<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________________
Commission file number 1-10667
------------------------------------------------
AmeriCredit Corp.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2291093
- ------------------------------------ -------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Bailey Avenue, Fort Worth, Texas 76107
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(817) 332-7000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
There were 63,063,107 shares of common stock, $.01 par value outstanding as of
January 31, 1999.
<PAGE>
AMERICREDIT CORP.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C> <C>
Item 1. Financial Statements Page
Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998...................... 3
Consolidated Statements of Income and Comprehensive
Income - Three Months and Six Months Ended
December 31, 1998 and 1997............................... 4
Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1998 and 1997.............. 5
Notes to Consolidated Financial
Statements............................................... 6
Item 2.Management's Discussion and
Analysis of Financial Condition
and Results of Operations......................... 18
Item 3.Quantitative and Qualitative Disclosures About
Market Risk....................................... 32
Part II. OTHER INFORMATION
SIGNATURE..................................................................35
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 68,709 $ 33,087
Receivables held for sale, net 345,654 342,853
Interest-only receivables from Trusts 170,162 131,694
Investments in Trust receivables 123,627 98,857
Restricted cash 87,912 55,758
Property and equipment, net 31,599 23,385
Other assets 37,742 28,037
------- --------
Total assets $865,405 $713,671
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $236,922 $165,608
Senior notes 175,000 175,000
Other notes payable 11,022 6,410
Accrued taxes and expenses 56,266 47,132
Deferred income taxes 48,886 31,673
-------- ---------
Total liabilities 528,096 425,823
-------- --------
Shareholders' equity:
Preferred Stock, $.01 par value
per share; 20,000,000 shares
authorized, none issued
Common stock, $.01 par value
per share; 120,000,000 shares
authorized; 70,564,880 and
69,272,948 shares issued 706 693
Additional paid-in capital 242,138 230,269
Accumulated other comprehensive income 11,611 7,234
Retained earnings 105,628 72,770
-------- --------
360,083 310,966
Treasury stock, at cost
(7,546,433 and 7,667,318 shares) (22,774) (23,118)
-------- --------
Total shareholders' equity 337,309 287,848
-------- --------
Total liabilities and shareholders'
equity $865,405 $713,671
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
3
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Income and Comprehensive Income
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Finance charge income $16,260 $13,129 $33,177 $26,190
Gain on sale of receivables 38,900 23,655 74,020 44,335
Servicing fee income 21,146 11,882 38,011 22,171
Other income 2,013 582 2,877 1,022
------- ------ ------- -------
78,319 49,248 148,085 93,718
------- ------- ------- -------
Costs and expenses:
Operating expenses 39,676 21,825 73,735 41,916
Provision for losses 2,115 1,849 4,303 3,755
Interest expense 8,274 6,206 16,619 12,045
------- ------- ------- -------
50,065 29,880 94,657 57,716
------- ------- ------- -------
Income before income taxes 28,254 19,368 53,428 36,002
Income tax provision 10,878 7,456 20,570 13,860
------- ------- ------- -------
Net income 17,376 11,912 32,858 22,142
------- ------ ------- -------
Other comprehensive income:
Unrealized gain on credit
enhancement assets 12,663 7,264 7,117 1,000
Less related income tax
provision (4,875) (2,797) (2,740) (385)
------ ------- ------- -------
Comprehensive income $25,164 $16,379 $37,235 $22,757
======= ======= ======= =======
Earnings per share:
Basic $ .28 $ .20 $ .52 $ .37
======= ======= ======= =======
Diluted $ .26 $ .18 $ .49 $ .34
======= ======= ======= =======
Weighted average shares 62,857,131 59,780,710 62,657,929 59,369,920
========== ========== ========== ==========
Weighted average shares and
assumed incremental
shares 66,750,045 64,813,118 66,918,992 64,398,534
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
4
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $32,858 $22,142
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,134 1,914
Provision for losses 4,303 3,755
Deferred income taxes 20,841 288
Non-cash servicing fee income (6,543) (7,176)
Non-cash gain on sale of auto receivables (70,403) (36,234)
Distributions from Trusts 24,921 16,864
Changes in assets and liabilities:
Other assets (3,797) (4,581)
Accrued taxes and expenses 9,134 1,882
------- -------
Net cash provided (used) by operating activities 15,448 (1,146)
------- -------
Cash flows from investing activities:
Purchases of auto receivables (1,219,493) (687,269)
Originations of mortgage receivables (124,446) (51,572)
Principal collections and recoveries on
receivables 9,469 22,406
Net proceeds from sale of auto receivables 1,205,877 673,417
Net proceeds from sale of mortgage receivables 121,489 48,129
Initial deposits to restricted cash (36,250) (31,851)
Purchases of property and equipment (6,162) (3,571)
Increase in other assets (6,057) (2,541)
------- -------
Net cash used by investing activities (55,573) (32,852)
------- -------
Cash flows from financing activities:
Net change in warehouse credit facilities 71,314 33,325
Payments on other notes payable (1,425) (10,153)
Proceeds from issuance of common stock 5,858 7,066
------- -------
Net cash provided by financing activities 75,747 30,238
------- -------
Net increase (decrease) in cash and cash equivalents 35,622 (3,760)
Cash and cash equivalents at beginning of period 33,087 6,027
------- -------
Cash and cash equivalents at end of period $68,709 $ 2,267
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
5
<PAGE>
AMERICREDIT CORP.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
AmeriCredit Corp. and its wholly-owned subsidiaries ("the Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The consolidated financial statements as of December 31, 1998 and for the
periods ended December 31, 1998 and 1997 are unaudited, but in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such
interim periods. Certain prior year amounts have been reclassified to conform
to the current period presentation. The results for interim periods are not
necessarily indicative of results for a full year.
The interim period financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. These interim period financial statements should be
read in conjunction with the Company's consolidated financial statements
which are included in the Company's Annual Report on Form 10-K/A for the year
ended June 30, 1998.
The Company's Board of Directors approved a two for one stock split on August
6, 1998 which was effected in the form of a 100% stock dividend for
shareholders of record on September 11, 1998 and paid on September 30, 1998.
In connection with the stock split, $347,000 was transferred from retained
earnings to common stock representing the par value of the additional shares
issued. All share data for the periods presented, except shares authorized,
have been adjusted to reflect the stock split on a retroactive basis.
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), effective
July 1, 1998. SFAS 130 establishes standards for reporting comprehensive
income and its components in a full set of financial statements. The new
standard requires that all items that are required to be recognized under
accounting standards as components of comprehensive income, including an
amount representing total comprehensive income, be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Pursuant to SFAS 130, the Company has reported comprehensive
income in the accompanying Consolidated Statements of Income and
Comprehensive Income. All prior periods presented have been restated to
conform to the requirements of SFAS 130.
