<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1999
Registration No. 333-80675
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
AMENDMENT NO 1
TO
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 Management Company
Delaware 75-2788787
(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 Corporation of California
California 33-0011256
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AmeriCredit Financial Services of Canada Ltd.
Ontario, Canada 866121080
(State or Other Jurisdiction (Canadian Business
of Incorporation or Organization) Number)
6199
(Primary Standard Industrial
Classification Code Number)
______________________
801 Cherry Street, Suite 3900
Fort Worth, Texas 76102
(817) 302-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
______________________
Daniel E. Berce
Chief Financial Officer
AmeriCredit Corp.
801 Cherry Street, Suite 3900
Ft. Worth, Texas 76102
(817) 302-7000
(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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
_____________________
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CALCULATION OF REGISTRATION FEE
=============================================================================================================================
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>
9.875% Senior Notes due 2006 $200,000,000 100% $200,000,000 $55,600(2)
- -----------------------------------------------------------------------------------------------------------------------------
AmeriCredit Financial Services, Inc.
ACF Investment Corp.
Americredit Corporation of
California
AmeriCredit Financial Services of
Canada Ltd.
AmeriCredit Management Company
Guarantees (3)
$200,000,000 100% $200,000,000 (4)
=============================================================================================================================
</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) Paid with initial filing of Registration Statement.
(3) Each of these subsidiaries of AmeriCredit Corp. has guaranteed the Notes
being registered pursuant hereto.
(4) Pursuant to Rule 457(n), no separate fee is payable with respect to
guarantees of the Notes being registered.
===============================================================================
The Co-Registrants, hereby amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Co-
Registrants 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.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 29, 1999
AMERICREDIT CORP.
OFFER TO EXCHANGE ALL
OUTSTANDING 9.875% SENIOR NOTES DUE 2006
($200,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
REGISTERED 9.875% SENIOR NOTES DUE 2006
We are offering to exchange all of our outstanding 9.875% Senior Notes due
2006 ("Old Notes") for our registered 9.875% Senior Notes due 2006 ("New
Notes"). The Old Notes and New Notes are collectively referred to as the
"Notes." The Old Notes were issued on April 20, 1999. The terms of the New
Notes are identical to the terms of the Old Notes except that the New Notes are
registered under the Securities Act of 1933, as amended, and therefore are
freely transferable.
Please Consider the Following:
- You should carefully review the risk factors beginning on page 10 of
this prospectus.
- Our offer to exchange Old Notes for New Notes will be open until 5:00
p.m., New York City time, on August 27, 1999, unless we extend the
offer.
- You should also carefully review the procedures for tendering the Old
Notes beginning on page 23 of this prospectus.
- If you fail to tender your Old Notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected.
- No public market currently exists for the Notes. We do not intend to
list the New Notes on any securities exchange and, therefore, no
active public market is anticipated.
Information about the Notes:
- The Notes will mature on April 15, 2006.
- We will pay interest on the Notes semi-annually on October 15 and
April 15 of each year, beginning October 15, 1999 at the rate of
9.875% per annum.
- We may redeem the Notes on or after April 15, 2003 at certain rates
set forth on page 66 of this prospectus.
- We also have the option until April 15, 2002, to redeem up to 33% of
the original aggregate principal amount of the Notes with the net
proceeds of certain equity offerings.
- The Notes are unsecured obligations and are subordinated to our
existing and future senior debt.
- The Notes are fully and unconditionally guaranteed on an unsecured
senior subordinated basis by certain of our subsidiaries.
- If we undergo a change of control or sell certain of our assets, we
may be required to offer to purchase Notes from you.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST 2, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
Where You Can Find More Information..................................................... ii
Incorporation of Certain Documents by Reference......................................... ii
Prospectus Summary...................................................................... 1
Summary Financial and Operating Information............................................. 8
Risk Factors............................................................................ 10
Use of Proceeds......................................................................... 19
The Exchange Offer...................................................................... 20
Capitalization.......................................................................... 28
Selected Consolidated Financial Data.................................................... 29
Management's Discussion and Analysis of Financial Condition and Results of Operations... 31
Business................................................................................ 45
Management.............................................................................. 55
Principal Shareholders.................................................................. 62
Description of the New Notes............................................................ 64
Description of Other Debt............................................................... 91
Certain United States Federal Income Tax Considerations................................. 97
Plan of Distribution.................................................................... 97
Legal Matters........................................................................... 98
Experts................................................................................. 98
Index to Consolidated Financial Statements.............................................. F-1
</TABLE>
(i)
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). You
may read and copy any document we file at the Commission's public reference
rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center,
13th floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Please call 1-800-SEC-0330 for
further information on the public reference rooms. Our filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the Commission at "http://www.sec.gov." In addition,
reports, proxy statements, and certain other information concerning AmeriCredit
Corp., can be inspected at the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
We have filed with the Commission a registration statement on Form S-4
under the Securities Act with respect to our offering of New Notes. This
prospectus, which constitutes part of the registration statement, does not
contain all of the information in the registration statement on Form S-4. You
will find additional information about us and the New Notes in the registration
statement on Form S-4. All statements made in this prospectus concerning the
provisions of legal documents are not necessarily complete and you should read
the documents which are filed as exhibits to the registration statement or
otherwise filed by us with the Commission.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS ABOUT THE MATTERS WE DISCUSS IN THIS PROSPECTUS OTHER THAN THOSE
CONTAINED HEREIN OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY REFERENCE. IF YOU
ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS NOT
DISCUSSED OR INCORPORATED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT
PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. OUR AFFAIRS MAY
HAVE CHANGED SINCE THE DATE OF THIS PROSPECTUS. WE CANNOT ASSURE YOU THAT THE
INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS WE INCORPORATE HEREIN BY
REFERENCE IS CORRECT AFTER THIS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We "incorporate by reference" into this prospectus the information we file
with the Commission, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus and information that we file
subsequently with the Commission will automatically update and supersede this
prospectus. We have filed the following documents and incorporate them into and
as a part of this prospectus:
(1) our Annual Report on Form 10-K for the fiscal year ended June 30,
1998, as amended by Form 10-K/A filed on February 16, 1999;
(2) our Quarterly Reports on Form 10-Q for the quarters ended September
30, 1998 (as amended by Form 10-Q/A filed on February 16, 1999),
December 31, 1998, and March 31, 1999;
(3) our Current Reports on Form 8-K dated January 13, 1999, April 12,
1999, and April 16, 1999; and
(4) our Form 8-A, dated September 5, 1997.
Each document that we file pursuant to Section 13(a), 13(c), 14 and 15(d)
of the Securities Exchange Act of 1934 after the date of this prospectus and
prior to the termination of this exchange offer will be deemed to be
incorporated by reference in this prospectus and to be a part of this prospectus
from the date of filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this prospectus shall
be deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus 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 shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
(ii)
<PAGE>
You should not assume that the information in this prospectus is accurate
as of any date other than the date of this prospectus or the respective dates of
those documents we incorporate herein by reference, regardless of the time of
delivery of this prospectus. You should rely on the information incorporated by
reference or provided in this prospectus. We have not authorized anyone else to
provide you with different information.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, on request, a copy of any or all of the foregoing
documents incorporated in this prospectus by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Written or telephone requests for such copies should be
directed to AmeriCredit Corp., 801 Cherry Street, Suite 3900, Fort Worth, Texas
76102, Attention: Daniel E. Berce, telephone: 817-302-7000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain certain
forward-looking statements about our financial condition, results of operations
and business. These statements may be made expressly in this document, or may
be "incorporated by reference" to other documents we have filed with the
Commission. You can find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," or similar expressions used
in this prospectus or documents incorporated in this prospectus.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:
- our ability to pay interest and principal on a large amount of debt;
- changes in our customers' demands;
- seasonal changes in customer demands;
- our ability, and the ability of our customers and vendors, to become
year 2000 compliant;
- the competitive nature of the automobile finance business; and
- general economic conditions and the interest rate environment.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the forward-
looking statements. You are cautioned not to place undue reliance on such
statements, which speak only as of the date of this prospectus or, in the case
of documents incorporated by reference, as of the date of such document.
We do not undertake any responsibility to release publicly any
revisions to these forward-looking statements to take into account events or
circumstances that occur after the date of this prospectus. Additionally, we do
not undertake any responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ from those
expressed or implied by the forward-looking statements.
(iii)
<PAGE>
PROSPECTUS SUMMARY
IN THIS PROSPECTUS, THE WORDS "AMERICREDIT" AND "COMPANY" REFER TO
AMERICREDIT CORP., THE ISSUER OF THE OLD NOTES AND THE NEW NOTES, AND ITS
SUBSIDIARIES. THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT THE COMPANY
AND THIS EXCHANGE OFFER. IT DOES NOT CONTAIN ALL THE INFORMATION THAT IS
IMPORTANT TO YOU. FOR A MORE COMPLETE UNDERSTANDING OF THIS EXCHANGE OFFER, WE
ENCOURAGE YOU TO READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS WE HAVE REFERRED
YOU TO.
The Exchange Offer
We completed on April 20, 1999, the private offering of $200 million of
9.875% Senior Notes due 2006. We entered into a registration rights agreement
with the initial purchasers in the private offering of such Old Notes in which
we agreed, among other things, to deliver to you this prospectus and to complete
this exchange offer within 150 days of the original issuance of the Old Notes.
You are entitled to exchange in this exchange offer Old Notes that you hold for
registered New Notes with substantially identical terms. If this exchange offer
is not completed within 150 days of April 20, 1999, then the interest rates on
such Old Notes will increase initially by 0.50%. You should read the discussion
under the headings "-Summary of the Terms of the New Notes," "Description of the
New Notes" and "Registration Rights" for further information regarding the New
Notes.
We believe that the New Notes to be issued in this exchange offer may be
resold by you without compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain conditions. You should
read the discussion under the headings "-Summary of the Terms of Exchange Offer"
and "The Exchange Offer" for further information regarding this exchange offer
and resale of the New Notes.
The Company
We are 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. We target borrowers with
limited credit histories, modest incomes or those who have experienced prior
credit difficulties ("Non-Prime Borrowers"). With the use of proprietary
credit scoring models, we underwrite contracts on a decentralized basis through
a branch office network. These credit scoring models, combined with experienced
underwriting personnel, enable us to implement a risk-based pricing approach to
structuring and underwriting individual contracts. Our centralized risk
management department monitors these underwriting strategies and portfolio
performance to balance credit quality and profitability objectives. We service
our loan portfolio at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
We had 168 branch offices as of March 31, 1999. As a result of our
expansion strategy, we have been able to increase our aggregate volume of
automobile installment sales contracts purchased to $1,737.8 million in fiscal
1998 from $18.3 million in fiscal 1993. We have continued this growth during the
first nine months of fiscal 1999, with purchases aggregating $1,990.9 million,
compared to $1,176.7 million during the same period in fiscal 1998. For fiscal
1998, the average principal amount financed was $12,479 and the weighted average
APR of contracts we purchased was 19.1%.
We generate earnings and cash flow primarily through the purchase,
retention, securitization and servicing of automobile receivables. In each
securitization, we sell automobile receivables to a trust that, in turn, sells
asset-backed securities to investors. We recognize a gain on the sale of the
receivables to the trust and receive monthly excess cash flow distributions from
the trust resulting from the difference between the interest received from the
consumer obligors on the receivables and the interest on the asset-backed
securities paid to investors, net of losses and expenses. When we receive excess
cash flow distributions depends on the type of structure we use. Historically,
we have used a structure that involved a higher initial cash deposit and
resulted in receipt of excess cash flow distributions approximately seven to
nine months after the receivables were securitized. Since November 1997, we have
employed a structure that involves a lower initial cash deposit. Under this
structure we expect to begin to receive excess cash flow distributions
approximately 20 to 24 months after the receivables are securitized. We received
excess cash flow of $43.8 million from securitization trusts in fiscal 1998. Due
to the time delay associated with distributions of excess cash flow from
securitizations, we expect to receive increased cash flow distributions in
fiscal 2000 from trusts created as a result of
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securitization transactions occurring in fiscal 1998. Prior to the time when we
begin 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 us. In addition to
excess cash flow, we earn servicing fees of 2.25% per annum of the outstanding
principal balance of receivables securitized. Over the four quarters ended March
31, 1999 we completed four securitization transactions totaling $2.425 billion.
We also completed a $1 billion securitization in May 1999.
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 $603 billion of loan
and lease originations during 1998. The industry is generally segmented
according to the type of car sold (new vs. used) and the credit characteristics
of the borrower (prime vs. non-prime). The non-prime segment of the market
accounted for approximately $188 billion of these originations.
Our principal objective is to continue to build upon our position as a
leading lender to Non-Prime Borrowers. To achieve this objective, we employ the
following key strategies:
Continued Expansion of Automobile Contract Purchase Volume. We seek to
continue to develop our automobile contract purchase volume. We intend to do
this through the continued expansion of our automobile finance branch network,
through increasing our market share in existing branch territories and through
marketing alliances with select automobile dealer groups and prime automotive
lenders, such as banks. We opened five branch offices in fiscal 1993, 13 in
fiscal 1994, 13 in fiscal 1995, 20 in fiscal 1996, 34 in fiscal 1997, 44 in
fiscal 1998, and 39 through March 31, 1999, bringing our branch office network
to 168 offices located in 41 states and one Canadian province as of March 31,
1999. We plan to open a minimum of six additional branch offices during the
remainder of fiscal 1999. As part of our goal of increasing the number of
dealers from whom we purchase automobile finance contracts, we have entered into
marketing alliances with certain automobile dealer groups and regional banks. In
addition, in March 1999 we announced a new marketing alliance with Chase
Manhattan Bank, USA, N.A., whereby we will provide non-prime automobile
financing programs to automobile dealers who currently have a relationship with
Chase.
Use of Proprietary Credit Scoring Models for Risk-based Pricing. We have
developed and implemented a credit scoring system across our branch office
network to support the branch level credit approval process. Our proprietary
credit scoring models are designed to enable us to tailor each loan's pricing
and structure to a statistical assessment of the underlying credit risk.
Sophisticated Risk Management Techniques. Our centralized risk management
department is responsible for monitoring the origination process, supporting
management's supervision of each branch office, tracking collateral values of
our receivables portfolio and monitoring portfolio returns. The 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 us to become a low-cost provider in the non-prime automobile finance
market. Our annualized ratio of operating expenses to average managed
receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.2% for fiscal
1997, 5.4% for fiscal 1998 and 5.0% for the nine months ended March 31, 1999.
Funding and Liquidity Through Securitizations. We sell 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 our first securitization transaction in December 1994, we
have securitized approximately $4.8 billion of automobile receivables in private
and public offerings of asset-backed securities through March 31, 1999. In
addition, we completed a $1 billion securitization in May 1999.
We were 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. In November 1996, we acquired a small residential mortgage lender which
conducts business under the name AmeriCredit Mortgage Services. Our common stock
is traded on the New York Stock Exchange under the symbol "ACF. Our principal
executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth,
Texas 76102 and our telephone number is 817-302-7000.
