of duty of the director to the
Company or an act or omission that involves intentional misconduct or a knowing
violation of the law; (iii) a transaction from which the director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or (iv) an act or omission for which
the liability of a director is expressly provided by an applicable statute.
II-1
<PAGE>
ITEM 21. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.1 (1) -- Articles of Incorporation of the Company, filed May 18,
1988, and Articles of Amendment to Articles of
Incorporation, filed August 24, 1988 (Exhibit 3.1)
3.2 (1) -- Amendment to Articles of Incorporation, filed October
18, 1989 (Exhibit 3.2)
3.3 (5) -- Articles of Amendment to Articles of Incorporation of
the Company, filed November 12, 1992 (Exhibit 3.3)
3.4 (12) -- Bylaws of the Company, as amended (Exhibit 3.4)
4.1 (4) -- Specimen stock certificate evidencing the Common
4.2 (14) -- Rights Agreement, dated August 28, 1997, between the
Company and ChaseMellon Shareholder Services, L.L.C.
(Exhibit 1)
5.1 (18) -- Opinion of Jenkens & Gilchrist, a Professional
Corporation
10.1 (1) -- 1989 Stock Option Plan for Non-Employee Directors of
the Company (Exhibit 10.4)
10.2 (1) -- 1989 Stock Option Plan (with Stock Appreciation Rights)
for the Company (Exhibit 10.5)
10.3 (2) -- Amendment No. 1 to the 1989 Stock Option Plan the
Company (Exhibit 4.6)
10.4 (3) -- 1990 Stock Option Plan for Non-Employee Directors of
the Company (Exhibit 10.14)
10.5 (4) -- 1991 Key Employee Stock Option Plan of the Company
(Exhibit 10.10)
10.6 (4) -- 1991 Non-employee Director Stock Option Plan of the
Company (Exhibit 10.11)
10.7 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Clifton H. Morris, Jr. (Exhibit
10.18)
10.7.1 (12) -- Amendment No. 1 to Executive Employment Agreement,
dated May 1, 1997, between the Company and Clifton H.
Morris, Jr. (Exhibit 10.7.1)
10.8 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Michael R. Barrington (Exhibit
10.19)
10.8.1 (12) -- Amendment No. 1 to Executive Employment Agreement,
dated May 1, 1997, between the Company and Michael R.
Barrington (Exhibit 10.8.1)
10.9 (4) -- Executive Employment Agreement, dated January 30, 1991
between the Company and Daniel E. Berce (Exhibit 10.20)
10.9.1 (12) -- Amendment No. 1 to Executive Employment Agreement
between the Company and Daniel E. Berce dated May 1,
1997 (Exhibit 10.9.1)
10.10 (12) -- Amended and Restated Employment Agreement, dated
October 15, 1996, between the Company and Edward H.
Esstman (Exhibit 10.10)
10.10.1 (12) -- Amendment No. 1 to Amended and Restated Employment
Agreement, between the Company and Edward H. Esstman,
dated May 1, 1997 (Exhibit 10.10.1)
10.11 (12) -- Amended and Restated Employment Agreement, dated July
1, 1997, between the Company and Michael T. Miller
(Exhibit 10.11)
10.12 (6) -- Indenture, dated June 1, 1995, between AmeriCredit
Receivables Finance Corp. 1995-A and LaSalle National
Bank (Exhibit 10.15)
10.13 (6) -- Sale and Servicing Agreement, dated June 1, 1995,
between AmeriCredit Receivables Finance Corp. 1995-A,
AmeriCredit Financial Services, Inc., AmeriCredit
Receivables Corp. and LaSalle National Bank (Exhibit
10.16)
10.14 (15) -- Restated Revolving Credit Agreement, dated as of
October 3, 1997, between AmeriCredit Corp. And
subsidiaries, Wells Fargo Bank (Texas), National
Association, Bank One Texas, N.A. and other banks named
therein (Exhibit 10.1)
10.15 (7) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit
Corp.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.16 (13) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive
Plan for AmeriCredit Corp. (Exhibit 10.19)
10.17 (8) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1995-B, dated November 20,
1995, among AmeriCredit Financial Services, Inc.,
AmeriCredit Receivables Corp. and LaSalle National Bank
(Exhibit 10.1)
10.18 (9) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-A, dated February 12,
1996, among AmeriCredit Financial Services, Inc.,
AmeriCredit Receivables Corp. and LaSalle National Bank
(Exhibit 10.1)
10.19 (10) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-B, dated April 30,
1996, among AmeriCredit Financial Services, Inc., AFS
Funding Corp. and LaSalle National Bank (Exhibit 4.1)
10.20 (11) -- 1996 Limited Stock Option Plan for AmeriCredit
Corp.