6
<PAGE>
NOTE 2 - RESTATEMENT
On January 14, 1999, the Company issued a press release reporting a
restatement of its financial statements for the fiscal years ended June 30,
1998, 1997, and 1996 as well as for the first quarter of fiscal 1999. Interim
periods in the fiscal years ended June 30, 1998, 1997 and 1996 were also
restated. As required by the Financial Accounting Standards Board's ("FASB")
Special Report, "A Guide to Implementation of Statement 125 on Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, Second Edition", dated December 1998, and related guidance set
forth in statements made by the staff of the Securities and Exchange
Commission ("SEC") on December 8, 1998, the Company retroactively changed its
method of measuring and accounting for credit enhancement assets to the
cash-out method from the cash-in method.
Initial deposits to restricted cash accounts and subsequent cash flows
received by securitization trusts sponsored by the Company accumulate as
credit enhancement assets until certain targeted levels are achieved, after
which cash is distributed to the Company on an unrestricted basis. Under the
cash-in method previously used by the Company, (i) the assumed discount
period for measuring the present value of credit enhancement assets ended
when cash flows were received by the securitization trusts and (ii) initial
deposits to restricted cash accounts were recorded at face value. Under the
cash-out method required by the FASB and SEC, the assumed discount period for
measuring the present value of credit enhancement assets ends when cash,
including return of the initial deposits, is distributed to the Company on an
unrestricted basis.
The change to the cash-out method results only in a difference in the timing
of revenue recognition from a securitization and has no effect on the total
cash flows of such transactions. While the total amount of revenue recognized
over the term of a securitization transaction is the same under either
method, the cash-out method results in (i) lower initial gains on the sale of
receivables due to the longer discount period and (ii) higher subsequent
servicing fee income from accretion of the additional cash-out discount.
7
<PAGE>
NOTE 3 - RECEIVABLES HELD FOR SALE
Receivables held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
----------- ----------
<S> <C> <C>
Auto receivables $330,036 $334,110
Less allowance for losses (8,377) (12,756)
-------- --------
Auto receivables, net 321,659 321,354
Mortgage receivables 23,995 21,499
-------- --------
$345,654 $342,853
========= ========
</TABLE>
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $10,657 $13,549 $12,756 $12,946
Provision for losses 2,115 1,849 4,303 3,755
Acquisition fees 13,383 10,681 27,429 22,046
Allowance related to auto receivables
sold to Trusts (16,213) (12,007) (32,688) (21,773)
Net charge-offs (1,565) (2,722) (3,423) (5,624)
------ ------ ------- -------
Balance at end of period $ 8,377 $11,350 $ 8,377 $11,350
====== ====== ====== ======
</TABLE>
NOTE 4 - CREDIT ENHANCEMENT ASSETS
As of December 31, 1998 and June 30, 1998, the Company was servicing $2,752.4
million and $1,968.4 million, respectively, of auto receivables which have
been sold to certain special purpose financing trusts (the "Trusts"). The
Company has retained an interest in these receivables in the form of credit
enhancement assets.
Credit enhancement assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
---- ----
<S> <C> <C>
Interest-only receivables from Trusts $170,162 $131,694
Investments in Trust receivables 123,627 98,857
Restricted cash 87,912 55,758
------- -------
$381,701 $286,309
======= =======
</TABLE>
8
<PAGE>
A summary of credit enhancement assets is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $315,702 $197,010 $286,309 $161,395
Non-cash gain on sale of auto
receivables 42,089 15,672 70,403 36,234
Accretion of present value discount 7,798 4,650 14,943 8,176
Initial deposits to restricted cash 19,500 5,250 36,250 31,851
Change in unrealized gain 12,663 7,264 7,117 1,000
Distributions from Trusts (12,451) (8,054) (24,921) (16,864)
Permanent impairment write-down (3,600) (1,000) (8,400) (1,000)
-------- ------- ------- ------
Balance at end of period $381,701 $220,792 $381,701 $220,792
======== ======== ======== ========
</TABLE>
A summary of the allowance for losses included as a component of the
interest-only receivables is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 217,891 $ 94,549 $179,359 $74,925
Assumptions for cumulative credit
losses 68,597 35,152 131,190 69,318
Permanent impairment write-down 3,600 1,000 8,400 1,000
Net charge-offs (33,489) (17,907) (62,350) (32,449)
--------- -------- ------- --------
Balance at end of period $ 256,599 $ 112,794 $256,599 $112,794
========= ========= ======== ========
</TABLE>
NOTE 5 - WAREHOUSE CREDIT FACILITIES
Warehouse credit facilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
----------- --------
<S> <C> <C>
Commercial paper facility $214,585 $140,708
Mortgage facility 22,337 24,900
------ -------
$236,922 $165,608
======== ========
</TABLE>
In September 1998, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks and increased the amount of structured warehouse
financing available under the agreement from $245 million to $505 million.
9
<PAGE>
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 agent. The agent provides funding under the note to CPFC pursuant to an
advance formula and CPFC forwards the funds to the Company in consideration
for the transfer of auto receivables. While CPFC is a consolidated subsidiary
of the Company, CPFC is a separate legal entity and the auto receivables
transferred to CPFC and the other assets of CPFC are legally owned by CPFC
and not available to creditors of AmeriCredit Corp. or its other
subsidiaries. Advances under the note bear interest at commercial paper,
London Interbank Offered Rates ("LIBOR") or prime rates plus specified fees
depending upon the source of funds provided by the agent to CPFC. The funding
agreement, which expires in September 1999, contains various covenants
requiring certain minimum financial ratios and results.
The Company has a revolving credit agreement with a group of banks under
which the Company may borrow up to $235 million, subject to a defined
borrowing base. Borrowings under the credit agreement are collateralized by
certain auto receivables and bear interest, based upon the Company's option,
at either the prime rate or LIBOR plus 1.25%. The Company is also required to
pay an annual commitment fee equal to 1/4% of the unused portion of the
credit agreement. The credit agreement, which expires in April 1999, contains
various restrictive covenants requiring certain minimum financial ratios and
results and placing certain limitations on the incurrence of additional debt,
capital expenditures, cash dividends and repurchase of common stock. There
were no outstanding balances under the credit agreement as of December 31,
1998.
In February 1999, the Company renewed its mortgage warehouse facility with a
bank under which the Company may borrow up to $75 million, subject to a
defined borrowing base. Borrowings under the facility are collateralized by
certain mortgage receivables and bear interest, based upon the Company's
option, at either the prime rate or LIBOR plus 1.50%. The Company is also
required to pay an annual commitment fee equal to 1/4% of the unused portion
of the facility. The facility expires in July 1999.