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Summary of the Terms of the Exchange Offer
Securities to be Exchanged...... On April 20, 1999, we issued $200.0 million
aggregate principal amount of Old Notes to
the initial purchasers (the "Original
Offering") in a transaction exempt from the
registration requirements of the Securities
Act of 1933, as amended (the "Securities
Act"). The terms of the New Notes and the Old
Notes are substantially identical in all
material respects, except that the New Notes
will be freely transferable by the holders
except as otherwise provided in this
prospectus. See "Description of the New
Notes."
The Exchange Offer.............. $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, Old Notes
representing $200.0 million aggregate
principal amount are outstanding.
Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to certain third parties unrelated to
us, we believe that New Notes issued pursuant
to the exchange offer in exchange for Old
Notes may be offered for resale, resold or
otherwise transferred by holders thereof
(other than any holder which is an
"affiliate" of the Company or certain
subsidiaries of the Company (the
"Guarantors") within the meaning of Rule 405
under the Securities Act, or a broker-dealer
who purchased Old Notes directly from us to
resell pursuant to Rule 144A or any other
available exemption under the Securities
Act), without compliance with the
registration and prospectus delivery
requirements of the Securities Act, provided
that such New Notes are acquired in the
ordinary course of such holders' business and
such holders have no arrangement with any
person to engage in a distribution of New
Notes.
However, the Commission has not considered
the exchange offer in the context of a no-
action letter and we cannot be sure that the
staff of the Commission would make a similar
determination with respect to the exchange
offer as in such other circumstances.
Furthermore, each holder, other than a
broker-dealer, must acknowledge that is not
engaged in, and does not intend to engage or
participate in, a distribution of New Notes.
Each broker-dealer that receives New Notes
for his own account pursuant to the exchange
offer must acknowledge that it will comply
with the prospectus delivery requirements of
the Securities Act in connection with any
resale of such New Notes. Broker-dealers who
acquired Old Notes directly from us and not
as a result of market-making activities or
other trading activities may not rely on the
staff's interpretations discussed above or
participate in the exchange offer and must
comply with the prospectus delivery
requirements of the Securities Act in order
to resell the Old Notes.
Registration Rights Agreement... We sold the Old Notes on April 20, 1999, in a
private placement in reliance on Section 4(2)
of the Securities Act. The Old Notes were
immediately resold by the initial purchasers
in reliance on Rule 144A under the Securities
Act. In connection with the sale, we,
together with the Guarantors, entered into a
Registration Rights Agreement with the
initial purchasers (the "Registration
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Rights Agreement") requiring us to make
the exchange offer. The Registration
Rights Agreement further provides that
we must (i) cause the Registration
Statement with respect to the exchange
offer to be declared effective within
150 days of April 20, 1999, and (ii)
consummate the exchange offer on or
before the 180th business day following
April 20, 1999. See "The Exchange Offer-
Purpose and Effect."
Expiration Date ...................... The exchange offer will expire at 5:00
p.m., New York City time, August 27,
1999 or a later date and time if we
extend it (the "Expiration Date").
Withdrawal............................ The tender of the Old Notes pursuant to
the exchange offer may be withdrawn at
any time prior to the Expiration Date.
Any Old Notes not accepted for exchange
for any reason will be returned without
expense as soon as practicable after the
expiration or termination of the
exchange offer.
Interest on the New Notes and
the Old Notes...................... Interest on the New Notes will accrue
from April 20, 1999 or from the date of
the last payment of interest on the Old
Notes, whichever is later. No additional
interest will be paid on Old Notes
tendered and accepted for exchange.
Conditions to the Exchange Offer...... The exchange offer is subject to certain
customary conditions, certain of which
may be waived by us. See "The Exchange
Offer-Conditions of the Exchange Offer."
Procedures for Tendering Old
Note.............................. Each holder of the Old Notes wishing to
accept the exchange offer must complete,
sign and date the letter of transmittal,
or a copy thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver
the letter of transmittal, or the copy,
together with the Old Notes and any
other required documentation, to the
exchange agent at the address set forth
herein. Persons holding the Old Notes
through the Depository Trust Company
("DTC") and wishing to accept the
exchange offer must do so pursuant to
DTC's Automated Tender Offer Program, by
which each tendering participant will
agree to be bound by the letter of
transmittal. By executing or agreeing to
be bound by the letter of transmittal,
each holder will represent to us that,
among other things, (1) the New Notes
acquired pursuant to the exchange offer
are being obtained in the ordinary
course of business of the person
receiving such New Notes, (2) the holder
is not engaging in and does not intend
to engage in a distribution of such New
Notes, (3) the holder does not have an
arrangement or understanding with any
person to participate in the
distribution of such New Notes, and (4)
the holder is not an "affiliate," as
defined under Rule 405 promulgated under
the Securities Act, of the Company or
the Guarantors.
We will accept for exchange any and all
Old Notes which are properly tendered
(and not withdrawn) in the exchange
offer prior to the Expiration Date. The
New Notes will be delivered promptly
following the Expiration Date. See "The
Exchange Offer-Terms of the Exchange
Offer."
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<PAGE>
Exchange Agent................. Bank One, NA is serving as Exchange Agent
(the "Exchange Agent") in connection with the
exchange offer.
Federal Income Tax
Considerations.............. We believe the exchange of Old Notes for New
Notes pursuant to the exchange offer will not
constitute a sale or an exchange for federal
income tax purposes. See "Certain United
States Federal Income Tax Considerations."
Effect of Not Tendering........ Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the exchange offer, continue to
be subject to the existing restrictions upon
transfer. We will have no further obligation
to provide for the registration under the
Securities Act of such Old Notes.
Summary of the Terms of the New Notes
Issuer......................... AmeriCredit Corp.
Securities Offered............. $200.0 million in aggregate principal amount
of 9.875% senior notes due 2006.
Maturity....................... April 15, 2006
Interest Rate.................. 9.875% per year.
Interest Payment Dates......... April 15 and October 15, beginning on October
15, 1999. Interest will accrue from April 20,
1999.
Subsidiary Guarantees.......... Each Guarantor is our subsidiary. However,
not all of our subsidiaries are guarantors of
the New Notes. If we cannot make payments on
the New Notes when they are due, the
Guarantors must make them instead.
If we create or acquire a new subsidiary, it
will guarantee the New Notes unless we
designate the subsidiary as an "unrestricted
subsidiary" under the indenture or the
subsidiary qualifies as a Securitization
Trust.
Ranking........................ The New Notes will be our unsecured senior
obligations and will rank pari passu to our
existing and future senior debt and senior to
our future subordinated debt. The guarantees
by our subsidiaries will be pari passu to
existing and future senior debt of our
subsidiaries, and senior to future
subordinated debt of our subsidiaries. We and
certain of our subsidiaries are parties to
warehouse facilities and credit agreements
which are secured by first priority liens on
the assets financed under such facilities.
The Notes are effectively subordinated to
these obligations. As of March 31, 1999, the
aggregate amount of secured indebtedness of
ours and our subsidiaries was approximately
$268.3 million, and approximately $76.3
million would have been available for
additional borrowing under our credit
agreement.
Optional Redemption............ We cannot redeem the New Notes until April
15, 2003. Thereafter we may redeem some or
all of the New Notes at the redemption prices
listed in the "Description of the New Notes"
5
<PAGE>
section under the heading "Optional
Redemption," plus accrued interest.
Optional Redemption after Public
Equity Offerings............. At any time (which may be more than once)
before April 15, 2002, we can choose to buy
back up to 33% of the outstanding Notes
(including New Notes) with money that we
raise in certain equity offerings, as long
as:
- we pay 109.875% of the face amount of the
Notes, plus accrued interest;
- we buy the Notes back within 45 days of
completing such equity offering; and
- at least 67% of the aggregate principal
amount of Notes issued remains outstanding
afterwards.
Change of Control Offer.......... If a change in control of the Company occurs,
we may be required to give holders of the New
Notes the opportunity to sell us their New
Notes at 101% of their face amount, plus
accrued interest.
We might not be able to pay you the required
price for New Notes you present to us at the
time of a change of control, because:
- we might not have enough funds at that
time; or
- the terms of our senior debt may prevent
us from paying.
Asset Sale Proceeds.............. If we engage in asset sales, we generally
must either invest the net cash proceeds from
such sales in our business within a period of
time, repay senior debt or make an offer to
purchase a principal amount of the New Notes
equal to the excess net cash proceeds. The
purchase price of the New Notes will be 100%
of their principal amount, plus accrued
interest.
Certain Indenture Provisions..... The indenture governing the New Notes will
contain covenants limiting our (and most or
all of our subsidiaries') ability to:
- incur additional debt or enter into sale
and leaseback transactions;
- pay dividends or distributions on capital
stock or repurchase capital stock;
- issue stock of subsidiaries;
- make certain investments;
- create liens on our assets to secure debt;
- enter into transactions with affiliates;
- merge or consolidate with another company;
and
6
<PAGE>
- transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Risk Factors................... See "Risk Factors" beginning on page 10 for a
description of certain of the risks you
should consider.
Recent Developments
On July 16, 1999, we filed a registration statement with the Commission for a
follow-on offering of 8,000,000 shares of our common stock. In addition, the
underwriters will have a 30-day option to purchase up to 1,200,000 additional
shares of common stock to cover over-allotments, if any. There can be no
assurance that we can sell these shares of common stock at an acceptable price,
or at all.
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(dollars in thousands, except per share data)
The following table presents summary financial data for the five most
recent fiscal years and the first nine months of the current and most recent
fiscal years, which is from our consolidated financial statements. Since the
information in this table is only a summary and does not provide all of the
information contained in our financial statements, including the related notes,
you should read "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our Consolidated Financial Statements contained
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------------------------------
June 30, June 30, June 30, June 30, June 30,
1994 1995 1996(1) 1997(1) 1998(1)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue:
Finance charge income........... $ 7,820 $ 29,039 $ 51,679 $ 44,910 $ 55,837
Gain on sale of receivables..... -- -- 21,405 52,323 103,194
Servicing fee income............ -- -- 3,892 23,492 47,910
Other income.................... 8,062 4,045 2,659 2,631 2,395
----------- ----------- ----------- ----------- -----------
Total revenue............... 15,882 33,084 79,635 123,356 209,336
Costs and expenses.............. 10,817 23,066 46,722 74,822 129,174
----------- ----------- ----------- ----------- -----------
Income before taxes............. 5,065 10,018 32,913 48,534 80,162
Provision (credit) for taxes(2). -- (18,875) 12,148 18,685 30,861
----------- ----------- ----------- ----------- -----------
Net income...................... $ 5,065 $ 28,893 $ 20,765 $ 29,849 $ 49,301
Diluted earnings per share...... $ .08 $ .48 $ .34 $ .48 $ .76
Weighted average shares
outstanding(3)................ 63,636,166 60,761,498 60,406,596 61,574,548 65,203,460
Cash Flow Data:
(Used in) Provided by
operating activities.......... $ 3,900 $ 14,637 $ 34,530 $ 36,003 $ 37,813
(Used in) Provided by
investing activities.......... (12,174) (144,512) (62,749) (92,947) (144,868)
(Used in) Provided by
financing activities.......... (9,238) 132,433 12,050 60,826 134,115
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents..... $ (17,512) $ 2,558 $ (16,169) $ 3,882 $ 27,060
Other Data:
Auto receivable originations.... $ 65,929 $ 230,176 $ 432,442 $ 906,794 $ 1,737,813
Managed auto receivables........ $ 67,636 $ 240,491 $ 523,981 $ 1,138,255 $ 2,302,516
Average managed auto
receivables................... $ 37,507 $ 141,526 $ 357,966 $ 792,155 $ 1,649,416
Auto loans securitized.......... $ -- $ 150,170 $ 270,351 $ 817,500 $ 1,637,499
Number of branches.............. 18 31 51 85 129
Average principal amount per
managed auto receivable....... $ 7,215 $ 7,773 $ 8,746 $ 10,087 $ 10,782
Ratios:
Ratio of earnings to fixed
charges(4).................... 31.2 3.5 3.5 4.0 4.0
Percentage of total
indebtedness to total
capitalization................ 0.3% 47.9% 48.7% 51.8% 54.7%
Return on average common
equity(5)..................... 4.1% 23.1% 13.7% 16.4% 20.1%
Operating expenses as a
percentage of average......... 15.0% 10.0% 7.2% 6.2% 5.4%
managed auto
receivables (5)
Percentage of senior
unsecured debt to total
equity........................ 0.0% 0.0% 0.0% 60.0% 60.8%
Asset Quality Data:
Managed auto receivables
greater than 60 days
delinquent.................... $ 1,269 $ 4,907 $ 16,207 $ 36,421 $ 59,175
Delinquencies as a
percentage of managed
auto receivables.............. 1.9% 2.0% 3.1% 3.2% 2.6%
Net charge-offs................. $ 1,432 $ 6,409 $ 19,974 $ 43,231 $ 88,002
Net charge-offs as a
percentage of average
managed auto
receivables(5)................ 3.8% 4.5% 5.6% 5.5% 5.3%
<CAPTION>
Nine Months Ended
-------------------------------
March 31, March 31,
1998(1) 1999
----------- -----------
<S> <C> <C>
Statement of Income Data:
Revenue:
Finance charge income........... $ 40,052 $ 51,538
Gain on sale of receivables..... 71,838 116,551
Servicing fee income............ 34,389 61,702
Other income.................... 1,901 3,361
----------- -----------
Total revenue............... 148,180 233,152
Costs and expenses.............. 90,621 148,009
----------- -----------
Income before taxes............. 57,559 85,143
Provision (credit) for taxes(2). 22,159 32,780
----------- -----------
Net income...................... $ 35,400 $ 52,363
Diluted earnings per share...... $ .55 $ .78
Weighted average shares
outstanding(3)................ 64,644,030 66,822,426
Cash Flow Data:
(Used in) Provided by
operating activities.......... $ 11,162 $ 38,214
(Used in) Provided by
investing activities.......... (105,820) (129,225)
(Used in) Provided by
financing activities.......... 97,725 94,770
----------- -----------
Net increase (decrease) in
cash and cash equivalents..... $ 3,067 $ 3,759
Other Data:
Auto receivable originations.... $ 1,176,734 $ 1,990,893
Managed auto receivables........ $ 1,924,796 $ 3,553,208
Average managed auto
receivables................... $ 1,495,784 $ 2,892,752
Auto loans securitized.......... $ 1,117,499 $ 1,920,001
Number of branches.............. 119 168
Average principal amount per
managed auto receivable....... $ 10,584 $ 11,074
Ratios:
Ratio of earnings to fixed
charges(4).................... 4.0 4.3
Percentage of total
indebtedness to total
capitalization................ 55.3% 55.1%
Return on average common
equity(5)..................... 20.5% 21.3%
Operating expenses as a
percentage of average......... 5.5% 5.0%
managed auto
receivables (5)
Percentage of senior
unsecured debt to total
equity........................ 63.1% 48.5%
Asset Quality Data:
Managed auto receivables
greater than 60 days
delinquent.................... $ 50,653 $ 80,668
Delinquencies as a
percentage of managed
auto receivables.............. 2.6% 2.3%
Net charge-offs................. $ 60,918 $ 103,891
Net charge-offs as a
percentage of average
managed auto
receivables(5)................ 5.4% 4.8%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
March 31, 1999
-------------------------------
June 30, June 30, As
1997 1998 Actual Adjusted(6)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $ 6,027 $ 33,087 $ 36,846 $ 36,846
Credit enhancement assets (7).................... 161,395 286,309 413,653 413,653
Auto receivables held for sale................... 275,249 334,110 400,722 400,722
Total assets..................................... 475,493 713,671 937,982 943,982
Credit Agreements................................ 71,700 -- 603 603
Mortgage Subsidiary Credit Agreement (8)......... 345 24,900 21,267 21,267
Warehouse Facilities............................. -- 140,708 233,661 39,661
Senior Notes..................................... 125,000 175,000 175,000 375,000
Other notes payable.............................. 27,206 6,410 12,759 12,759
Total debt....................................... 224,251 347,018 443,290 443,290
Shareholders' equity............................. 208,261 287,848 360,764 360,764
</TABLE>
____________________
(1) We restated our financial statements for the fiscal years ended June 30,
1996, 1997 and 1998 and interim periods within those fiscal years as a
result of a retroactive change in its method of measuring and accounting for
credit enhancement assets to the cash-out method from the cash-in method.