10.21 (16) -- Indenture, dated as of February 4, 1997, between
AmeriCredit Corp. and subsidiaries and Bank One,
Columbus, NA, with form of 9 1/4% Senior Notes due
2004 attached as exhibit (Exhibit 10.2)
10.22 (16) -- Purchase Agreement, dated as of January 30, 1997,
between AmeriCredit Corp. and subsidiaries and Smith
Barney Inc., Montgomery Securities, Piper Jaffray
Inc. and Wheat First Butcher Singer (Exhibit 10.3)
10.23 (16) -- A/B Exchange Registration Rights Agreement, dated as
of February 4, 1997, between AmeriCredit Corp. and
subsidiaries and Smith Barney Inc., Montgomery
Securities, Piper Jaffray Inc. and Wheat First Butcher
Singer (Exhibit 10.4)
10.24 (18) -- Indenture, dated as of January 29, 1998, between
AmeriCredit Corp. and subsidiaries and Bank One,
NA, with form of 9 1/4% Senior Notes due 2004 attached
as exhibit
10.25 (18) -- Purchase Agreement, dated as of January 26, 1998,
between AmeriCredit Corp. and subsidiaries and Salomon
Brothers Inc and Credit Suisse First Boston
10.26 (18) -- C/D Exchange Registration Rights Agreement, dated as of
January 29, 1998, between AmeriCredit Corp. and
subsidiaries and Salomon Brothers Inc and Credit Suisse
First Boston
10.27 (15) -- Sale and Servicing Agreement, dated as of October 8,
1997, between CP Funding Corp., AmeriCredit Financial
Services, Inc., and The Chase Manhattan Bank (Exhibit
10.2)
10.28 (15) -- Funding Agreement, dated as of October 8, 1997, between
CP Funding Corp, Park Avenue Receivables Corporation,
The Chase Manhattan Bank, and other financial
institutions named therein (Exhibit 10.3)
10.29 (15) -- Financial Data Schedule
11.1 (15) -- Statement Re Computation of Per Share Earnings
12.1 (18) -- Statement Re Computation of Ratios
21.1 (18) -- Subsidiaries of the Company
23.1 (17) -- Consent of Coopers & Lybrand L.L.P.
23.2 (18) -- Consent of Jenkens & Gilchrist, a Professional
Corporation (included in its opinion filed in Exhibit
5.1)
24.1 (18) -- Power of Attorney (included on signature page hereto)
25.1 (18) -- Statement of Eligibility under the Trust Indenture Act
of 1939 on Form T-1
________________________________________________________________________________
</TABLE>
(1) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-31220 on Form S-1 filed by the Company with
the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-41203 on Form S-8 filed by the Company with
the Securities and Exchange Commission.
(3) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1990
filed by the Company with the Securities and Exchange Commission.
II-3
<PAGE>
(4) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1991, filed by the Company with the Securities and Exchange Commission.
(5) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1993, filed by the Company with the Securities and Exchange Commission.
(6) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1995, filed by the Company with the Securities and Exchange Commission.
(7) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1995, filed by the Company with the Securities and
Exchange Commission.
(8) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1995, filed by the Company with the Securities and
Exchange Commission.
(9) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996, filed by Company with the Securities and Exchange
Commission.
(10) Incorporated by reference to the exhibit shown in parenthesis included in
Form 8-K, dated May 16, 1996, filed by the AmeriCredit Automobile
Receivables Trust 1996-B with the Securities and Exchange Commission.
(11) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1996, filed by the Company with the Securities and
Exchange Commission.
(12) Incorporated by reference to exhibit shown in parenthesis included in the
Company's Annual Report on Form 10-K for the period ended June 30, 1997,
filed by the Company with the Securities and Exchange Commission.
(13) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1997, filed by the Company with the Securities and
Exchange Commission.
(14) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Report on Form 8-K, dated August 28, 1997, filed by the
Company with the Securities and Exchange Commission.
(15) Incorporated by reference to exhibit shown in parenthesis included in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1997 filed by the Company with the Securities and Exchange
Commission.
(16) Incorporated by reference to the exhibit shown in parenthesis included
in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997 filed by the Company with the Securities and
Exchange Commission.