NOTE 6 - SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended
December 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Interest costs (none capitalized) $15,728 $12,661
Income taxes (14,000) 6,915
</TABLE>
During the six months ended December 31, 1998 and 1997, the Company entered
into lease agreements for property and equipment of $6,037,000 and
$1,543,000, respectively.
10
<PAGE>
NOTE 7 - GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's
Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are
wholly-owned consolidated subsidiaries of the Company and are jointly,
severally and unconditionally liable for the obligations represented by the
Senior Notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the
combined Non-Guarantor Subsidiaries provide information that is more
meaningful in understanding the financial position of the Subsidiary
Guarantors than separate financial statements of the Subsidiary Guarantors.
Therefore, the separate financial statements of the Subsidiary Guarantors are
not deemed material.
The following supplemental schedules present consolidating financial
information for (i) AmeriCredit Corp. (on a parent only basis), (ii) the
combined Subsidiary Guarantors, (iii) the combined Non-Guarantor
Subsidiaries, (iv) an elimination column for adjustments to arrive at the
information for the Company and its subsidiaries on a consolidated basis and
(v) the Company and its subsidiaries on a consolidated basis.
Investments in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment
accounts and earnings. The principal elimination entries set forth below
eliminate investments in subsidiaries and intercompany balances and
transactions.
11
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
December 31, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ $ 70,660 $ (1,951) $ $ 68,709
Receivables held for sale, net 97,728 247,926 345,654
Interest-only receivables
from Trusts (1,833) 1,551 170,444 170,162
Investments in Trust receivables 895 122,732 123,627
Restricted cash 2,402 3,300 82,210 87,912
Property and equipment, net 357 31,192 50 31,599
Other assets 8,441 14,681 14,620 37,742
Due (to) from affiliates 354,415 (231,872) (122,543)
Investment in affiliates 148,681 13,921 (162,602)
------- -------- -------- --------- --------
Total assets $512,463 $ 2,056 $513,488 $(162,602) $865,405
======== ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ $ 22,337 $214,585 $ $236,922
Senior notes 175,000 175,000
Other notes payable 10,999 23 11,022
Accrued taxes and expenses 11,792 43,202 1,272 56,266
Deferred income taxes (22,637) (22,497) 94,020 48,886
-------- -------- -------- --------- --------
Total liabilities 175,154 43,065 309,877 528,096
-------- -------- -------- --------- --------
Shareholders' equity:
Common stock 706 203 3 (206) 706
Additional paid-in capital 242,138 108,242 13,920 (122,162) 242,138
Accumulated other
comprehensive income 11,611 8,350 (8,350) 11,611
Retained earnings 105,628 (149,454) 181,338 (31,884) 105,628
-------- --------- -------- --------- --------
360,083 (41,009) 203,611 (162,602) 360,083
Treasury stock (22,774) (22,774)
-------- --------- -------- --------- --------
Total shareholders' equity 337,309 (41,009) 203,611 (162,602) 337,309
-------- --------- -------- --------- --------
Total liabilities and
shareholders' equity $512,463 $ 2,056 $513,488 $(162,602) $865,405
======== ========= ======== ========= ========
</TABLE>
12
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
June 30, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ $ 30,157 $ 2,930 $ $ 33,087
Receivables held for sale, net 178,219 164,634 342,853
Interest-only receivables (2,151) 3,623 130,222 131,694
from Trusts
Investments in Trust receivables 2,109 96,748 98,857
Restricted cash 55,758 55,758
Property and equipment, net 175 23,210 23,385
Other assets 8,911 13,003 6,123 28,037
Due (to) from affiliates 330,924 (226,892) (104,032)
Investment in affiliates 110,623 13,921 2 (124,546)
-------- -------- -------- --------- --------
Total assets $448,482 $ 37,350 $352,385 $(124,546) $713,671
======== ========= ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ $ 24,900 $140,708 $ $165,608
Senior notes 175,000 175,000
Other notes payable 6,384 26 6,410
Accrued taxes and expenses (2,280) 53,950 (4,538) 47,132
Deferred income taxes (18,470) (16,637) 66,780 31,673
-------- -------- -------- --------- --------
Total liabilities 160,634 62,239 202,950 425,823
-------- -------- -------- --------- --------
Shareholders' equity:
Common stock 693 203 3 (206) 693
Additional paid-in capital 230,269 108,336 13,921 (122,257) 230,269
Accumulated other
comprehensive income 7,234 7,234 (7,234) 7,234
Retained earnings 72,770 (133,428) 128,277 5,151 72,770
-------- -------- -------- --------- --------
310,966 (24,889) 149,435 (124,546) 310,966
Treasury stock (23,118) (23,118)
-------- -------- -------- --------- --------
Total shareholders'equity 287,848 (24,889) 149,435 (124,546) 287,848
-------- -------- -------- --------- --------
Total liabilities and
shareholders' equity $448,482 $ 37,350 $352,385 $(124,546) $713,671
======== ======== ======== ========= ========
</TABLE>
13
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Six Months Ended December 31, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income $ $ 18,890 $ 14,287 $ $ 33,177
Gain on sale of receivables (6,394) 4,762 75,652 74,020
Servicing fee income 59,497 5,190 (26,676) 38,011
Other income 14,736 2,124 693 (14,676) 2,877
Equity in income of
affiliates 37,035 (37,035)
-------- -------- -------- --------- --------
45,377 85,273 95,822 (78,387) 148,085
-------- -------- -------- --------- --------
Costs and expenses:
Operating expenses 7,687 92,599 125 (26,676) 73,735
Provision for losses 1,850 2,453 4,303
Interest expense 8,999 11,320 10,976 (14,676) 16,619
-------- -------- -------- --------- --------
16,686 105,769 13,554 (41,352) 94,657
-------- -------- -------- --------- --------
Income before income taxes 28,691 (20,496) 82,268 (37,035) 53,428
Income tax provision (4,167) (4,470) 29,207 20,570
-------- -------- -------- --------- --------
Net income $32,858 $(16,026) $ 53,061 $ (37,035) $32,858
======== ======== ======== ========= ========
</TABLE>
14
<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 45,917 44,335
Servicing fee income 42,350 6,607 (26,786) 22,171
Other income 14,920 397 393 (14,688) 1,022
Equity in income of
affiliates 23,002 (23,002)
-------- -------- -------- --------- --------
33,019 66,281 58,894 (64,476) 93,718
-------- -------- -------- --------- --------
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 21,753 (13,694) 50,945 (23,002) 36,002
Income tax provision (389) (4,270) 18,519 13,860
-------- -------- -------- --------- --------
Net income $ 22,142 $ (9,424) $ 32,426 $ (23,002) $ 22,142
======== ======== ======== ========= ========
</TABLE>
15