See Note 2 of Notes to Consolidated Financial Statements.
(2) We recognized an income tax benefit in fiscal 1995 equal to the expected
future tax savings from using our net operating loss carry forward and other
future tax benefits.
(3) All share data for the periods presented have been adjusted to retroactively
reflect the two-for-one stock split paid on September 30, 1998.
(4) Represents the ratio of the sum of income before taxes plus interest expense
for the period to interest expense.
(5) Data for the nine-month periods ended March 31, 1998 and 1999 have been
annualized.
(6) The as adjusted balance sheet data have been calculated giving effect to the
Original Offering and the application of the net proceeds therefrom as if
each occurred on March 31, 1999.
(7) Credit enhancement assets consist of restricted cash, investments in Trust
receivables and interest-only receivables. See Note 4 of Notes to
Consolidated Financial Statements.
(8) Fully guaranteed by us and certain of our Subsidiaries.
9
<PAGE>
RISK FACTORS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT INCLUDING,
IN PARTICULAR, THE STATEMENTS ABOUT THE COMPANY'S PLANS, STRATEGIES, AND
PROSPECTS UNDER THE HEADINGS "PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND "BUSINESS."
ALTHOUGH WE BELIEVE THAT OUR PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN OR
SUGGESTED BY SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO
ASSURANCE THAT SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS WE MAKE IN THIS PROSPECTUS ARE SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO
THE COMPANY OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE FOLLOWING CAUTIONARY STATEMENTS.
Failure to Exchange Old Notes-If You Do Not Properly Tender Your Old Notes, You
Will Continue to Hold Unregistered Old Notes and Your Ability to Transfer Old
Notes Will Be Adversely Affected.
We will only issue New Notes in exchange for Old Notes that are timely
received by the Exchange Agent together with all required documents, including a
properly completed and signed letter of transmittal. Therefore, you should allow
sufficient time to ensure timely delivery of the Old Notes and you should
carefully follow the instructions on how to tender your Old Notes. Neither we
nor the Exchange Agent are required to tell you of any defects or irregularities
with respect to your tender of the Old Notes. If you do not tender your Old
Notes properly, then, after we consummate the exchange offer, you may continue
to hold Old Notes that are subject to the existing transfer restrictions. In
addition, if you tender your Old Notes for the purpose of participating in a
distribution of the New Notes, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the New Notes. If you are a broker-dealer that
receives New Notes for your own account in exchange for Old Notes that you
acquired as a result of market-making activities or any other trading
activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale of such New Notes. After the exchange
offer is consummated, if you continue to hold any Old Notes, you may have
difficulty selling them because there will be less Old Notes outstanding. In
addition, if a large amount of Old Notes are not tendered or are tendered
improperly, the limited amount of New Notes that would be issued and outstanding
after we consummate the exchange offer could lower the market price of such New
Notes.
Dependence on Funding Sources - Our Ability to Continue to Purchase Contracts
and to Fund Our Business is Dependent On a Number of Financing Sources.
Credit Facilities and Warehouse Facilities. We depend on credit facilities
and warehouse facilities with financial institutions to finance our purchase of
contracts pending securitization. At the date of this prospectus, we have five
credit and warehouse facilities with various banks providing for revolving
credit borrowings of up to a total of $845 million and $20 million Cdn., subject
to defined borrowing bases. We have a $505 million warehouse facility which
expires in October 1999 and a $150 million warehouse facility which expires in
March 2000. Our bank credit agreement, which provides for up to $115 million of
revolving borrowings (subject to a borrowing base), matures in March 2000 and
the $20 million Cdn. bank facility to fund Canadian auto receivables expires in
November 1999. Our mortgage subsidiary credit agreement, which provides for up
to $75 million of revolving borrowings (subject to a borrowing base), matures in
July 1999. We cannot assure you that any of these financing resources will
continue to be available to us on reasonable terms or at all. If we are unable
to extend or replace any of these facilities and arrange new credit or warehouse
facilities, we would have to curtail our contract purchasing activities, which
would have a material adverse effect on our financial position, liquidity and
results of operations.
Our credit and warehouse facilities contain extensive restrictions and
covenants and require us to maintain specified financial ratios and satisfy
specified financial tests. A breach of any of these covenants could result in an
event of default under these agreements. If an event of default occurs under
these agreements the lenders could elect to declare all amounts outstanding
under these agreements to be immediately due and payable and/or restrict our
ability to obtain additional borrowings under these agreements. Our ability to
meet those financial ratios and tests can be affected by events beyond our
control, and we cannot assure you that we will meet those financial ratios and
tests.
10
<PAGE>
Securitization Program. Since December 1994, we have relied upon our
ability to aggregate and sell receivables in the asset-backed securities market
to generate cash proceeds for repayment of credit and warehouse facilities and
to purchase additional contracts from automobile dealers. Further, gains on
sales generated by our securitizations currently represent the single largest
component of our revenues. We try to effect securitizations of our receivables
on at least a quarterly basis. Accordingly, adverse changes in our asset-backed
securities program or in the asset-backed securities market for automobile
receivables generally could materially adversely affect our ability to purchase
and resell loans on a timely basis and upon terms reasonably favorable to us.
Any delay in the sale of receivables beyond a quarter-end would eliminate the
gain on sale in that quarter and adversely affect our reported earnings for that
quarter. Any of these adverse changes or delays would have a material adverse
effect on our financial position, liquidity and results of operations.
Credit Enhancement. To date, all of our securitizations have utilized
credit enhancement in the form of financial guaranty insurance policies issued
by Financial Security Assurance Inc. in order to achieve "AAA/Aaa" ratings,
which reduces the costs of securitizations relative to alternative forms of
credit enhancement available to us. Financial Security Assurance is not required
to insure our securitizations and we can give you no assurance that it will
continue to do so or that our future securitizations will be similarly rated.
Likewise, we are not required to utilize financial guaranty insurance policies
issued by Financial Security Assurance or any other form of credit enhancement
in connection with our securitizations. We have recently begun to utilize
reinsurance and other credit enhancement alternatives to reduce our initial cash
deposit related to securitizations. A downgrading of Financial Security
Assurance's credit rating or Financial Security Assurance's withdrawal of credit
enhancement or the lack of availability of reinsurance or other alternative
credit enhancements could result in higher interest costs for our future
securitizations and larger initial cash deposit requirements. These events could
have a material adverse effect on our financial position, liquidity and results
of operations.
Ability to Service Debt - To Service Our Debt, We Will Require a Significant
Amount of Cash. Our Ability to Generate Cash Depends on Many Factors.
Our ability to make payments on and to refinance our indebtedness,
including the Notes, and to fund planned capital expenditures will depend on our
ability to generate cash in the future. This, to a certain extent, is subject
to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control. We believe our cash flow from operating,
investing and financing activities will be adequate to meet our future liquidity
needs, for at least the next few years.
We require substantial amounts of cash to fund our contract purchase and
securitization activities. Although we recognize a gain on the sale of
receivables upon the closing of a securitization, we typically receive the cash
representing that gain over the actual life of the receivables securitized. We
also incur significant transaction costs in connection with a securitization and
incur both current and deferred tax liabilities as a result of the gains on
sale. Accordingly, our strategy of securitizing substantially all of our newly
purchased receivables and increasing the number of contracts purchased will
require substantial amounts of cash.
We expect to continue to require substantial amounts of cash as the volume
of our contract purchases increases and our securitization program grows. Our
primary cash requirements include the funding of:
. contract purchases pending their securitization and sale;
. credit enhancement requirements in connection with the securitization
and sale of the receivables;
. interest and principal payments under the warehouse facilities, the
credit agreement, the Canadian facility, the mortgage subsidiary
credit agreement, our notes and other indebtedness;
. fees and expenses incurred in connection with the securitization of
receivables and the servicing of them;
. ongoing operating expenses; and
. tax payments due on receipt of excess cash flows from securitization
trusts.
Our primary sources of liquidity in the future are expected to be:
. existing cash;
11
<PAGE>
. financings under the warehouse facilities, the credit agreement, the
Canadian facility, and the mortgage subsidiary credit agreement;
. sales of automobile receivables through securitizations;
. excess cash flow received from securitization trusts; and
. further issuances of debt or equity securities, depending on capital
market conditions.
Because our principal credit facilities are initially 360 days in length,
we must renew these facilities annually. In addition, because we expect to
continue to require substantial amounts of cash for the foreseeable future, we
anticipate that we will need to enter into debt or equity financings regularly,
in addition to quarterly securitizations. The type, timing and terms of
financing selected by us will be dependent upon our cash needs, the availability
of other financing sources and the prevailing conditions in the financial
markets. We cannot assure you that any of these sources will be available to us
at any given time or that the terms on which these sources may be available will
be favorable to us.
Holding Company Structure - As a Holding Company, We Depend on Our Subsidiaries
to Meet Our Financial Obligations.
AmeriCredit Corp. is a holding company with no significant assets other
than the stock of our subsidiaries. In order to meet our financial needs, we
will rely exclusively on repayments of interest and principal on intercompany
loans made by us to our operating subsidiaries and income from dividends and
other cash flow from such subsidiaries. We cannot assure you that our operating
subsidiaries will generate sufficient net income to pay upstream dividends or
cash flow to make payments of interest and principal to us in respect of our
intercompany loans.
Holding Company Structure - Because of Our Holding Company Structure and the
Security Interests Our Subsidiaries Have Granted in Their Assets, the Repayment
of the Notes Will Be Effectively Subordinated to Substantially All of Our Debt.
We derive substantially all of our revenues from our subsidiaries and from
our interests in securitization trusts. Holders of any secured indebtedness of
ours or our subsidiaries or the securitization trusts will have claims that are
prior to the claims of the holders of any debt securities issued by us with
respect to the assets securing most of our other indebtedness. Notably, we and
most of our subsidiaries, including the Guarantors, are parties to the credit
agreement, the Canadian facility and the mortgage subsidiary credit agreement
which are secured by liens on all of the receivables financed under them and
certain of ours and our subsidiaries' other assets. Any debt securities issued
by us, including the Notes, will be effectively subordinated to that secured
indebtedness. As of March 31, 1999, the aggregate amount of secured indebtedness
of ours and our subsidiaries was approximately $268.3 million and approximately
$76.3 million would have been available for additional borrowing under the
credit agreement, under the borrowing base requirements of that agreement. If we
defaulted under our obligations under the warehouse facilities, the credit
agreement, the Canadian facility or the mortgage subsidiary credit agreement,
the lenders could proceed against the collateral granted to them to secure that
indebtedness. If any senior indebtedness were to be accelerated, we cannot
assure you that our assets would be sufficient to repay in full that
indebtedness and the other indebtedness of ours, including any debt securities
issued by us.
Holding Company Structure - Your Right to Receive Payments on the Notes Could Be
Adversely Affected If Any of Our Non-Guarantor Subsidiaries Declares Bankruptcy,
Liquidates or Reorganizes.
Some but not all of our subsidiaries guarantee the Notes. In a bankruptcy,
liquidation or reorganization of any of the non-guarantor subsidiaries, holders
of their indebtedness and their trade creditors will generally be entitled to
payment of their claims from the assets of those subsidiaries before any assets
are made available for distribution to us.
In addition, a substantial portion of our business is conducted through
certain wholly-owned subsidiaries which are limited purpose entities and are
subject to substantial contractual restrictions (the "Non-Guarantor Special
Purpose Finance Vehicles"). The Non-Guarantor Special Purpose Finance Vehicles
will not be Guarantors with respect to any debt securities issued by us,
including the Notes. All financings by us under our warehouse facilities are
secured by a first priority lien on the receivables and related assets held by
our Non-Guarantor Special Purpose Finance Vehicles. The auto receivables owned
by the Non-Guarantor Special Purpose Finance Vehicles will not be available to
satisfy claims by our creditors, including any claims made under the Notes.
Because the Non-Guarantor
12
<PAGE>
Special Purpose Finance Vehicles are not Guarantors, any debt securities issued
by us will be structurally subordinated to all indebtedness and other
obligations of the Non-Guarantor Special Purpose Finance Vehicles.
AFS Funding Corp. is also subject to certain contingent claims by Financial
Security Assurance relating to the financial guarantee insurance policies issued
by Financial Security Assurance in connection with our securitizations. We have
agreed to reimburse Financial Security Assurance, on a limited recourse basis,
for amounts paid by Financial Security Assurance under these financial guarantee
insurance policies. In order to secure those reimbursement obligations, we have
granted to Financial Security Assurance a lien on the capital stock and some
assets of, AFS Funding Corp. Financial Security Assurance will have claims that
are prior to the claims of the holders of debt securities issued by us,
including the Notes, with respect to these assets and the debt securities issued
by us, including the Notes, will be effectively subordinated to all of these
reimbursement rights. Substantially all of AFS Funding Corp.'s other assets are
credit enhancement assets consisting of subordinated interests in our
securitizations that are effectively subordinated to the asset-backed securities
issued in such securitizations. As of March 31, 1999, credit enhancement assets
were approximately $413.7 million. We can give you no assurance that our
operations, independent of AFS Funding Corp., will generate sufficient cash flow
to support payment of interest or principal on any debt securities issued by us,
including the Notes, or that dividend distributions will be available from AFS
Funding Corp. to fund these payments.
Substantial Leverage - Our Substantial Indebtedness Could Adversely Affect the
Financial Health of the Company and Prevent Us from Fulfilling Our Obligations
Under the New Notes.