(17) Filed herewith. Powers of Attorney for the Guarantors are filed herewith
on the signature pages of the Guarantors.
(18) To be filed by amendment.
__________________
II-4
<PAGE>
(b) Financial Schedules.
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are either not required
under the related instructions, are inapplicable, or the required information is
included elsewhere in the Consolidated Financial Statements and incorporated
herein by reference.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Company hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Exchange Offer Registration
Statement through the date of responding to the request.
(c) The undersigned Company hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Exchange Offer Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the County of Tarrant, State
of Texas, on February 24, 1998.
AMERICREDIT CORP.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive February 24, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Vice Chairman of the Board, Chief Operating February 24, 1998
- ---------------------------- Officer and President
Michael R. Barrington
/s/ Daniel E. Berce Vice Chairman of the Board and Chief February 24, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Edward H. Esstman President of AmeriCredit Financial February 24, 1998
- ---------------------------- Services, Inc., Executive Vice President-Auto
Edward H. Esstman Finance Division and Director
Director February ___, 1998
- ----------------------------
James A. Greer
Director February ___, 1998
- ----------------------------
Gerald W. Haddock
Director February ___, 1998
- ----------------------------
Douglas K. Higgins
/s/ Kenneth H. Jones, Jr. Director February 24, 1998
- ----------------------------
Kenneth H. Jones, Jr.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Tarrant,
State of Texas, on February 24, 1998.
AMERICREDIT FINANCIAL SERVICES, INC.
By: /s/ Michael R. Barrington
----------------------------------------------
Michael R. Barrington
Vice Chairman of the Board and Chief Executive
Officer
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael R. Barrington Vice Chairman of the Board and Chief Executive February 24, 1998
- ---------------------------- Officer
Michael R. Barrington (Principal Executive Officer)
/s/ Daniel E. Berce Vice Chairman of the Board and Chief Financial February 24, 1998
- ---------------------------- Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Edward H. Esstman President, Chief Operating Officer and Director February 24, 1998
- ----------------------------
Edward H. Esstman
/s/ Clifton H. Morris, Jr. Chairman of the Board February 24, 1998
- ----------------------------
Clifton H. Morris, Jr.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Tarrant,
State of Texas, on February 24, 1998.
AMERICREDIT OPERATING CO., INC.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board February 24, 1998
- ----------------------------
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Vice Chairman of the Board and Chief February 24, 1998
- ----------------------------
Michael R. Barrington Executive Officer
/s/ Daniel E. Berce Vice Chairman of the Board and Chief February 24, 1998
- ----------------------------
Daniel E. Berce Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Tarrant,
State of Texas, on February 24, 1998.
ACF INVESTMENT CORP.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive February 24, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Daniel E. Berce Vice Chairman of the Board and Chief February 24, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Michael R. Barrington Vice Chairman of the Board, President and February 24, 1998
- ---------------------------- Chief Operating Officer
Michael R. Barrington
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Tarrant,
State of Texas, on February 24, 1998.
AMERICREDIT PREMIUM FINANCE, INC.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive February 24, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Director February 24, 1998
- ----------------------------
Michael R. Barrington
/s/ Daniel E. Berce President, Chief Financial Officer, Treasurer February 24, 1998
- ---------------------------- and Director
Daniel E. Berce (Principal Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Tarrant,
State of Texas, on February 24, 1998.
AMERICREDIT CORPORATION OF CALIFORNIA
By: /s/ Michael R. Barrington
----------------------------------------------
Michael R. Barrington
Vice Chairman of the Board
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board February 24, 1998
- ----------------------------
Clifton H. Morris, Jr.
/s/ Michael R. Barrington Vice Chairman of the Board February 24, 1998
- ---------------------------- (Principal Executive Officer)
Michael R. Barrington
/s/ Daniel E. Berce Vice Chairman of the Board and Chief February 24, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Michael Hughes President and Director February 24, 1998
- ----------------------------
Michael Hughes
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(Registration No. 333-_______) of our report, which includes an explanatory
paragraph regarding AmeriCredit Corp. changing its method of accounting for
transfers and servicing of financial assets and extinguishment of liabilities,
dated August 6, 1997, on our audits of the consolidated financial statements of
AmeriCredit Corp. as of June 30, 1997 and 1996, and for the years ended June 30,
1997, 1996 and 1995. We also consent to the reference to our firm under the
caption "Experts."
/s/Coopers & Lybrand L.L.P.
Fort Worth, Texas
February 25, 1998