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Six Months Ended December 31, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income $32,858 $ (16,026) $ 53,061 $ (37,035) $32,858
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 42 4,091 1 4,134
Provision for losses 1,850 2,453 4,303
Deferred income taxes 2,202 (5,860) 24,499 20,841
Non-cash servicing fee income (6,543) (6,543)
Non-cash gain on sale of auto
receivables (70,403) (70,403)
Distributions from Trusts 24,921 24,921
Equity in income of affiliates (37,035) 37,035
Changes in assets and liabilities:
Other assets 470 (1,827) (2,440) (3,797)
Accrued taxes and expenses 14,072 (10,748) 5,810 9,134
-------- ----------- ---------- ----------- --------
Net cash provided by operating
activities 12,609 (28,520) 31,359 15,448
-------- ----------- ---------- ----------- --------
Cash flows from investing activities:
Purchases of auto receivables (1,219,493) (1,305,107) 1,305,107 (1,219,493)
Originations of mortgage receivables (124,446) (124,446)
Principal collections and recoveries on
receivables (4,385) 13,854 9,469
Net proceeds from sale of auto receivables 1,305,107 1,205,877 (1,305,107) 1,205,877
Net proceeds from sale of mortgage
receivables 121,489 121,489
Initial deposits to restricted cash (2,402) (3,300) (30,548) (36,250)
Purchases of property and equipment (224) (5,887) (51) (6,162)
Increase in other assets (6,057) (6,057)
-------- ----------- ---------- ---------- ---------
Net cash used by investing activities (2,626) 69,085 (122,032) (55,573)
-------- ----------- ---------- ---------- ---------
Cash flows from financing activities:
Net change in warehouse credit facilities (2,563) 73,877 71,314
Payments on other notes payable (1,422) (3) (1,425)
Proceeds from issuance of common stock 5,514 275 69 5,858
Net change in due (to) from affiliates (14,075) 2,229 11,846
-------- ----------- ---------- ----------- ---------
Net cash provided by financing
activities (9,983) (62) 85,792 75,747
-------- ----------- ---------- ----------- ---------
Net increase in cash and cash equivalents 40,503 (4,881) 35,622
Cash and cash equivalents at beginning of
period 30,157 2,930 33,087
-------- ----------- ---------- ----------- ---------
Cash and cash equivalents at end of period $ $ 70,660 $ (1,951) $ $ 68,709
======== ========== ========== =========== =========
</TABLE>
16
<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 flow from operating activities:
Net income $ 22,142 $ (9,424) $ 32,426 $ (23,002) $ 22,142
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 9,193 2,648 (11,553) 288
Non-cash servicing fee income (7,176) (7,176)
Non-cash gain on sale of auto
receivables (36,234) (36,234)
Distributions from Trusts 16,864 16,864
Equity in income of affiliates (23,002) 23,002
Changes in assets and liabilities:
Other assets (962) (1,611) (2,008) (4,581)
Accrued taxes and expenses 1,253 (589) 1,218 1,882
------------ --------- ---------- ---------- ----------
Net cash provided by operating
activities 8,646 (3,329) (6,463) (1,146)
------------ --------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of auto receivables (687,269) (791,332) 791,332 (687,269)
Originations of mortgage receivables (51,572) (51,572)
Principal collections and recoveries on
receivables 11,340 11,066 22,406
Net proceeds from sale of auto receivables 791,332 673,417 (791,332) 673,417
Net proceeds from sale of mortgage receivables 48,129 48,129
Initial deposits to restricted cash (31,851) (31,851)
Purchases of property and equipment (23) (3,548) (3,571)
Net change in investment in affiliates (9,998) (3,921) (2) 13,921
Increase in other assets (2,541) (2,541)
------------ --------- ---------- ---------- ----------
Net cash used by investing
activities (10,021) 104,491 (141,243) 13,921 (32,852)
------------ --------- ---------- ---------- ----------
Cash flows from financing activities:
Net change in warehouse credit facilities (62,664) 95,989 33,325
Payments on other notes payable (598) (4) (9,551) (10,153)
Proceeds from issuance of common stock 7,066 13,921 (13,921) 7,066
Net change in due (to) from affiliates (5,093) (43,507) 48,600
------------ --------- ---------- ---------- ----------
Net cash provided by financing
activities 1,375 (106,175) 148,959 (13,921) 30,238
------------ --------- ---------- ---------- ----------
Net 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>
17
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates earnings and cash flow primarily from the purchase,
securitization and servicing of auto receivables. The Company purchases auto
finance contracts from franchised and select independent automobile
dealerships. To fund the acquisition of receivables prior to securitization,
the Company utilizes borrowings under its warehouse credit facilities. The
Company generates finance charge income on its receivables pending
securitization ("receivables held for sale") and pays interest expense on
borrowings under its warehouse credit facilities.
The Company sells receivables to securitization trusts ("Trusts") that, in
turn, sell asset-backed securities to investors. By securitizing its
receivables, the Company is able to lock in the gross interest rate spread
between the yield on such receivables and the interest rate payable on the
asset-backed securities. The Company recognizes a gain on the sale of
receivables to the Trusts which represents the difference between the sale
proceeds to the Company, net of transaction costs, and the Company's net
carrying value of the receivables, plus the present value of the estimated
future excess cash flows to be received by the Company over the life of the
securitization. Excess cash flows result from the difference between the
interest received from the obligors on the receivables and the interest paid
to investors in the asset-backed securities, net of credit losses and
expenses.
Excess cash flows from the Trusts are initially utilized to fund credit
enhancement requirements to secure financial guaranty insurance policies
issued by an insurance company to protect investors in the asset-backed
securities from losses. Once predetermined credit enhancement requirements
are reached and maintained, excess cash flows are distributed to the Company
on an unrestricted basis. In addition to excess cash flows, the Company earns
monthly base servicing fee income of 2.25% per annum on the outstanding
principal balance of receivables securitized ("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"),
which originates and sells mortgage loans. The acquisition was accounted for
as a purchase and the results of operations for AMS have been included in the
consolidated financial statements since the acquisition date. Receivables
originated in this business are referred to as mortgage receivables. Such
receivables are generally packaged and sold for cash on a servicing released
whole-loan basis. The Company recognizes a gain at the time of sale.