We currently have now, and after the offering, will continue to have a
significant amount of indebtedness. Our ability to make payments of principal
or interest on, or to refinance our indebtedness will depend on:
. our future operating performance; and
. our ability to enter into additional securitizations and debt and/or
equity financings, which to a certain extent is subject to economic,
financial, competitive and other factors beyond our control.
If we are unable to generate sufficient cash flow in the future to service
our debt, we may be required to refinance all or a portion of our existing debt
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 us.
Our substantial indebtedness could have important consequences to the
holders of securities, including:
. we may be unable to satisfy our obligations under the Notes;
. we may be more vulnerable to adverse general economic and industry
conditions;
. we may find it more difficult to fund future working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes; and
. we will have to dedicate a substantial portion of our cash resources
to the payments on our indebtedness, thereby reducing the funds
available for operations and future business opportunities.
Substantial Leverage - Our Credit and Warehouse Facilities and Indentures
Restrict Our Operations.
Our indentures and our credit and warehouse facilities restrict our ability
and our subsidiaries' ability to, among other things:
. sell or transfer assets;
. incur additional debt;
. repay other debt;
. pay dividends;
. make certain investments or acquisitions;
. repurchase or redeem capital stock;
13
<PAGE>
. engage in mergers or consolidations; and
. engage in certain transactions with subsidiaries and affiliates.
The indentures and the credit and warehouse facilities also require us to
comply with certain financial ratios. These restrictions may interfere with our
ability to obtain financing or to engage in other necessary or desirable
business activities.
If we cannot comply with the requirements in our credit and warehouse
facilities, then the lenders may require us to repay immediately all of the
outstanding debt under our facilities. If our debt payments were accelerated,
our assets might not be sufficient to fully repay our debt. These lenders may
also require us to use all of our available cash to repay our debt or may
prevent us from making payments to other creditors on certain portions of our
outstanding debt.
We may not be able to obtain a waiver of these provisions or refinance our
debt, if needed. In such a case, our business, results of operations and
financial condition would suffer.
Additional Borrowings Available -- Despite Current Indebtedness Levels, We and
Our Subsidiaries May Still Be Able to Incur Substantially More Debt. This Could
Further Exacerbate the Risks Described Above.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify.
See "Capitalization," "Selected Consolidated Financial Data" and
"Description of the New Notes --Repurchase at the Option of Holders--Change of
Control" and "Description of Other Debt."
Default and Prepayment Risks - Defaults and Prepayments on Contracts Purchased
By Us Could Adversely Affect Our Operations.
Our results of operations, financial condition and liquidity depend, to a
material extent, on the performance of contracts purchased and held by us 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 us may default or prepay during the period prior to their sale in a
securitization transaction or if they remain owned by us. We bear the full risk
of losses resulting from payment defaults during that period. In the event of a
payment default, the collateral value of the financed vehicle usually does not
cover the outstanding loan balance and costs of recovery. We maintain an
allowance for losses on loans held by us, which reflects management's estimates
of anticipated losses for these loans. If the allowance is inadequate, then we
would recognize as an expense the losses in excess of that allowance and results
of operations could be adversely affected. In addition, under the terms of our
credit agreements, we are not able to borrow against defaulted loans and loans
greater than 30 days delinquent held by us.
We also retain a substantial portion of the default and prepayment risk
associated with the receivables that we sell in our securitizations. A large
component of the gain recognized on these sales and the corresponding asset
recorded on our balance sheet are credit enhancement assets, which are based on
the present value of estimated future excess cash flows from the securitized
receivables which will be received by us. Accordingly, credit enhancement assets
are 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, we are
required to deposit substantial amounts of the cash flows generated by our
interests in our securitizations ("restricted cash") into spread accounts
which are pledged to Financial Security Assurance as security for our obligation
to reimburse Financial Security Assurance for any amounts which may be paid out
on financial guarantee insurance policies.
We regularly measure our default, prepayment and other assumptions against
the actual performance of securitized receivables. If we were to determine, as
a result of that regular review or otherwise, that we underestimated defaults
and/or prepayments, or that any other material assumptions were inaccurate, we
would be required to adjust the carrying value of our credit enhancement assets
(which consist of restricted cash, investments in Trust receivables and
interest-only receivables) by making a charge to income and writing down the
carrying value of these assets on our balance sheet. Future cash flows from
securitization trusts may also be less than expected and our
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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 our servicing portfolio which would reduce our servicing fee
income, further adversely affecting results of operations and cash flow. A
material write-down in credit enhancement assets and the corresponding decreases
in earnings and cash flow could limit our ability to service debt and to enter
into future securitizations and other financings. Although we believe that we
have 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.
As of March 31, 1999, credit enhancement assets totaled $413.7 million.
Depending on our growth, credit enhancement assets may become a larger share of
our overall assets.
Portfolio Performance - The Negative Performance of Auto Contracts In Our
Portfolio Could Adversely Affect Our Cash Flow and Servicing Rights.
Generally, the form of credit enhancement agreement we enter 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 us, which would have an adverse effect on
our 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 our other securitization
trusts, so that excess cash flow from a performing securitization trust insured
by Financial Security Assurance may be used to support increased credit
enhancement requirements for a nonperforming securitization trust insured by
Financial Security Assurance, which would further restrict excess cash flow
available to us. We have on occasion exceeded these specified limits, however,
Financial Security Assurance has either waived each of these occurrences or
amended the agreements. We can give you no assurance that Financial Security
Assurance would waive any such future occurrence or amend the agreements. Any
refusal of Financial Security Assurance to waive any such future occurrence or
amend the agreements could have a material adverse effect on our financial
position, liquidity and results of operations.
The credit enhancement agreements we enter 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 Financial Security
Assurance to terminate our 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 Financial Security Assurance
to terminate our servicing rights under all of our servicing agreements.
Although we have never exceeded such delinquency, default or loss rates, we can
give you no assurance that our 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. Financial Security Assurance
has other rights to terminate us as servicer if:
. we breach our obligations under the servicing agreements;
. Financial Security Assurance was required to make payments under its
policy; or
. some bankruptcy or insolvency events were to occur.
As of the date of this prospectus, none of these termination events have
occurred with respect to any of the trusts formed by us.
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Implementation of Business Strategy - Failure to Implement Our Business Strategy
Could Adversely Affect Our Operations.
Our financial position and results of operations depend on our ability to
execute our business strategy. Our ability to execute our business strategy
depends on our ability:
. to obtain substantial additional financing;
. to expand our automobile contract purchase volume; and
. to attract and retain skilled employees and on the ability of our
officers and key employees to manage growth successfully.
Our failure or inability to execute our business strategy could materially
adversely affect our financial position, liquidity and results of operations.
Credit-Impaired Borrowers - There is a High Degree of Risk Associated With Non-
Prime Borrowers.
We specialize in purchasing, securitizing and servicing non-prime
receivables. Non-Prime Borrowers are associated with higher-than-average
delinquency and default rates. While we believe that we effectively manage these
risks with our proprietary credit scoring models, risk-based loan pricing and
other underwriting policies and collection methods, we can give you no assurance
that these criteria or methods will be effective in the future. In the event
that we underestimate the default risk or under-price contracts that we
purchase, our financial position, liquidity and results of operations would be
adversely affected, possibly to a material degree.
Economic Conditions - We Are Subject to General Economic Conditions Which are
Beyond Our Control.
General. Delinquencies, defaults, repossessions and losses generally
increase during periods of economic recession. These periods also may be
accompanied by decreased consumer demand for automobiles and declining values of
automobiles securing outstanding loans, which weakens collateral coverage and
increases the amount 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 these sales. Because we focus on Non-Prime Borrowers, the actual rates
of delinquencies, defaults, repossessions and losses on these 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 slow down or recession, our servicing costs may increase
without a corresponding increase in our servicing fee income. While we believe
that the underwriting criteria and collection methods we employ enable us to
manage the higher risks inherent in loans made to Non-Prime Borrowers, we can
give you no assurance that these criteria or methods will afford adequate
protection against these risks. Any sustained period of increased delinquencies,
defaults, repossessions or losses or increased servicing costs could also
adversely affect our ability to enter into future securitizations and
correspondingly, our financial position, liquidity and results of operations.
Interest Rates. Our profitability may be directly affected by the level of
and fluctuations in interest rates, which affect our ability to earn a gross
interest rate spread. As the level of interest rates increases, our gross
interest rate spread will generally decline since the rates charged on the
contracts we purchase from dealers are limited by statutory maximums, affording
us little opportunity to pass on any increased interest costs. Furthermore, our
future gains recognized upon the securitization of automobile receivables will
also be affected by interest rates. We recognize a gain in connection with our
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. We believe that our profitability and
liquidity would be adversely affected during any period of higher interest
rates, possibly to a material degree. We monitor the interest rate environment
and employ pre-funding or other hedging strategies designed to mitigate the
impact of changes in interest rates. We can give you no assurance, however, that
pre-funding or other hedging strategies will mitigate the impact of changes in
interest rates.
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Competition - We May be Unable to Repay the New Notes if We Do Not Successfully
Compete in Our Industry.
Competition in the field of non-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 us. 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 us. 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 ourself as
one of the principal financing sources of the dealers we serve, we compete
predominately on the basis of our high level of dealer service and strong dealer
relationships and by offering flexible loan terms. There can be no assurance
that we will be able to compete successfully in this market or against these
competitors.
Fraudulent Conveyance Matters - Federal and State Statutes Allow Courts, Under
Specific Circumstances, to Void the New Notes and the Guarantees and Require
Noteholders to Return Payments Received from the Company or the Guarantors.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the New Notes and the guarantees could be voided, or
claims in respect of the New Notes or the guarantees could be subordinated to
all other debts of the Company or any guarantor if, among other things, the
Company or such guarantor, at the time it incurred the indebtedness evidenced by
the New Notes or its guarantee:
. received less than reasonably equivalent value or fair consideration
for the incurrence of such indebtedness; or
. was insolvent or rendered insolvent by reason of such incurrence; or
. was engaged in a business or transaction for which the Company's or
such guarantor's remaining assets constituted unreasonably small
capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by the Company or a guarantor pursuant to the New
Notes or a guarantee could be voided and required to be returned to the Company
or that guarantor, or to a fund for the benefit of the creditors of the Company
or that guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, the Company or a
guarantor would be considered insolvent if:
. the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets,
. 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
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. it could not pay its debts as they become due.
Based upon information currently available to us, we believe that the New
Notes and the guarantees are being incurred for proper purposes and in good
faith and that we, and each of the Guarantors:
. are solvent and will continue to be solvent after giving effect to the
issuance of the New Notes and the guarantees, as the case may be;
. will have enough capital for carrying on our business and the business
of each of the Guarantors after the issuance of the New Notes and the
guarantees, as the case may be; and
. will be able to pay our debts.
Regulation - Our Business Would Be Adversely Affected if We Lost Our Licenses or
if Future, More Onerous Government Regulations Were Enacted.
Our business is subject to numerous federal and state consumer protection
laws and regulations which, among other things:
. require us to obtain and maintain licenses and qualifications;
. limit the interest rates, fees and other charges we are allowed to
charge;
. limit or prescribe other terms of our automobile installment sales
contracts;
. require specific disclosures; and
. define our rights to repossess and sell collateral.
We believe we are in substantial compliance with all of these laws and
regulations, and that these laws and regulations have had no material adverse
effect on our ability to operate our business. Changes in existing laws or
regulations, or in the interpretation, or the promulgation of any additional
laws or regulations, could have a material adverse effect on our business. In
addition, we retain some of the regulatory risk on receivables sold in
securitizations as a result of representations and warranties made by us in
these transactions.
As a result of the consumer-oriented nature of the industry in which we
operate and uncertainties with respect to the application of various laws and
regulations in some 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 us in connection with any litigation could have a material
adverse affect on our financial condition and results of operations. In
addition, if it were determined that a material number of contracts purchased by
us involved violations of applicable lending laws by automobile dealers, our
financial condition and results of operations could be materially adversely
affected.
Financing Change of Control Offer-We May Not Have the Ability to Raise the Funds
Necessary to Finance the Change of Control Offer Required by the Indenture.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding New Notes. However,
it is possible that we will not have sufficient funds at the time of the change
of control to make the required repurchase of New Notes or that restrictions in
our Credit Facilities will not allow such repurchases. In addition, certain
important corporate events, such as leveraged recapitalizations that would
increase the level of our indebtedness, would not constitute a "Change of
Control" under the indenture. See "Description of the New Notes-Repurchase at
the Option of Holders- Change of Control."
Year 2000 - Our Operations May Suffer from Year 2000 Computer Problems.
Year 2000 issues exists when computers record dates using two digits rather
than four, and then use the dates for arithmetic operations, comparisons or
sorting. A two-digit recording may recognize a date using "00" as 1900 rather
than 2000, which could cause computer systems to perform inaccurate computations
or fail to operate. Although we do not anticipate being subject to a material
impact in this area, if we and the companies with which we
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do business do not take adequate preventative action, then the Year 2000 problem
could damage our business, financial condition and results of operations.
No Prior Market for the New Notes-You Cannot Be Sure that an Active Trading
Market Will Develop for the New Notes.
The New Notes are a new issue of securities with no establishing trading
market and will not be listed on any securities exchange. The liquidity of the
trading market in the New Notes, and the market price quoted for the New Notes,
may be adversely affected by changes in the overall market for high yield
securities and by changes in our financial performance or prospects or in the
prospects for companies in our industry generally. As a result, you cannot be
sure that an active trading market will develop for the New Notes.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
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THE EXCHANGE OFFER
Purpose and Effect
We sold the Old Notes on April 20, 1999 to Salomon Smith Barney Inc., Bear,
Stearns & Co., Inc. and ING Baring Furman Selz LLC, as the initial purchasers,
pursuant to a purchase agreement. The initial purchasers subsequently resold the
Old Notes under Rule 144A under the Securities Act. As part of the offering of
the initial notes, we entered into a registration rights agreement
("Registration Rights Agreement"). The Registration Rights Agreement requires,
unless the exchange offer is not permitted by applicable law or Commission
policy, that we
. file a registration statement with the Commission under the Securities
Act with respect to the New Notes within 60 days of the execution of
the registration rights agreement;
. use our best efforts to cause the registration statement to become
effective within 150 days of the execution of the registration rights
agreement; and
. upon effectiveness of the registration statement, commence the
exchange offer and keep the exchange offer open for at least 20
business days and not more than 30 business days.
Except as provided below, upon the completion of the exchange offer, the
Company's obligations with respect to the registration of the Old Notes and the
New Notes will terminate. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement, of which this prospectus is a
part, and this summary of the material provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the complete Registration Rights Agreement. As a result of the
timely filing and the effectiveness of the Registration Statement, the Company
will not have to pay certain additional interest on the Old Notes provided in
the Registration Rights Agreement. Following the completion of the exchange
offer (except as set forth in the paragraph immediately below), holders of Old
Notes not tendered will not have any further registration rights and those Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Notes could be adversely
affected upon consummation of the exchange offer.