18
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 AS COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1997
REVENUE:
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Auto:
Held for sale $ 279,693 $ 244,597
Serviced 2,625,065 1,248,876
--------- ---------
2,904,758 1,493,473
Mortgage 27,560 14,565
--------- ---------
$2,932,318 $1,508,038
========== ==========
</TABLE>
Average managed receivables outstanding increased by 94% as a result of
higher loan purchase volume. The Company purchased $599.1 million of auto
loans during the three months ended December 31, 1998, compared to purchases
of $341.2 million during the three 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 165 auto lending branch offices as of December 31, 1998, compared to
108 as of December 31, 1997.
The Company originated $85.5 million of mortgage loans during the three months
ended December 31, 1998, compared to $24.2 million during the three months ended
December 31, 1997.
Finance charge income consisted of the following (in thousands):
Three Months Ended
December 31,
---------------------
1998 1997
---- ----
Auto $ 15,652 $ 12,786
Mortgage 608 343
------ -------
$ 16,260 $ 13,129
====== ======
The increase in finance charge income is due primarily to an increase of 14% in
average auto receivables held for sale in the three months ended December 31,
1998 versus the three months ended December 31, 1997. In addition, the Company's
effective yield on its auto receivables held for sale increased to 22.2% for the
three months ended December 31, 1998 from 20.7% for the three months ended
December 31, 1997. The effective yield is higher than the
19
<PAGE>
contractual rates of the Company's auto finance contracts as a result of
finance charge income earned between the date the auto finance contract is
originated by the automobile dealership and the date the auto finance
contract is funded by the Company.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
Auto $37,168 $22,601
Mortgage 1,732 1,054
------ -------
$38,900 $23,655
======= =======
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$650.0 million of receivables in the three months ended December 31, 1998 as
compared to $350.0 million of receivables sold in the three months ended
December 31, 1997. The gains amounted to 5.7% and 6.5% of the sales proceeds
for the three months ended December 31, 1998 and 1997, respectively. The gain
on sale for the three months ended December 31, 1998 includes a cash hedging
loss of $5.8 million.
Significant assumptions used in determining the gain on sale of auto receivables
were as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
Cumulative credit losses 10.6% 10.0%
Discount rate used to estimate
present value:
Interest-only receivables from Trusts 12.0% 12.0%
Investments in Trust receivables 7.8% 7.8%
Restricted cash 7.8% 7.8%
</TABLE>
The discount rates used to estimate the present value of credit enhancement
assets are based on the relative risk of each asset type. Interest-only
receivables represent estimated future excess cash flows in the Trusts, which
involves a greater degree of risk than investments in Trust receivables and
restricted cash. Investments in Trust receivables and restricted cash
represent assets currently held by the trustee and are senior to
interest-only receivables for credit enhancement purposes.
The increase in the gain on sale of mortgage receivables resulted from the
sale of $73.9 million of receivables in the three months ended December 31,
1998, compared to $23.2 million of receivables sold in the three months ended
December 31, 1997. The average premium received on sales decreased to 2.3%
for the three months ended December 31, 1998 from 4.6% for the three months
ended December 31, 1997.
20
<PAGE>
Servicing fee income increased to $21.1 million, or 3.2% of average serviced
auto receivables, for the three months ended December 31, 1998, as compared
to $11.9 million, or 3.8% of average serviced auto receivables, for the three
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. Servicing fee income for the
three months ended December 31, 1998 and 1997 includes charges of $3.6
million and $1.0 million, respectively, to increase credit loss reserves
related to certain of the Company's fiscal 1997 and 1996 securitization
transactions since the Company's current estimates of cumulative credit
losses for these transactions exceed the original estimates. The Company has
raised the assumptions for cumulative credit losses for securitization
transactions completed subsequent to fiscal 1997 compared to assumptions used
for transactions completed in fiscal 1997 and 1996. The growth in servicing
fee income exclusive of the aforementioned charge is attributable to the
increase in average serviced auto receivables outstanding for the three
months ended December 31, 1998 compared to the three months ended December
31, 1997.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 5.4% (5.1% excluding operating expenses of $2.5
million related to the mortgage business) for the three months ended December
31, 1998, compared to 5.8% (5.5% excluding operating expenses of $1.3 million
related to the mortgage business) for the three months ended December 31,
1997. 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
$17.9 million, or 82%, primarily due to the addition of auto lending branch
offices and management and auto loan processing and servicing staff.
The provision for losses increased to $2.1 million for the three months ended
December 31, 1998 from $1.8 million for the three months ended December 31,
1997 due to higher average amounts of auto receivables held for sale. As a
percentage of average receivables held for sale, the provision for losses was
3.0% for the three months ended December 31, 1998 and 1997, respectively.
Interest expense increased to $8.3 million for the three months ended
December 31, 1998 from $6.2 million for the three months ended December 31,
1997 due to higher debt levels. Average debt outstanding was $374.7 million
and $271.7 million for the three months ended December 31, 1998 and 1997,
respectively. The Company's effective rate of interest paid on its debt
decreased to 8.8% from 9.1% as a result of larger amounts of debt outstanding
under the Company's warehouse credit facilities for the three months ended
December 31, 1998. Interest rates on the warehouse credit facilities are
lower than rates on the Senior Notes.
21
<PAGE>
The Company's effective income tax rate was 38.5% for the three months ended
December 31, 1998 and 1997, respectively.
SIX MONTHS ENDED DECEMBER 31, 1998 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,
------------------------
1998 1997
----- ----
<S> <C> <C>
Auto:
Held for sale $ 284,969 $ 245,296
Serviced 2,419,905 1,130,318
--------- ---------
2,704,874 1,375,614
Mortgage 22,757 11,534
--------- ---------
$2,727,631 $1,387,148
========== ==========
</TABLE>
Average managed receivables outstanding increased by 97% as a result of
higher loan purchase volume. The Company purchased $1,224.1 million of auto
loans during the six months ended December 31, 1998, 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 165
auto lending branch offices as of December 31, 1998, compared to 108 as of
December 31, 1997.
The Company originated $124.4 million of mortgage loans during the six months
ended December 31, 1998, compared to $51.6 million during the six months
ended December 31, 1997.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1998 1997
----- ----
<S> <C> <C>
Auto $ 32,146 $ 25,645
Mortgage 1,031 545
-------- --------
$ 33,177 $ 26,190
======== ========
</TABLE>
The increase in finance charge income is due primarily to an increase of 16%
in average auto receivables held for sale in the six months ended December
31, 1998 versus the six months ended December 31, 1997. In addition, the
Company's effective yield on its auto receivables held for sale increased to
22.4% for
22
<PAGE>
the six months ended December 31, 1998 from 20.7% for the six months ended
December 31, 1997. The effective yield is higher than the contractual rates
of the Company's auto finance contracts as a result of finance charge income
earned between the date the auto finance contract is originated by the
automobile dealership and the date the auto finance contract is funded by the
Company.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
Auto $70,938 $42,091
Mortgage 3,082 2,244
------- -------
$74,020 $44,335
======= =======
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$1,220.0 million of receivables in the six months ended December 31, 1998 as
compared to $682.5 million of receivables sold in the six months ended
December 31, 1997. The gains amounted to 5.8% and 6.2% of the sales proceeds
for the six months ended December 31, 1998 and 1997, respectively. The gain
on sale for the six months ended December 31, 1998 includes a cash hedging
loss of $5.8 million.
Significant assumptions used in determining the gain on sale of auto
receivables were as follows:
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
Cumulative credit losses 10.8% 10.2%
Discount rate used to estimate
present value:
Interest-only receivables from Trusts 12.0% 12.0%
Investments in Trust receivables 7.8% 7.8%
Restricted cash 7.8% 7.8%
</TABLE>
The increase in the gain on sale of mortgage receivables resulted from the
sale of $121.5 million of receivables in the six months ended December 31,
1998, compared to $48.1 million of receivables sold in the six months ended
December 31, 1997. The average premium received on sales decreased to 2.5%
for the six months ended December 31, 1998 from 4.7% for the six months ended
December 31, 1997.
Servicing fee income increased to $38.0 million, or 3.1% of average serviced
auto receivables, for the six months ended December 31, 1998, as compared to
$22.2 million, or 3.9% 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
23
<PAGE>
auto receivables sold to the Trusts. Servicing fee income for the six months
ended December 31, 1998 and 1997 also includes charges of $8.4 million and
$1.0 million, respectively, to increase credit loss reserves related to
certain of the Company's fiscal 1997 and 1996 securitization transactions
since the Company's current estimates of cumulative credit losses for these
transactions exceed the original estimates. The Company has raised the
assumptions for cumulative credit losses for securitization transactions
completed subsequent to fiscal 1997 compared to assumptions used for
transactions completed in fiscal 1997 and 1996. The growth in servicing fee
income exclusive of the aforementioned charge is attributable to the increase
in average serviced auto receivables outstanding for the six months ended
December 31, 1998 compared to the six months ended December 31, 1997.
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 5.4% (5.1% excluding operating expenses of $4.4
million related to the mortgage business) for the six months ended December
31, 1998, compared 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
$31.8 million, or 76%, primarily due to the addition of auto lending branch
offices and management and auto loan processing and servicing staff.
The provision for losses increased to $4.3 million for the six months ended
December 31, 1998 from $3.8 million for the six months ended December 31,
1997 due to higher average amounts of auto receivables held for sale. As a
percentage of average receivables held for sale, the provision for losses was
3.0% for the six months ended December 31, 1998 and 1997, respectively.
Interest expense increased to $16.6 million for the six months ended December
31, 1998 from $12.0 million for the six months ended December 31, 1997 due to
higher debt levels. Average debt outstanding was $370.7 million and $257.6
million for the six months ended December 31, 1998 and 1997, respectively.
The Company's effective rate of interest paid on its debt decreased to 8.9%
from 9.3% as a result of larger amounts of debt outstanding under the
Company's warehouse credit facilities for the six months ended December 31,
1998. Interest rates on the warehouse credit facilities are lower than rates
on the Senior Notes.
The Company's effective income tax rate was 38.5% for the six months ended
December 31, 1998 and 1997, respectively.
CREDIT QUALITY
The Company provides financing in relatively high-risk markets, and therefore,
charge-offs are anticipated. The Company records a periodic provision for losses
as a charge to operations and a related allowance for losses in the
24
<PAGE>
consolidated balance sheets as a reserve against estimated losses in the
receivables held for sale portfolio. The Company typically purchases
individual finance contracts for a non-refundable acquisition fee on a
non-recourse basis. Such acquisition fees are also recorded in the
consolidated balance sheets as an allowance for losses. When the Company
sells auto receivables to the Trusts, the calculation of the gain on sale of
receivables is reduced by an estimate of cumulative credit losses expected
over the life of the auto receivables sold.
The Company sells mortgage receivables for cash on a servicing released,
whole-loan basis. Such receivables are generally held by the Company for less
than 90 days. Accordingly, no allowance for losses is provided by the Company
for the mortgage receivables.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports,
estimates of the value of the underlying collateral, economic conditions and
trends and other information in order to make the necessary judgments as to
the appropriateness of the assumptions for cumulative credit losses,
provisions for losses and allowance for losses. Although the Company uses
many resources to assess the adequacy of loss reserves, there is no precise
method for estimating the ultimate losses in the receivables portfolio.
25
<PAGE>
The following table presents certain data related to the receivables
portfolio (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------
Held for Sale
------------- Auto Managed Auto
Auto Mortgage Total Serviced Portfolio (2)
---- --------- ----- -------- -------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables $330,036 $ 23,995 $354,031 $2,752,384 $3,082,420
========== ==========
Allowance for losses (8,377) (8,377) $ (256,599)(1) $ (264,976)
-------- -------- -------- ========== ==========
Receivables, net $321,659 $ 23,995 $345,654
======== ======== ========
Number of outstanding contracts 25,059 268 255,258 280,317
======== ======== ========== ==========
Average amount of outstanding
contract (principal amount)
(in dollars) $ 13,170 $ 89,534 $ 10,783 $ 10,996
======== ======== ========== ==========
Allowance for losses as a percentage
of receivables 2.5% 9.3% 8.6%
======== ========== ==========
</TABLE>
(1) The allowance for losses related to serviced auto receivables is netted
against interest-only receivables from Trusts in the Company's
consolidated balance sheets.
(2) Includes auto receivables only.
The following is a summary of managed auto receivables which are (i) more
than 30 days delinquent, but not in repossession, and (ii) in
repossession(dollars in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
----------------- ----------------
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Delinquent contracts:
31 to 60 days $236,083 7.7% $122,035 7.6%
Greater than 60 days 87,443 2.8 57,186 3.6
------- --- ------- ----
323,526 10.5 179,221 11.2
In repossession 30,204 1.0 22,012 1.4
------- ---- ------- ----
$353,730 11.5% $201,233 12.6%
======= ===== ======= =====
</TABLE>
In accordance with its policies and guidelines, the Company at times offers
payment deferrals to consumers, whereby the consumer is allowed to move a
delinquent payment to the end of the loan by paying a fee (approximately the
interest portion of the payment deferred). Contracts receiving a payment
deferral as a quarterly percentage of average managed auto receivables
outstanding were 4.5% and 4.7% for the three months ended December 31, 1998
and 1997, respectively. The Company believes that payment deferrals granted
according to its policies and guidelines are an effective portfolio
management technique and result in higher ultimate cash collections from the
portfolio.