In order to participate in the exchange offer, a holder must represent to
the Company, among other things, that (i) the New Notes acquired pursuant to the
exchange offer are being obtained in the ordinary course of business of the
holder, (ii) the holder is not engaging in and does not intend to engage in a
distribution of the New Notes, (iii) the holder does not have an arrangement or
understanding with any person to participate in the distribution of the New
Notes and (iv) the holder is not an "affiliate," as defined under Rule 405
promulgated under the Securities Act, of the Company or the Guarantors. Under
certain circumstances specified in the Registration Rights Agreement, the
Company may be required to file a "shelf" registration statement for a
continuous offering pursuant to Rule 415 under the Securities Act in respect of
the Old Notes. See "Registration Rights." For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Note until (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for an New
Note in the exchange offer, (ii) following the exchange by a broker-dealer in
the exchange offer of an Old Note for a New Note, the date on which such New
Note is sold to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of this prospectus, (iii) the date on which such
Old Note has been effectively registered under the Securities Act and disposed
of in accordance with such "shelf" registration statement or (iv) the date on
which such Old Note is distributed to the public pursuant to Rule 144 under the
Act or may be distributed to the public pursuant to Rule 144(k) under the Act.
See "-Procedures for Tendering Old Notes."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
exchange offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any holder which is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act, or a broker-dealer who purchased Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that the New
Notes are acquired in the ordinary course of business of the holder and the
holder does not have an arrangement or understanding with any person to
participate in the distribution of such New Notes. Any holder who tenders in the
exchange offer for the purpose of participating in a distribution of the New
Notes cannot rely on this interpretation by the Commission's staff
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and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction. 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 activities 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." Broker-dealers who acquired Old Notes directly from us
and not as a result of market-making activities or other trading activities may
not rely on the staff's interpretations discussed above or participate in the
exchange offer and must comply with the prospectus delivery requirements of the
Securities Act in order to sell the Old Notes.
Consequences of Failure to Exchange Old Notes
Following the completion of the exchange offer, holders of Old Notes who
did not tender their Old Notes, or who did not properly tender their Old Notes,
will not have any further registration rights and such Old Notes will continue
to be subject to restrictions on transfer. 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
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we 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. We will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of the outstanding Old Notes
accepted in the exchange offer. Holders who have tendered their Old Notes may
withdraw their tender of Old Notes 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 they hold, provided that they appropriately
indicate this fact on the letter of transmittal accompanying the tendered Old
Notes.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes, except that the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer. The
New Notes will evidence the same debt as the Old Notes and will be issued
pursuant to, and entitled to the benefits of, the Indenture pursuant to which
the Old Notes were issued.
As of the date of this prospectus, $200 million in aggregate principal
amount of the Old Notes is outstanding. As of July 27, 1999, Cede & Co., was the
only registered holder of the Old Notes. Cede & Co. held the Old Notes for 24 of
its participants. We have fixed the close of business on July 27, 1999 as the
record date for purposes of determining the persons to whom we will mail this
prospectus and the letter of transmittal initially. Only a holder of the Old
Notes, or such holder's legal representative or attorney-in-fact, may
participate in the exchange offer. We will not fix a record date for determining
holders of the Old Notes entitled to participate in the exchange offer. We
believe that, as of the date of this prospectus, no such holder is our
affiliate, as defined in Rule 405 under the Securities Act.
We will be deemed to have accepted validly tendered Old Notes when, as and
if we have 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 purpose of receiving the New Notes from us.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of other events set forth in this prospectus or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
expiration date.
Holders who tender Old Notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of Old Notes
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pursuant to the exchange offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the exchange offer. See
"-Fees and Expenses."
Expiration Date; Extensions; Amendments
The expiration date shall be August 27, 1999, at 5:00 p.m., New York City
time, unless we, in our sole discretion, extend 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 September 13, 1999.
In order to extend the exchange offer, we 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.
We reserve the right, in our sole discretion,
. to delay accepting any Old Notes,
. to extend the exchange offer,
. 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
. to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner we determine to constitute a material
change, we will promptly disclose such amendments by means of a prospectus
supplement that we will distribute to the registered holders of the Old Notes.
Modification of the exchange offer, including, but not limited to,
. extension of the period during which the exchange offer is open, and
. satisfaction of the conditions set forth below under "--Conditions of
the Exchange Offer"
may require that at least five business days remain in the exchange offer.
Conditions of the Exchange Offer
Notwithstanding any other provision of the exchange offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the exchange offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for the Old Notes, the Company determines that the exchange offer violates
applicable law, any applicable interpretation of the staff of the Commission or
any order of any governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended. In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
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Accrued Interest
The New Notes will bear interest at a rate equal to 9.875% per annum, which
interest shall accrue from April 20, 1999 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 the New Notes--Principal, Maturity and
Interest."
Procedures for Tendering Old Notes
Only a holder of Old Notes may tender the Old Notes in the exchange offer.
Except as set forth under "-Book Entry Transfer," to tender in the exchange
offer a holder must complete, sign, and date the letter of transmittal, or a
copy thereof, have the signatures thereon guaranteed if required by the letter
of transmittal, and mail or otherwise deliver the letter of transmittal or copy
to the Exchange Agent prior to the expiration date. In addition, (i)
certificates for the Old Notes must be received by the Exchange Agent along with
the letter of transmittal prior to the expiration date, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if that procedure is available, into the Exchange Agent's account at DTC
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
expiration date or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the letter of
transmittal and other required documents must be received by the Exchange Agent
at the address set forth under "The Exchange Agent; Assistance" prior to the
expiration date.
The tender by a holder that is not withdrawn before the expiration date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the letter
of transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUSTS COMPANIES OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any 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 should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the letter of transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined) unless
Old Notes tendered pursuant thereto are tendered (i) by a registered holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the letter of transmittal or (ii) for the
account of an Eligible Institution. If signatures on a letter of transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, the
guarantee must be by any eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or an "eligible guarantor
institution" with the meaning on Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
If the letter of transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If the letter of transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
23
<PAGE>
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the letter of
transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the exchange offer (including the instructions in the letter of
transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent, nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the letter of transmittal, as soon as practicable
following August 27, 1999, unless the exchange offer is extended.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
expiration date or, as set forth under "-Conditions to the Exchange Offer," to
terminate the exchange offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions, or
otherwise. The terms of any such purchases or offers could differ from the
terms of the exchange offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the exchange offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the registered holder, (ii) the holder is
not engaging in and does not intend to engage in a distribution of such New
Notes, (iii) the holder does not have an arrangement or understanding with any
person to participate in the distribution of such New Notes and (iv) the holder
is not an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company.
In all cases, issuance 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 certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility, a properly completed and duly executed letter of
transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of an
agreement to be bound by the letter of transmittal), and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the exchange offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange , such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering holder thereof (or, in the case of Old Notes tendered, by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the exchange offer.
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 activities 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."
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
exchange offer within two business days after the date of this prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
24
<PAGE>
Book-Entry Transfer Facility, the letter of transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "--Exchange Agent;
Assistance" on or prior to the expiration date or the guaranteed delivery
procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the letter of transmittal.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available, or 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:
(1) the holder tenders through an eligible institution and signs a notice
of guaranteed delivery,
(2) on or prior to the Expiration Date, the Exchange Agent receives from
the holder and the eligible institution a written or facsimile copy of a
properly completed and duly executed notice of guaranteed delivery,
substantially in the form provided by the Company, 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 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
(3) such properly completed and executed documents required by the letter
of transmittal and the tendered Old Notes in proper form for transfer are
received by the Exchange Agent within five 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, we
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, we shall be
deemed to have accepted validly tendered Old Notes, when, as, and if we have
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 the Exchange
Agent timely receives such Old Notes, a properly completed and duly executed
letter of transmittal and all other required documents; provided, however, we
reserve the absolute right to waive any defects or irregularities in the tender
or conditions of the exchange offer. If we do not accept any tendered Old Notes
for any reason, we will return such unaccepted Old Notes without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the exchange offer.
25
<PAGE>
Withdrawal Rights
Holders may withdraw tenders of Old Notes at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. For the withdrawal to be effective,
the Exchange Agent must receive a written notice of withdrawal at its address
set forth on the back cover page of this prospectus. The notice of withdrawal
must:
. specify the name of the person who tendered the Old Notes to be
withdrawn (the "Depositor");
. identify the Old Notes to be withdrawn, including the certificate
number or numbers and principal amount of withdrawn notes;
. 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 us
in our 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
. specify the name in which such Old Notes are to be registered, if
different from the person who deposited the Old Notes, pursuant to such
documents of transfer.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices in our 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 their holder 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
26
<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
We will bear all expenses incident to the consummation of the exchange
offer and compliance with the Registration Rights Agreement, including, without
limitation: (1) all registration and filing fees, including fees and expenses of
compliance with state securities or Blue Sky laws; (2) printing expenses,
including expenses of printing certificates for the New Notes in a form eligible
for deposit with DTC and of printing prospectuses; (3) messenger, telephone and
delivery expenses; (4) fees and disbursements of our counsel; (5) fees and
disbursements of independent certified public accountants; (6) rating agency
fees; (7) our internal expenses, including all salaries and expenses of our
officers and employees performing legal or accounting duties; and (8) fees and
expenses, if any, incurred in connection with the listing of the New Notes on a
securities exchange.
We have 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. We, 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.
We 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
We will record the New Notes at the same carrying value as the Old Notes,
as reflected in our accounting records on the date of the exchange. Accordingly,
we will not recognize any gain or loss for accounting purposes. We will amortize
expenses of the exchange offer over the term of the New Notes.
27
<PAGE>
CAPITALIZATION
The following table sets forth certain information regarding our debt and
capitalization as of March 31, 1999, and as adjusted to give effect to the sale
by us of the Notes and 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>
March 31, 1999
-----------------------
Actual As Adjusted
--------- ------------
<S> <C> <C>
(in thousands)
Debt:
Credit Agreements........................................... $ 603 $ 603
Warehouse Facilities........................................ 233,661 39,661
Mortgage Subsidiary Credit Agreement........................ 21,267 21,267
Senior Notes................................................ 175,000 375,000
Other notes payable(1)...................................... 12,759 12,759
-------- --------
Total debt.............................................. 443,290 449,290
-------- --------
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; 70,790,686 shares issued............. 708 708
Additional paid-in capital.................................. 244,194 244,194
Accumulated other comprehensive income...................... 13,319 13,319
Retained earnings........................................... 125,133 125,133
Treasury stock, at cost (7,486,585 shares).................. (22,590) (22,590)
-------- --------
Total shareholders' equity.............................. 360,764 360,764
-------- --------
Total capitalization................................. $804,054 $810,054
======== ========
</TABLE>
______________________
(1) Consists of certain capitalized equipment leases.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents our selected unaudited consolidated data. The
historical consolidated financial information under the captions "Statement of
Income Data," "Cash Flow Data" and "Balance Sheet Data" for each of the years in
the five-year period ended June 30, 1998 have been derived from our consolidated
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The consolidated financial statements as of June 30,
1997 and June 30, 1998 and for each of the years in the three-year period ended
June 30, 1998, and the report thereon, are included elsewhere herein. The
historical consolidated financial information under the captions "Statement of
Income Data," "Cash Flow Data" and "Balance Sheet Data" as of March 31, 1998 and
March 31, 1999 and for the nine months then ended have been derived from the
unaudited consolidated financial statements which, except for the consolidated
balance sheet as of March 31, 1998, are included elsewhere herein; however, in
our opinion, 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 nine months
ended March 31, 1999 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.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
----------------------------------------------------------- -------------------------
June 30, June 30, June 30, June 30, June 30, March 31, March 31,
1994 1995 1996(1) 1997(1) 1998(1) 1998(1) 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue:
Finance charge income................ $ 7,820 $ 29,039 $ 51,679 $ 44,910 $ 55,837 $ 40,052 $ 51,538
Gain on sale of receivables.......... -- -- 21,405 52,323 103,194 71,838 116,551
Servicing fee income................. -- -- 3,892 23,492 47,910 34,389 61,702
Other income......................... 8,062 4,045 2,659 2,631 2,395 1,901 3,361
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue..................... 15,882 33,084 79,635 123,356 209,336 148,180 233,152
Costs and expenses................... 10,817 23,066 46,722 74,822 129,174 90,621 148,009
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before taxes.................. 5,065 10,018 32,913 48,534 80,162 57,559 85,143
Provision (credit) for taxes(2)...... -- (18,875) 12,148 18,685 30,861 22,159 32,780
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 5,065 $ 28,893 $ 20,765 $ 29,849 $ 49,301 $ 35,400 $ 52,363
Diluted earnings (loss) per share.... $ .08 $ .48 $ .34 $ .48 $ .76 $ .55 $ .78
Weighted average shares
outstanding(3)...................... 63,636,166 60,761,498 60,406,596 61,574,548 65,203,460 64,644,030 66,822,426
Cash Flow Data:
(Used in) Provided by operating
activities.......................... $ 3,900 $ 14,637 $ 34,530 $ 36,003 $ 37,813 $ 11,162 $ 38,214
(Used in) Provided by investing
activities.......................... (12,174) (144,512) (62,749) (92,947) (144,868) (105,820) (129,225)
(Used in) Provided by financing
activities.......................... (9,238) 132,433 12,050 60,826 134,115 97,725 94,770
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents.................... $ (17,512) $ 2,558 $ (16,169) $ 3,882 $ 27,060 $ 3,067 $ 3,759
Other Data:
Auto receivable originations......... $ 65,929 $ 230,176 $ 432,442 $ 906,794 $1,737,813 $1,176,734 $1,990,893
Managed auto receivables............. $ 67,636 $ 240,491 $ 523,981 $1,138,255 $2,302,516 $1,924,796 $3,553,208
Average managed auto originations.... $ 37,507 $ 141,526 $ 357,966 $ 792,155 $1,649,416 $1,495,784 $2,892,752
Auto loans securitized............... $ -- $ 150,170 $ 270,351 $ 817,500 $1,637,499 $1,117,499 $1,920,001
Number of branches................... 18 31 51 85 129 119 168
Average principal amount
per managed auto receivable......... $ 7,215 $ 7,773 $ 8,746 $ 10,087 $ 10,782 $ 10,584 $ 11,074
Ratios:
Ratio of earnings to fixed charges(4) 3.12 3.5 3.5 4.0 4.0 4.0 4.3
Percentage of total indebtedness to
total capitalization................ 0.3% 47.9% 48.7% 51.8% 54.7% 55.3% 55.1%
Return on average common equity(5)... 4.1% 23.1% 13.7% 16.4% 20.1% 20.5% 21.3%
Operating expenses as a percentage of
average managed auto receivables(5). 15.0% 10.0% 7.2% 6.2% 5.4% 5.5% 5.0%
Percentage of senior unsecured debt
to total equity..................... 0.0% 0.0% 0.0% 60.0% 60.8% 63.1% 48.5%
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
----------------------------------------------------------- -------------------------
June 30, June 30, June 30, June 30, June 30, March 31, March 31,
1994 1995 1996(1) 1997(1) 1998(1) 1998(1) 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Quality Data:
Managed auto receivables greater than
60 days delinquent................... $ 1,269 $ 4,907 $ 16,207 $ 36,421 $ 59,175 $ 50,653 $ 80,668
Delinquencies as a percentage of
managed auto receivables............. 1.9% 2.0% 3.1% 3.2% 2.6% 2.6% 2.3%
Net charge-offs....................... $ 1,432 $ 6,409 $ 19,974 $ 43,231 $ 88,002 $ 60,918 $ 103,891
Net charge-offs as a percentage of
average managed auto receivables(5).. 3.8% 4.5% 5.6% 5.5% 5.3% 5.4% 4.8%
Balance Sheet Data:
Cash and cash equivalents............. $ 15,756 $ 18,314 $ 2,145 $ 6,027 $ 33,087 $ 9,094 $ 36,846
Credit enhancement assets(6).......... -- -- 41,736 161,395 286,309 249,849 413,653
Auto receivables held for sale........ 67,636 240,491 264,086 275,249 334,110 299,335 400,722
Total assets.......................... 122,215 285,725 329,333 475,493 713,671 632,778 937,982
Credit Agreements..................... -- -- 86,000 71,700 -- -- 603
Mortgage Subsidiary Credit Agreement(7) -- -- -- 345 24,900 26,436 21,267
Warehouse Facilities.................. -- -- -- -- 140,708 97,592 233,661
Senior Notes.......................... -- -- -- 125,000 175,000 175,000 175,000
Other notes payable................... 388 135,236 68,265 27,206 6,410 16,923 12,759
Total debt............................ 388 135,236 154,265 224,251 347,018 315,951 443,290
Shareholders' equity.................. 119,501 147,226 162,399 208,261 287,848 254,873 360,764
</TABLE>
_____________________________
(1) We restated our financial statements for the fiscal years ended June 30,
1996, 1997 and 1998 and interim periods within those fiscal years as a
result of a retroactive change in its method of measuring and accounting
for credit enhancement assets to the cash-out method from the cash-in
method. See Note 2 of Notes to Consolidated Financial Statements.