26
<PAGE>
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net charge-offs:
Held for sale $1,565 $2,722 $3,423 $5,624
Serviced 33,489 17,907 62,350 32,449
------ ------ ------ ------
$35,054 $20,629 $65,773 $38,073
====== ====== ====== ======
Net charge-offs as an
annualized percentage of
average managed auto
receivables outstanding 4.8% 5.5% 4.8% 5.5%
=== === === ===
Net recoveries as a percentage
of gross repossession charge-offs 49.7% 50.1% 50.0% 50.0%
==== ==== ==== ====
</TABLE>
Delinquency and charge-off ratios typically fluctuate over time as a
portfolio matures. Accordingly, the delinquency and charge-off data above is
not necessarily indicative of delinquency and charge-off experience that
could be expected for a portfolio with a different level of seasoning.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
Operating activities $15,448 $ (1,146)
Investing activities (55,573) (32,852)
Financing activities 75,747 30,238
------- --------
Net increase (decrease) in
cash and cash equivalents $35,622 $ (3,760)
======= ========
</TABLE>
The Company's primary sources of liquidity have been cash flows from
operating activities, including excess cash flow distributions from the
Trusts, borrowings under its warehouse credit facilities and sales of auto
receivables to Trusts in securitization transactions. The Company's primary
uses of cash have been purchases and originations of receivables and funding
credit enhancement requirements for securitization transactions.
The Company purchased $1,224.1 million and $696.3 million of auto finance
contracts during the six months ended December 31, 1998 and 1997,
respectively, requiring cash of $1,219.5 million and $687.3 million,
respectively, net of acquisition fees and other items. These purchases were
funded initially utilizing warehouse credit facilities and subsequently
through the sale of auto receivables in securitization transactions.
In September 1998, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks and increased the amount of structured warehouse
financing available under the agreement from $245 million to $505 million.
The Company utilizes this facility to fund auto receivables pending
securitization. A total of $214.6 million was outstanding under this facility
as of December 31, 1998. The facility matures in September 1999.
In addition, the Company has a credit agreement with a group of banks that
provides for borrowings up to $235 million, subject to a defined borrowing
base. The Company utilizes the facility to fund its auto lending activities
and daily operations. The facility matures in April 1999. There were no
outstanding balances under the credit agreement as of December 31, 1998.
In February 1999, the Company renewed its mortgage warehouse facility with a
bank under which the Company may borrow up to $75 million, subject to a
defined borrowing base, to fund mortgage loan originations. The facility
expires in July 1999. A total of $22.3 million was outstanding under the
mortgage facility as of December 31, 1998.
28
<PAGE>
The Company has completed fifteen auto receivables securitization
transactions through December 31, 1998. The proceeds from the transactions
were primarily used to repay borrowings outstanding under the Company's
warehouse credit facilities.
A summary of these transactions is as follows:
<TABLE>
<CAPTION>
Original Balance at
Amount December 31,1998
Transaction Date (in millions) (in millions)
- ----------- ---- ------------- ----------------
<S> <C> <C> <C>
1994-A December 1994 $ 51.0 Paid in full
1995-A June 1995 99.2 Paid in full
1995-B December 1995 65.0 Paid in full
1996-A March 1996 89.4 11.6
1996-B May 1996 115.9 23.7
1996-C August 1996 175.0 35.6
1996-D November 1996 200.0 64.8
1997-A March 1997 225.0 89.8
1997-B May 1997 250.0 114.4
1997-C August 1997 325.0 175.9
1997-D November 1997 400.0 258.1
1998-A February 1998 425.0 310.6
1998-B May 1998 525.0 423.7
1998-C August 1998 575.0 513.8
1998-D November 1998 625.0 602.7
-------- --------
$4,145.5 $2,624.7
======== ========
</TABLE>
In connection with securitization transactions, the Company is required to
fund certain credit enhancement levels set by the insurer of the asset-backed
securities issued by the Trusts. The Company typically makes an initial
deposit to a restricted cash account and subsequently uses excess cash flows
generated by the Trusts to either increase the restricted cash account or
repay the outstanding asset-backed securities on an accelerated basis, thus
creating additional credit enhancement through overcolleratization in the
Trusts. When the credit enhancement levels reach specified percentages of the
Trust's pool of receivables, excess cash flows are distributed to the Company
on an unrestricted basis.
Initial deposits to restricted cash accounts were $36.3 million and $31.9
million for the six months ended December 31, 1998 and 1997, respectively.
Excess cash flows distributed to the Company were $24.9 million and $16.9
million for the six months ended December 31, 1998 and 1997, respectively.
Certain agreements with the insurer provide that if delinquency, default and
net loss ratios in a Trust's pool of receivables exceed certain targets, the
specified credit enhancement levels would be increased. As of December 31,
29
<PAGE>
1998, none of the Company's securitizations had delinquency, default and net
loss ratios in excess of the targeted levels.
The Company's Board of Directors has authorized the repurchase of up to
12,000,000 shares of the Company's common stock. A total of 9,189,400 shares
at an aggregate purchase price of $27.4 million had been purchased pursuant
to this program through December 31, 1998, although no common stock has been
repurchased since September 1996. The Indenture pursuant to which the Senior
Notes were issued contains restrictions as to the amount of common stock
which may be repurchased by the Company.
The Company operated 165 auto lending branch offices as of December 31, 1998
and plans to open a minimum of 9 additional branches through the remainder of
fiscal 1999. The Company may also expand loan production capacity at existing
auto lending branch offices where appropriate and may expand its mortgage
lending activities. While the Company has been able to establish and grow its
finance businesses thus far, there can be no assurance that future expansion
will be successful due to competitive, regulatory, market, economic or other
factors.
As of December 31, 1998, the Company had $68.7 million in cash and cash
equivalents. The Company also had available borrowing capacity of $33.7
million under its bank credit agreement pursuant to the borrowing base
requirement of such facility. The Company estimates that it will require
additional external capital for fiscal 1999 in addition to existing capital
resources in order to fund expansion of its lending activities.
The Company anticipates that such funding will be in the form of additional
securitization transactions and implementation of new warehouse credit
facilities. There can be no assurance that funding will be available to the
Company through these sources or, if available, that it will be on terms
acceptable to the Company.