(2) We recognized an income tax benefit in fiscal 1995 equal to the expected
future tax savings from using our net operating loss carry forward and
other future tax benefits.
(3) All share data for the periods presented have been adjusted to
retroactively reflect the two-for-one stock split paid on September 30,
1998.
(4) Represents the ratio of the sum of income before taxes plus interest
expense for the period to interest expense.
(5) Data for the nine-month periods ended March 31, 1998 and 1999 have been
annualized.
(6) Credit enhancement assets consist of restricted cash, investments in Trust
receivables and interest-only receivables. See Note 4 of Notes to
Consolidated Financial Statements.
(7) Fully guaranteed by us and certain of our Subsidiaries.
30
<PAGE>
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 and 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 and credit facilities.
The Company, through one or more Non-Guarantor Special Purpose Finance
Vehicles, 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 its 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. In addition to
excess cash flows, the Company earns monthly base servicing fee income of 2.25%
per annum of the outstanding principal balance of receivables securitized
("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services
("AMS"), which originates and sells mortgage loans. The Company accounted for
the acquisition 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.
These 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.
The Company restated its financial statements for the fiscal years ended
June 30, 1996, 1997 and 1998 and interim periods within those fiscal years as a
result of a retroactive change in its method of measuring and accounting for
credit enhancement assets to the cash-out method from the cash-in method. See
Note 2 of Notes to Consolidated Financial Statements.
Results of Operations
Nine Months Ended March 31, 1998 as compared to Nine Months Ended March 31,
1999
Revenue
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Auto:
Held for sale......................... $ 244,218 $ 292,629
Serviced.............................. 1,251,566 2,600,123
---------- ----------
1,495,784 2,892,752
Mortgage................................... 14,635 24,903
---------- ----------
$1,510,419 $2,917,655
========== ==========
</TABLE>
31
<PAGE>
Average managed receivables outstanding increased by 93% as a result of
higher loan purchase volume. The Company purchased $1,176.7 million of auto
loans during the nine months ended March 31, 1998, compared to purchases of
$1,990.9 million during the nine months ended March 31, 1999. This growth
resulted from higher loan production at branches open during both periods as
well as expansion of the Company's loan production capacity. The Company
operated 119 auto lending branch offices as of March 31, 1998, compared to 168
as of March 31, 1999.
The Company originated $94.5 million of mortgage loans during the nine
months ended March 31, 1998, compared to $203.5 million during the nine months
ended March 31, 1999.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------
1998 1999
-------- --------
<S> <C> <C>
Auto......................................... $39,032 $49,798
Mortgage..................................... 1,020 1,740
------- -------
$40,052 $51,538
======= =======
</TABLE>
The increase in finance charge income is due primarily to an increase of
20% in average auto receivables held for sale in the nine months ended March 31,
1998 versus the nine months ended March 31, 1999. In addition, the Company's
effective yield on its auto receivables held for sale increased from 21.3% for
the nine months ended March 31, 1998 to 22.7% for the nine months ended March
31, 1999. 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 automobile dealership originates the auto finance contract
and the date the Company funds the auto finance contract. The effective yield
rose for the nine months ended March 31, 1999 due to increased auto loan
purchases and correspondingly higher levels of finance charges earned between
the origination date and funding date.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------
1998 1999
-------- ---------
<S> <C> <C>
Auto............................................. $68,828 $111,452
Mortgage......................................... 3,010 5,099
------- --------
$71,838 $116,551
======= ========
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$1,117.5 million of receivables in the nine months ended March 31, 1998 as
compared to $1,920.0 million of receivables sold in the nine months ended March
31, 1999. The gain as a percentage of the sales proceeds decreased from 6.2%
for the nine months ended March 31, 1998 to 5.8% for the nine months ended March
31, 1999 primarily as a result of lower gross interest rate spreads.
Significant assumptions used in determining the gain on sale of auto
receivables were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------
1998 1999
--------- --------
<S> <C> <C>
Cumulative credit losses....................... 10.4% 10.6%
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 $70.7 million of receivables in the nine months ended March 31, 1998,
compared to $199.0 million of receivables sold in the nine months ended March
31, 1999. The average premium received on sales decreased from 4.3% for the nine
months
32
<PAGE>
ended March 31, 1998 to 2.6% for the nine months ended March 31, 1999 because of
lower prices for non-conforming mortgage loans in the secondary markets.
Servicing fee income increased from $34.4 million for the nine months ended
March 31, 1998, to $61.7 million for the nine months ended March 31, 1999.
Servicing fee income decreased as a percentage of average serviced auto
receivables from 3.7% for the nine months ended March 31, 1998 to 3.2% for the
nine months ended March 31, 1999, as a result of charges to increase credit loss
reserves. 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 nine months ended March 31,
1998 and 1999 also includes charges of $4.4 million and $13.4 million,
respectively, to increase credit loss reserves related to certain of the
Company's fiscal 1996 and 1997 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 1996 and 1997.
The growth in servicing fee income exclusive of the aforementioned charge is
attributable to the increase in average serviced auto receivables outstanding
for the nine months ended March 31, 1998 compared to the nine months ended March
31, 1999.
Costs and Expenses
Operating expenses as an annualized percentage of average managed
receivables outstanding decreased from 5.9% (5.5% excluding operating expenses
of $3.9 million relating to AMS) for the nine months ended March 31, 1998, to
5.3% (5.0% excluding operating expenses of $6.7 million relating to AMS) for
the nine months ended March 31, 1999. 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 $49.7 million, or 75%, 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 $5.5 million for the nine months
ended March 31, 1998 to $6.6 million for the nine months ended March 31, 1999
due to higher average amounts of auto receivables held for sale. As a
percentage of average auto receivables held for sale, the provision for losses
was 3.0% for the nine months ended March 31, 1998 and 1999.
Interest expense increased from $19.0 million for the nine months ended
March 31, 1998 to $25.7 million for the nine months ended March 31, 1999 due to
higher debt levels. Average debt outstanding was $271.7 million and $396.0
million for the nine months ended March 31, 1998 and 1999, respectively. The
Company's effective rate of interest paid on its debt decreased from 9.3% to
8.6% as a result of larger amounts of debt outstanding under the Company's
warehouse and credit facilities for the nine months ended March 31, 1999.
Interest rates on the warehouse and credit facilities are lower than rates on
the senior notes the Company issued previously.
The Company's effective income tax rate was 38.5% for the nine months ended
March 31, 1998 and 1999.
33
<PAGE>
Year Ended June 30, 1997 as compared to Year Ended June 30, 1998
Revenue
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Year Ended
June 30,
--------------------
1997 1998
-------- ----------
<S> <C> <C>
Auto
Held for sale........................ $223,351 $ 250,304
Serviced............................. 568,804 1,399,112
-------- ----------
792,155 1,649,416
Mortgage.................................... 8,187 18,728
-------- ----------
$800,342 $1,668,144
======== ==========
</TABLE>
Average managed receivables outstanding increased by 108% as a result of
higher loan purchase volume. The Company purchased $906.8 million of auto loans
during fiscal 1997, compared to purchases of $1,737.8 million during fiscal
1998. 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 85 auto lending branch offices as of June 30, 1997, compared to
129 as of June 30, 1998.
The Company originated $53.8 million of mortgage loans from the date of
acquisition of AMS through June 30, 1997 compared to $137.2 million during
fiscal 1998.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1998
-------- ---------
<S> <C> <C>
Auto........................................ $ 44,417 $ 54,125
Mortgage.................................... 493 1,712
-------- --------
$ 44,910 $ 55,837
======== ========
</TABLE>
The increase in finance charge income is due to an increase of 12% in
average auto receivables held for sale for fiscal 1997 versus fiscal 1998. In
addition, the Company's effective yield on its auto receivables held for sale
increased from 19.9% for fiscal 1997 to 21.6% for fiscal 1998. The effective
yield is higher than the contractual rates on the Company's auto finance
contracts as a result of finance charge income earned between the date the
automobile dealership originates the auto finance contract and the date the
Company funds the auto finance contract. The effective yield rose for fiscal
1998 due to increased auto loan purchases and correspondingly higher levels of
finance charges earned between the origination date and funding date.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended June
30,
------------------
1997 1998
-------- --------
<S> <C> <C>
Auto........................................ $49,405 $ 98,842
Mortgage.................................... 2,918 4,352
------- --------
$52,323 $103,194
======= ========
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$817.5 million of receivables in fiscal 1997 as compared to $1,637.5 million of
receivables sold in fiscal 1998. The gains amounted to 6% of the sales proceeds
for both fiscal 1997 and 1998.
34
<PAGE>
Significant assumptions used in determining the gain on sale of auto
receivables were as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Cumulative credit losses........................ 9.2% 10.7%
Discount rate used to determine present value:
Interest-only receivables from Trusts......... 12.0% 12.0%
Investments in Trust receivables.............. 7.8% 7.8%
Restricted case............................... 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 gain on sale of mortgage receivables resulted from the sale
of $52.5 million of receivables from the date of acquisition of AMS through June
30, 1997 compared to $119.7 million of receivables sold during fiscal 1998. The
average premium received on sales decreased from 5.6% for the period from the
date of acquisition of AMS through June 30, 1997 to 3.6% for fiscal 1998 because
of lower prices for non-conforming mortgage loans in the secondary markets.
Servicing fee income increased from $23.5 million for fiscal 1997, to $47.9
million for fiscal 1998. Servicing fee income decreased as a percentage of
average serviced auto receivables from 4.1% in fiscal 1997, to 3.4% in fiscal
1998, as a result of charges to increase credit loss reserves. 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 the
Company earned as servicer of the receivables sold to the Trusts. Servicing fee
income for fiscal 1998 also includes an $8.9 million charge to increase credit
loss reserves related to certain of the Company's fiscal 1996 and 1997
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 in fiscal 1998 compared to assumptions used for
transactions completed in prior fiscal years. The growth in servicing fee income
exclusive of the aforementioned charge is attributable to the increase in
average serviced auto receivables outstanding for fiscal 1997 compared to fiscal
1998.
Costs and Expenses
Operating expenses as a percentage of average managed receivables
outstanding decreased from 6.6% (6.2% excluding operating expenses of $2.6
million relating to AMS) for fiscal 1997 to 5.7% (5.4% excluding operating
expenses of $5.1 million relating to AMS) for fiscal 1998. 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 $42.6 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 from $6.6 million for fiscal 1997 to
$7.6 million for fiscal 1998 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% for fiscal 1997 and 1998.
Interest expense increased from $16.3 million for fiscal 1997 to $27.1
million for fiscal 1998 due to higher debt levels and effective interest rates.
Average debt outstanding was $187.6 million and $297.6 million for fiscal 1997
and 1998, respectively. The Company's effective rate of interest paid on its
debt increased from 8.7% to 9.1% as a result of the issuance of senior notes in
February 1997 and January 1998.
The Company's effective income tax rate was 38.5% for fiscal 1997 and 1998.
35
<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:
Held for sale........................... $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 branch offices as of June 30, 1996, compared to 85 as of June 30,
1997.
The Company originated $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 auto receivables held for sale for fiscal 1996 versus fiscal 1997. Prior
to December 1995, all of the auto finance contracts the Company purchased were
held on the Company's consolidated balance sheet. The Company began selling
auto receivables to the Trusts in December 1995, reducing average receivables
held for sale with corresponding increases in average serviced receivables. The
Company's effective yield on its auto receivables held for sale 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,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Auto......................................... $21,405 $ 49,405
Mortgage..................................... - 2,918
------- --------
$21,405 $ 52,323
======= ========
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$270.4 million of receivables in fiscal 1996 compared to $817.5 million of
receivables sold in fiscal 1997. The gains amounted to 7.9% and 6.0% of the
sales proceeds for fiscal 1996 and 1997, respectively.
36
<PAGE>
Significant assumptions used in determining the gain on sale of auto
receivables were as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Cumulative credit losses........................ 9.3% 9.2%
Discount rate used to determine 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 discounted rates used to determine the present value of credit
enhancement assets are based on the relative risks 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 the interest-
only receivables for credit enhancement purposes.
The gain on sale of mortgage receivables resulted from the sale of $52.5
million of receivables from the date of acquisition of AMS through June 30,
1997.
Servicing fee income increased from $3.9 million for fiscal 1996 to $23.5
million for fiscal 1997. Servicing fee income increased as a percentage of
average serviced auto receivables from 4.0% in fiscal 1996 to 4.1% in 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 the Company earns as servicer of the auto receivables sold to the
Trusts. The growth in servicing fee income is attributable to the increase in
serviced auto receivables outstanding for fiscal 1996 compared to fiscal 1997.
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 AMS) 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 and auto loan processing and servicing staff.
The provision for losses decreased from $7.9 million for fiscal 1996 to
$6.6 million for fiscal 1997 due to higher average amounts of receivables held
for sale. As a percentage of average receivables held for sale, the provision
for losses was 3% for fiscal 1996 and 1997.
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 Company's 9-
1/4% senior 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.
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 its
consolidated balance sheets as a reserve against estimated losses which may
occur in the receivables held for sale portfolio prior to the sale of such
receivables in securitization transactions. The Company typically purchases
individual finance contracts for a non-refundable acquisition fee on a non-
recourse basis. The Company records such acquisition fees in the consolidated
balance sheets as an allowance for losses. When the Company sells auto
37
<PAGE>
receivables to the Trusts, the Company reduces the calculation of the gain on
sale of receivables by an estimate of future cumulative credit losses over the
expected life of the auto receivables sold.
The Company sells mortgage receivables for cash on a servicing released,
whole-loan basis. The Company generally holds such receivables for less than 90
days. Accordingly, the Company provides no allowance for losses 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 in securitization transactions,
provision for losses and allowance for losses. Although the Company uses many
resources to assess the adequacy of loss reserves, there is no precise method
for estimating the ultimate losses in the receivables portfolio.
The following tables present certain data related to the receivables
portfolio (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1999
------------------------------------------------------------------
Held For Sale Managed
------------------------------
Auto Auto
Auto Mortgage Total Serviced Portfolio (2)
--------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables..................... $400,722 $25,248 $425,970 $3,152,486 $3,553,208
========== ==========
Allowance for losses................................ (10,549) (10,549) $ (299,017)(1) $ (309,566)
-------- ------- -------- ========== ==========
Receivables, net.................................... $390,173 $25,248 $415,421
======== ======= ========
Number of outstanding contracts..................... 30,495 279 290,368 320,863
======== ======= ========== ==========
Average amount of outstanding contract
(principal amount) (in dollars).................. $ 13,141 $90,495 $ 10,857 $ 11,074
======== ======= ========== ==========
Allowance for losses as a percentage of
receivables...................................... 2.6% 9.5% 8.7%
======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
------------------------------------------------------------------
Held For Sale Managed
--------------------------------
Auto Auto
Auto Mortgage Total Serviced Portfolio(2)
---------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables..................... $334,110 $ 21,499 $355,609 $1,968,406 $2,302,516
========== ==========
Allowance for losses................................ (12,756) (12,756) $ (179,359)(1) $ (192,115)
-------- -------- -------- ========== ==========
Receivables, net.................................... $321,354 $ 21,499 $342,853
======== ======== ========
Number of outstanding contracts..................... 26,035 187 187,514 213,549
======== ======== ========== ==========
Average amount of outstanding contract
(principal amount) (in dollars).................. $ 12,833 $114,968 $ 10,497 $ 10,782
======== ======== ========== ==========
Allowance for losses as a percentage of
receivables...................................... 3.8% 9.1% 8.3%
======== ========== ==========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
June 30, 1997
-------------------------------------------------------------------
Held for Sale Auto Managed
-------------------------------
Auto Mortgage Total Serviced Auto Portfolio(2)
--------- -------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables............. $275,249 $ 4,354 $279,603 $863,006 $1,138,255
======== ==========
Allowance for losses........................ (12,946) (12,946) $(74,925) (1) $ (87,871)
-------- ------- -------- ======== ==========
Receivables, net....................... $262,303 $ 4,354 $266,657
======== ======= ========
Number of outstanding contracts............. 25,757 48 87,090 112,847
======== ======= ======== ==========
Average amount of outstanding contract
(principal amount) (in dollars) $ 10,686 $90,708 $ 9,909 $ 10,087
======== ======= ======== ==========
Allowance for losses as a percentage of
receivables............................ 4.7% 8.7% 7.7%
======== ======== ==========
</TABLE>
__________________
(1) The allowance for losses relating 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 (1) more
than 30 days delinquent, but not in repossession, and (2) in repossession
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1998 March 31, 1999
-------------------- ------------------- ------------------
Amount Percent Amount Percent Amount Percent
-------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Delinquent contracts:
31-60 days...................... $ 73,197 6.4% $126,012 5.5% $220,022 6.2%
Greater than 60 days............ 36,421 3.2 59,175 2.6 80,668 2.3
-------- ---- -------- --- -------- ---
109,618 9.6 185,187 8.1 300,690 8.5
In repossession................. 14,471 1.3 18,818 0.8 31,431 0.9
-------- ---- -------- --- -------- ---
$124,089 10.9% $204,005 8.9% $332,121 9.4%
======== ==== ======== === ======== ===
</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 an average quarterly percentage of average managed auto receivables
outstanding were 1.9%, 4.3% and 4.5 % for fiscal 1996, 1997 and 1998,
respectively, and 4.5% and 4.6% for the nine months ended March 31, 1998 and
1999, respectively. The Company believes that payment deferrals granted
according to its policies and guidelines are an effective portfolio management
technique and result in higher ultimate cash collections from the portfolio.
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31,
---------------------------- -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net charge-offs:
Held for sale......................................... $18,322 $16,965 $ 9,140 $ 7,528 $ 5,708
Serviced.............................................. 1,652 26,266 78,862 53,390 98,183
------- ------- ------- ------- --------
$19,974 $43,231 $88,002 $60,918 $103,891
======= ======= ======= ======= ========
Net charge-offs as an annualized percentage of
average managed auto receivables outstanding 5.6% 5.5% 5.3% 5.4% 4.8%
======= ======= ======= ======= ========
Net recoveries as a percentage of gross repossession
charge-offs........................................... 52.5% 50.5% 50.6% 50.0% 51.4%
======= ======= ======= ======= ========
</TABLE>
39
<PAGE>
Delinquency and charge-offs 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.
Liquidity and Capital Resources
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31,
-------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating activities.................................. $ 34,530 $ 36,003 $ 37,813 $ 11,162 $ 38,214
Investing activities.................................. (62,749) (92,947) (144,868) (105,820) (129,225)
Financing activities.................................. 12,050 60,826 134,115 97,725 94,770
-------- -------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents.. $(16,169) $ 3,882 $ 27,060 $ 3,067 $ 3,759
======== ======== ========= ========= =========
</TABLE>
The Company's primary sources of cash have been cash flows from operating
activities, including excess cash flow distributions from the Trusts, borrowings
under its warehouse and credit facilities, sales of auto receivables to Trusts
in securitization transactions, and the issuance of senior notes. 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 $432.4 million, $906.8 million and $1,737.8 million
of auto finance contracts during fiscal 1996, 1997 and 1998 requiring cash of
$417.2 million, $896.7 million and $1,717.0 million, respectively, net of
acquisition fees and other items. The Company purchased $1,176.7 million and
$1,990.9 million of auto finance contracts during the nine months ended March
31, 1998 and 1999, respectively, requiring cash of $1,163.0 million and $1,983.8
million, respectively, net of acquisition fees and other items. The Company
initially funded these purchases utilizing warehouse and 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
"$505 Million Warehouse Facility"). The Company utilizes this facility to
fund auto receivables pending securitization. This facility matures in September
1999. A total of $233.7 million was outstanding under this facility as of March
31, 1999.
In March 1999, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
bank under which up to $150 million of structured warehouse financing is
available (the "$150 Million Warehouse Facility"). The Company utilizes this
facility to fund auto receivables pending securitization. There were no
outstanding balances under this agreement as of March 31, 1999. The facility
matures in March 2000.
In March 1999, the Company renewed its revolving credit agreement (the
"Credit Agreement") with a group of banks that provides for borrowings up to
$115 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 March 2000. There were no outstanding balances under the Credit
Agreement as of March 31, 1999.
The Company's Canadian subsidiary has a convertible revolving term credit
agreement (the "Canadian facility") with a bank that provides for borrowings
of up to $20 million Cdn., subject to a defined borrowing base. The Company
utilizes this facility to fund its Canadian auto lending activities. The
facility matures in November 1999. A total of $603,000 was outstanding under the
Canadian facility as of March 31, 1999.
In February 1999, the Company renewed its mortgage warehouse facility (the
"Mortgage Subsidiary Credit Agreement") with a bank under which it 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 $21.3 million was
outstanding under the mortgage facility as of March 31, 1999.
40
<PAGE>
As is customary in the Company's industry, its warehouse and credit
facilities need to be renewed on an annual basis. The Company has historically
been successful in renewing and expanding these facilities on an annual basis.
If the Company is unable to renew these facilities on acceptable terms it could
have a material adverse effect on its financial position, liquidity and results
of operation. See "Risk Factors--Dependence on Funding Sources" and "--
Ability to Service Debt."
The Company has completed 16 auto receivables securitization transactions
through March 31, 1999. The Company primarily used the proceeds from the
transactions to repay borrowings outstanding under its warehouse credit
facilities. A summary of these transactions is as follows:
<TABLE>
<CAPTION>
Balance at
Original Amount March 31, 1999
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 $ 8.6
1996-B May 1996 115.9 18.7
1996-C August 1996 175.0 26.5
1996-D November 1996 200.0 54.3
1997-A March 1997 225.0 76.4
1997-B May 1997 250.0 98.4
1997-C August 1997 325.0 153.7
1997-D November 1997 400.0 225.4
1998-A February 1998 425.0 272.0
1998-B May 1998 525.0 376.0
1998-C August 1998 575.0 463.9
1998-D November 1998 625.0 553.3
1999-A February 1999 700.0 675.4
---------- ------------
$ 4,845.5 $ 3,002.6
========== ============
</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 over collateralization 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.
When excess cash flow distributions are received depends on the type of
structure used. Historically, the Company has used a structure that involved a
higher initial cash deposit that resulted in receipt of excess cash flow
distributions approximately seven to nine months after the receivables were
securitized. Beginning in November 1997, the Company began to employ a structure
that involves a lower initial cash deposit and the use of reinsurance and other
alternative credit enhancements. Under this structure, the Company expects to
begin to receive excess cash flow distributions approximately 20 to 24 months
after receivables are securitized. For a description of the risks related to the
use of reinsurance and other alternative credit enhancements, see "Risk
Factors--Dependence on Funding Sources--Credit Enhancement."
Initial deposits to restricted cash accounts were $2.9 million, $71.4
million and $56.7 million for fiscal years 1996, 1997 and 1998, respectively,
and $43.4 million and $57.3 million for the nine months ended March 31, 1998 and
1999, respectively. Excess cash flows distributed to the Company were $1.2
million, $19.3 million and $43.8 million for fiscal years 1996, 1997 and 1998,
respectively, and $27.1 million and $35.2 million for the nine months ended
March 31, 1998 and 1999, respectively. In addition, the Company received $23.0
million representing a return of deposits from restricted cash accounts during
the nine months ended March 31, 1999.
41
<PAGE>
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 March 31, 1999,
none of the Company's securitizations had delinquency, default and net loss
ratios in excess of the targeted levels.
In February 1997 and January 1998, the Company issued $125 million and $50
million, respectively, of 9-1/4% Senior 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 Company's option after
February 2001 at a premium declining to par in February 2003.
In April 1999, the Company issued $200 million of 9.875% Senior Notes which
are due in April 2006. Interest on the Notes is payable semi-annually, in April
and October. The notes, which are unsecured, may be redeemed at the Company's
option after April 2003 at a premium declining to par in April 2005.
The Company operated 168 auto lending branch offices as of March 31, 1999
and plans to open a minimum of six additional branches in the remainder of
fiscal 1999. The Company may also expand loan production capacity at existing
auto lending branch offices where appropriate. 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 March 31, 1999, the Company had $36.8 million in cash and cash
equivalents. The Company also had available borrowing capacity of $76.3 million
under its bank credit agreement pursuant to the borrowing base requirements of
such facility. The Company estimates that it will require additional external
capital for the remainder of fiscal 1999 in addition to these 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 expansion of its warehouse and 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.
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 enter into 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 our
debt, the Company 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 the Company could
obtain any additional financing. 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:
. the Company may be more vulnerable to adverse general economic and
industry conditions;
. 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
. the Company will have to dedicate a substantial portion of its cash
resources to pay principal and interest on the Credit Agreement, the Mortgage
Subsidiary Credit Agreement and the Warehouse Facilities (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 indentures under which the 9-1/4% Senior Notes due 2004
were issued, the Indenture, the Credit Agreement, the Warehouse Facilities, the
Canadian facility and the Mortgage Subsidiary Credit Agreement contain certain
covenants which could limit the Company's operating and financial flexibility.
See "Risk Factors."
42
<PAGE>
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 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.
The Company utilizes derivative financial instruments to manage the gross
interest rate spread on the Company's securitization transactions. The Company
sells fixed rate auto receivables to Trusts that, in turn, sell either fixed
rate or floating rate securities to investors. The fixed rates on securities
issued by the Trusts are indexed to rates on U.S. Treasury notes with similar
average maturities. The Company periodically uses forward U.S. Treasury rate
lock agreements to lock in the indexed rate for specific anticipated
securitization transactions. The floating rates on securities issued by the
Trusts are indexed to London Interbank Offered Rates (LIBOR). The Company uses
interest rate swap agreements to convert the floating rate exposures on these
securities to a fixed rate.
The Company made cash payments of $6.2 million and $5.8 million for the
nine months ended March 31, 1998 and 1999, respectively, to settle Forward U.S.
Treasury rate lock agreements. These amounts were included in the gain on sale
of receivables in securitization transactions and are recovered over time
through a higher gross interest rate spread on the related securitization
transaction. There were no outstanding Forward U.S. Treasury rate lock
agreements as of March 31, 1999.
All of the Company's interest rate swap agreements are associated with
securitization transactions completed prior to March 31, 1999 and the net market
risk to the Company is not material.
Recent Accounting Developments
In June 1997, the Financial Accounting Standards Board ("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 Company's auto finance business is currently the only segment
reportable under SFAS 131.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The new standard requires that all
derivatives be recognized as either assets or liabilities in the consolidated
balance sheets and that those instruments be measured at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedging
instrument. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and the
resulting designation. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. While the new standard will apply
to the Company's derivative financial instruments, the Company does not believe
that adoption of SFAS 133 will have a material effect on its consolidated
financial position or results of operations.
43
<PAGE>
Year 2000 Issue
The year 2000 issue is whether the Company or the Company's 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. The Company has completed an inventory of critical hardware and
software and the Company has assessed information technology components. 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
complete. In addition, the Company is currently developing contingency plans
for critical systems. Year 2000 project costs incurred through March 31, 1999
have been approximately $900,000. The Company expects to incur an additional
$100,000 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, 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.
44
<PAGE>
BUSINESS
General
We are 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. We target borrowers with
limited credit histories, modest incomes or those who have experienced prior
credit difficulties ("Non-Prime Borrowers"). With the use of proprietary
credit scoring models, we underwrite contracts on a decentralized basis through
a branch office network. These credit scoring models, combined with experienced
underwriting personnel, enable us 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. We service
our loan portfolio at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
We had 168 branch offices as of March 31, 1999. As a result of our
expansion strategy, we have been able to increase our aggregate volume of
automobile installment sales contracts purchased to $1,737.8 million in fiscal
1998 from $18.3 million in fiscal 1993. We have continued this growth during the
first nine months of fiscal 1999, with purchases aggregating $1,990.9 million,
compared to $1,176.7 million during the same period in fiscal 1998. For fiscal
1998, the average principal amount financed was $12,479 and the weighted average
APR of contracts we purchased was 19.1%.