INTEREST RATE RISK
Since the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in
interest rates impact the Company's profitability. The Company utilizes
several strategies to minimize the risk of interest rate fluctuations,
including the use of derivative financial instruments, the regular sale of
auto receivables to the Trusts and pre-funding securitizations, whereby the
amount of asset-backed securities issued in a securitization exceeds the
amount of receivables initially sold to the Trust. The proceeds from the
pre-funded portion are held in an escrow account until the Company sells
additional receivables to the Trust in amounts up to the balance of the
pre-funded escrow account. In pre-funded securitizations, the Company locks
in the borrowing costs with respect to the loans it subsequently delivers to
the Trust. However, the Company incurs an expense in pre-funded
securitizations equal to the difference between the money market yields
earned on the proceeds
30
<PAGE>
held in escrow prior to subsequent delivery of receivables and the interest
rate paid on the asset-backed securities outstanding. There can be no
assurance that the Company's strategies will be effective in minimizing
interest rate risk or that increases in interest rates will not have an
adverse effect on the Company's profitability.
YEAR 2000 ISSUE
The year 2000 issue is whether the Company's or its vendors' computer systems
will properly recognize date sensitive information when the year changes to
2000. Systems that do not properly recognize such information could generate
erroneous data or fail.
The Company has developed a comprehensive project plan for achieving year
2000 readiness. An inventory of critical hardware and software has been
completed and information technology components have been assessed. This
assessment included major suppliers and business partners and the Company is
monitoring their continued progress toward year 2000 compliance; however, the
Company does not rely on any single supplier or partner to conduct business.
The Company has completed the process of renovating or replacing critical
systems. Integrated testing and installation of all renovated systems is in
process with an estimated completion date of March 31, 1999. In addition, the
Company is currently developing contingency plans for critical systems. Year
2000 project costs incurred through December 31, 1998 have been approximately
$400,000. The Company expects to incur an additional $700,000 of costs to
fund year 2000 project efforts through the end of calendar year 1999.
The Company presently believes that with modifications to existing systems
and/or conversion to new systems, the year 2000 issue will not pose
significant operational problems for the Company. However, if such
modifications and conversions are not made, or are not completed in a timely
manner, the year 2000 issue could have a material impact on the operations of
the Company. In addition, there can be no assurance that unforeseen problems
in the Company's computer systems, or the systems of third parties on which
the Company's computers rely, would not have an adverse effect on the
Company's systems or operations.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the matters discussed
above are forward looking statements that involve risks and uncertainties
including competitive factors, the management of growth, portfolio credit
quality, the availability of capital resources and other risks detailed from
time to time in the Company's filings and reports with the Securities and
Exchange Commission including the Company's Annual Report on Form 10-K for the
year ended June 30, 1998. Such statements are only predictions and actual events
or results may differ materially.
31
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative financial instruments are utilized to manage the gross interest
rate spread on the Company's securitization transactions. The Company sells
fixed rate auto receivables to Trusts that, in turn, sell either fixed rate
or floating rate securities to investors. The fixed rates on securities
issued by the Trusts are indexed to rates on U.S. Treasury Notes with similar
average maturities. The Company periodically uses Forward U.S. Treasury Rate
Lock agreements to lock in the indexed rate for specific anticipated
securitization transactions. The floating rates on securities issued by the
Trusts are indexed to London Interbank Offered Rates (LIBOR). The Company
uses Interest Rate Swap agreements to convert the floating rate exposures on
these securities to a fixed rate.
All of the Company's derivative financial instrument positions are associated
with securitization transactions completed prior to December 31, 1998 and the
net market risk to the Company is not material.
32
<PAGE>
<TABLE>
<S> <C>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 4, 1998, the Company held its Annual Meeting of
Shareholders. The Shareholders voted upon the election of
eight directors, an amendment to increase the number of shares
reserved under the AmeriCredit Corp. Employee Stock Purchase
Plan (the "Purchase Plan"), the adoption of the 1998 Limited
Stock Option Plan for AmeriCredit Corp. (the "1998 Plan") and
the ratification of the appointment of the Company's
independent auditors. Each of the eight nominees identified in
the Company's proxy statement, filed pursuant to Rule 14a-b of
the Securities Exchange Act of 1934, were elected at the
meeting to hold office until the next Annual Meeting or until
their successors are duly elected and qualified. The
shareholders approved the amendment to the Purchase Plan, with
20,887,856 shares voting in favor, 1,270,780 shares voting
against and 88,805 shares withheld. The shareholders adopted
the 1998 Plan, with 14,628,889 shares voting in favor,
7,512,513 shares voting against and 106,039 shares withheld.
The Company's selection of independent auditors was also
ratified. References to numbers of shares in this item 4 do
not reflect the two-for-one stock split paid in the form of a
100% stock dividend by the Company on September 30, 1998
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Statement Re Computation of Per Share Earnings
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on
Form 8-K during the quarterly period
ended December 31, 1998.
Certain subsidiaries and affiliates of
the Company filed reports on Form 8-K
during the quarterly period ended
December 31, 1998 reporting monthly
information related to securitization
trusts.
</TABLE>
34
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AmeriCredit Corp.
-------------------------------------
(Registrant)
Date: February 16, 1999 By: /s/ Daniel E. Berce
-------------------------------------
(Signature)
Daniel E. Berce
Chief Financial Officer
35
<PAGE>
EXHIBIT 11.1
AMERICREDIT CORP.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares
outstanding 62,857,131 59,780,710 62,657,929 59,369,920
Incremental shares
resulting from assumed
exercise of stock options 3,892,914 5,032,408 4,261,063 5,028,614
---------- ---------- ---------- -----------
Weighted average shares and
assumed incremental shares 66,750,045 64,813,118 66,918,992 64,398,534
---------- ---------- ---------- -----------
NET INCOME $17,376 $11,912 $32,858 $ 22,142
---------- ---------- ---------- -----------
EARNINGS PER SHARE:
Basic $ .28 $ .20 $ 0.52 $ 0.37
========== ========== ========== ===========
Diluted $ .26 $ .18 $ 0.49 $ 0.34
========== ========== ========== ===========
</TABLE>
Basic earnings per share have been computed by dividing net income by the
weighted average shares outstanding. Diluted earnings per share have been
computed by dividing net income by the weighted average shares and assumed
incremental shares.
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCLUDED IN ITS QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 156,621
<SECURITIES> 0
<RECEIVABLES> 354,031
<ALLOWANCES> 8,377
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 43,501
<DEPRECIATION> 11,902
<TOTAL-ASSETS> 865,405
<CURRENT-LIABILITIES> 0
<BONDS> 422,944
0
0
<COMMON> 706
<OTHER-SE> 336,603
<TOTAL-LIABILITY-AND-EQUITY> 865,405
<SALES> 0
<TOTAL-REVENUES> 148,085
<CGS> 0
<TOTAL-COSTS> 73,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,303
<INTEREST-EXPENSE> 16,619
<INCOME-PRETAX> 53,428
<INCOME-TAX> 20,570
<INCOME-CONTINUING> 32,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,858
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.49
</TABLE>