We generate earnings and cash flow primarily through the purchase,
retention, securitization and servicing of automobile receivables. In each
securitization, we sell automobile receivables to a trust that, in turn, sells
asset-backed securities to investors. We recognize a gain on the sale of the
receivables to the trust and receive monthly excess cash flow distributions from
the trust resulting from the difference between the interest received from the
consumer obligors on the receivables and the interest on the asset-backed
securities paid to investors, net of losses and expenses. When we receive excess
cash flow distributions depends on the type of structure we use. Historically,
we have used a structure that involved a higher initial cash deposit and
resulted in receipt of excess cash flow distributions approximately seven to
nine months after the receivables were securitized. Since November 1997, we have
employed a structure that involves a lower initial cash deposit. Under this
structure we expect to begin to receive excess cash flow distributions
approximately 20 to 24 months after the receivables are securitized. We received
excess cash flow of $43.8 million from securitization trusts in fiscal 1998. Due
to the time delay associated with distributions of excess cash flow from
securitizations, we expect to receive increased cash flow distributions in
fiscal 2000 from trusts created as a result of securitization transactions
occurring in fiscal 1998. Prior to the time when we begin 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 us. In addition to excess cash flow, we earn
servicing fees of 2.25% per annum of the outstanding principal balance of
receivables securitized. Over the four quarters ended March 31, 1999 we
completed four securitization transactions totaling $2.4 billion. We also
completed a $1 billion securitization in May 1999.
Business Strategy
Our principal objective is to continue to build upon our position as a
leading lender to Non-Prime Borrowers. To achieve this objective, we employ the
following key strategies:
Continued Expansion of Automobile Contract Purchase Volume. We seek to
continue to develop our automobile contract purchase volume. We intend to do
this through the continued expansion of our automobile finance branch network,
through increasing our market share in existing branch territories and through
marketing alliances with select automobile dealer groups and prime automotive
lenders, such as banks. We opened five branch offices in fiscal 1993, 13 in
fiscal 1994, 13 in fiscal 1995, 20 in fiscal 1996, 34 in fiscal 1997, 44 in
fiscal 1998, and 39 through March 31, 1999, bringing our branch office network
to 168 offices located in 41 states and one Canadian province as of March 31,
1999. We plan to open a minimum of six additional branch offices during the
remainder of fiscal 1999. As part of our goal of increasing the number of
dealers from whom we purchase automobile finance contracts, we have entered into
marketing alliances with certain automobile dealer groups and regional banks. In
addition, in March
45
<PAGE>
1999 we announced a new marketing alliance with Chase Manhattan Bank, USA, N.A.,
whereby we will provide non-prime automobile financing programs to automobile
dealers who currently have a relationship with Chase.
Use of Proprietary Credit Scoring Models for Risk-based Pricing. We have
developed and implemented a credit scoring system across our branch office
network to support the branch level credit approval process. Our proprietary
credit scoring models are designed to enable us to tailor each loan's pricing
and structure to a statistical assessment of the underlying credit risk.
Sophisticated Risk Management Techniques. Our centralized risk management
department is responsible for monitoring the origination process, supporting
management's supervision of each branch office, tracking collateral values of
our receivables portfolio and monitoring portfolio returns. The 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 us to become a low-cost provider in the non-prime automobile finance
market. Our annualized ratio of operating expenses to average managed
receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.2% for fiscal
1997, 5.4% for fiscal 1998 and 5.0% for the nine months ended March 31, 1999.
Funding and Liquidity Through Securitizations. We sell 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 our first securitization transaction in December 1994, we
have securitized approximately $4.8 billion of automobile receivables in private
and public offerings of asset-backed securities through March 31, 1999. In
addition, we completed a $1 billion securitization in May 1999.
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 $603 billion of
franchised dealers loan and lease originations during 1998. The industry is
generally segmented according to the type of car sold (new vs. used) and the
credit characteristics of the borrower (prime vs. non-prime segment). The non-
prime segment of the market accounted for approximately $188 billion of these
originations.
Competition in the field of non-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
Target Market. Our indirect automobile lending programs are designed to
serve customers who have limited access to traditional automobile financing. Our
typical borrowers have experienced prior credit difficulties or have limited
credit histories. Because we serve consumers who are unable to meet the credit
standards imposed by most traditional automobile financing sources, we generally
charge interest at rates higher than those charged by traditional automobile
financing sources. We also expect to sustain a higher level of credit losses
than traditional automobile financing sources since we provide financing in a
relatively high risk market.
46
<PAGE>
Dealership Marketing. Since we are an indirect lender, we focus our
marketing activities on automobile dealerships. We are selective in choosing the
dealers with whom we conduct business. We primarily pursue manufacturer
franchised dealerships with used car operations and select independent
dealerships. We select these dealers because they sell the type of used cars we
prefer to finance, specifically later model, low mileage used cars. Of the
contracts we purchased during the fiscal year ended June 30, 1998, approximately
90% were originated by manufacturer franchised dealers with used car operations
and 10% by select independent dealers. We purchased contracts from 9,204 dealers
during the fiscal year ended June 30, 1998. No dealer accounted for more than 1%
of the total volume of contracts we purchased for that same period.
Our financing programs are marketed to dealers through branch office
personnel, including branch managers, assistant managers and in some cases
marketing representatives. We believe that the personal relationships our
branch managers and other branch office personnel establish with the dealership
personnel are an important factor in creating and maintaining productive
relationships with our dealership customer base. Branch office personnel are
responsible for the solicitation, enrollment and education of new dealers
regarding our financing programs. Branch office personnel visit dealerships to
present information regarding our financing programs and capabilities. These
personnel explain our underwriting philosophy, including our preference for non-
prime quality contracts secured by later model, lower mileage used vehicles and
our practice of underwriting in the local branch office.
Prior to entering into a relationship with a dealer, we consider the
dealer's operating history and reputation in the marketplace. We then maintain a
non-exclusive relationship with the dealer. We actively monitor this
relationship with the objective of maximizing the volume of applications
received from the dealer that meet our underwriting standards and profitability
objectives. Due to the non-exclusive nature of our relationships with
dealerships, the dealerships retain discretion to determine whether to obtain
financing from us 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 our financing programs and capabilities. To increase
the effectiveness of these contacts, the branch managers and other branch office
personnel have access to our management information systems which detail current
information regarding the number of applications submitted by dealership, our
response and the reasons why we rejected a particular application.
We generally purchase finance contracts without recourse to the dealer, and
accordingly, the dealer usually has no liability to us if the consumer defaults
on the contract. To mitigate our risk from potential credit losses, we typically
charge dealers an acquisition fee when purchasing finance contracts. We
negotiate these acquisition fees with dealers on a contract-by-contract basis
and they are usually non-refundable. Although we purchase finance contracts
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 us against any claims, defenses and set-offs that may be
asserted against us 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. We do 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. We use a branch office network to market our
financing programs to selected dealers and develop relationships with dealers
throughout the country. Additionally, we use the branch office network for the
underwriting of contracts submitted by dealerships. We believe a local presence
enables us to more fully service dealers and be more responsive to dealer
concerns and local market conditions. We select 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 our
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. We compensate branch managers with base salaries and
annual incentives based on overall branch performance including factors such as
branch credit quality, loan pricing adequacy and loan volume objectives. We
typically pay the incentives in cash and stock option grants. The branch
managers report to regional vice presidents.
47
<PAGE>
Our regional vice presidents monitor branch office compliance with our
underwriting guidelines. Our management information systems provide the regional
vice presidents access to credit application information enabling them to
consult with the branch managers on daily credit decisions and review exceptions
to our underwriting guidelines. The regional vice presidents also make periodic
visits to the branch offices to conduct operating reviews.
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>
Nine Months Ended
Year Ended June 30, March 31,
------------------------------- ------------------------
1996 1997 1998 1998 1999
-------- ------- ---------- --------- ---------
($ in thousands)
<S> <C> <C> <C> <C>
Number of branch offices...................... 51 85 129 119 168
Dollar volume of contracts purchased.......... $ 432.4 $ 906.8 $ 1,737.8 $ 1,176.7 $ 1,990.9
Number of producing dealerships(1)............ 3,262 5,657 9,204 7,763 10,991
</TABLE>
_________________
(1) A producing dealership refers to a dealership from which we have purchased
contracts in the relevant period.
We plan to expand our indirect automobile finance business by adding
additional branch offices and increasing dealer penetration at our existing
branch offices. The success of this strategy is dependent upon, among other
factors, our ability to hire and retain qualified branch managers and other
personnel and to develop relationships with more dealers. We confront intense
competition in attracting key personnel and establishing relationships with
dealers. Dealers often already have favorable non-prime financing sources, which
may restrict our ability to develop dealer relationships and delay our growth.
In addition, the competitive conditions in our markets may result in a reduction
in the profitability of the contracts that we purchase or a decrease in contract
acquisition volume, which would adversely affect our results of operations.
Underwriting and Purchasing of Contracts
Proprietary Credit Scoring System and Risk-based Pricing. We have
implemented a credit scoring system throughout our 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 our consumer
demographic and portfolio databases. We use credit scoring to differentiate
credit applicants and to rank order credit risk in terms of expected default
rates, which enables us 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, we would
seek to compensate for this higher default risk through the structuring and
pricing of the transaction. While we employ 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 our 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
the applicant's residential and employment stability, financial history, current
financial capacity and integrity of meeting historical financial obligations as
well as the 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 we should charge for that
risk. The credit scorecards are validated on a monthly basis through the
comparison of actual versus projected performance by score. We endeavor to
refine our proprietary scorecards based on new information and identified
correlations relating to receivables performance.
48
<PAGE>
Through the use of our 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 us. This ability to prioritize applications allows for
a more effective allocation of resources to those applications requiring more
review.
Decentralized Loan Approval Process. We purchase individual contracts
through our branch offices based on a decentralized credit approval process
tailored to local market conditions. Each branch manager has a specific credit
authority based upon their 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, we
purchase contracts through our regional purchasing offices. Although the credit
approval process is decentralized, all credit decisions are guided by our credit
scoring strategies, overall credit and underwriting policies and procedures and
daily monitoring process.
We receive loan application packages completed by prospective obligors via
facsimile at the branch offices from dealers. Application data are entered into
our 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,
credit history, the contract terms and collateral value. We estimate that we
deny credit to approximately 60% to 65% of applicants typically because of their
credit histories or because their income levels are not sufficient to support
the proposed level of monthly payments. We contact dealers regarding credit
decisions by telefax and/or telephone. Declined and conditioned applicants are
also provided with appropriate notification of the decision.
Our 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.
The dealers send completed loan packages to the branch office. As part of
the credit decision process, a customer service representative investigates the
residence, employment and credit history of the applicant. Loan terms and
insurance coverages are generally reverified with the consumer by branch office
personnel and the loan packages are forwarded to our centralized loan services
department. All loan documentation is scanned to create electronic images and
key original documents are stored in a fire-resistant vault. The loans are
reviewed for proper documentation and regulatory compliance and are entered into
our 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, we require applicants to provide a perfected security
interest in the automobile that was financed. All of our contracts are fully
amortizing with substantially equal monthly installments.
Servicing and Collections Procedures
General. Our 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,
. maintaining physical damage insurance coverage of the financed
vehicle, and
. repossessing and liquidating collateral when necessary.
We utilize various automated systems to support our servicing and
collections activities. We use 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 us of an address change. Approximately 15 days before a
customer's first payment due date and each month thereafter, we mail the
customer a billing statement directing the customer to mail payments to a
lockbox
49
<PAGE>
bank for deposit in a lockbox account. Payment receipt data is electronically
transferred from our lockbox bank to us for posting to the loan accounting
system. We may also directly receive payments from customers. All payment
processing and customer account maintenance is performed centrally in Fort
Worth, Texas by the loan services department. We receive servicing fees for
servicing securitized receivables equal to 2.25% per annum of the outstanding
principal balance of such receivables.
Our collections activities are performed at regional centers located in
Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. We utilize a
predictive dialing system to make phone calls to customers whose payments are
past due. The predictive dialer is a computer-controlled telephone dialing
system which dials phone numbers of customers from a file of records extracted
from our 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
our 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 to 90 days past due, we typically initiate
repossession of the financed vehicle. However, we may repossess it without
regard to the length of payment delinquency if:
. an account is deemed uncollectible,
. the financed vehicle is deemed by collection personnel to be in danger
of being damaged, destroyed or hidden,
. the customer deals in bad faith, or
. the customer voluntarily surrenders the financed vehicle.
At times, we offer payment deferrals 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 our policies and
guidelines for deferrals. Exceptions to our policies and guidelines for
deferrals must be approved by a collections officer. The loan services
department processes deferment transactions. As of March 31, 1999,
approximately 13% of our managed receivables had received a deferral.
Repossessions. Repossessions are subject to prescribed legal procedures,
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.
Some jurisdictions provide the consumer with reinstatement or redemption rights.
Legal requirements, particularly in the event of bankruptcy, may restrict our
ability to dispose of the repossessed vehicle. Repossessions are handled by
independent repossession firms engaged by us and must be approved by a
collections officer. Upon repossession and after any prescribed waiting period,
we sell the repossessed automobile at auction. We do not sell any vehicles on a
retail basis. We credit the proceeds from the sale of the automobile at auction,
and any other recoveries, 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. We may pursue collection of deficiencies when we
deem such action to be appropriate.
Charge-Off Policy. Our policy is to charge-off an account in the month in
which the account becomes 180 days contractually delinquent even if we have not
repossessed the related vehicle. On accounts less than 180 days delinquent, we
charge-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
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<PAGE>
contract, including accrued interest. Accrual of finance charge income is
suspended on accounts which are more than 60 days contractually delinquent.
Risk Management
Overview. We have developed procedures to evaluate and supervise the
operations of each branch office on a centralized basis. Our 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 our
credit scoring system and is involved with third-party vendors in the
development and enhancement of our credit scorecards.
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 our management information systems. We use this
information to monitor credit quality as well as to constantly refine the
structure and mix of new contract purchases. We review portfolio returns on a
consolidated basis, as well as at the branch office, dealer and contract levels.
Behavioral Scoring. We use statistically-based behavioral assessment
models 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.
Projected default rates from the behavioral assessment models and credit scoring
systems are compared and analyzed to monitor the effectiveness of our credit
strategies.
Collateral Value Management. The value of the collateral underlying our
receivables portfolio is updated monthly with a loan-by-loan link to national
wholesale auction values. This data, along with our own experience relative to
mileage and vehicle condition, are used for evaluating collateral disposition
activities as well as for reserve analysis models.
Compliance Audits. Our internal audit department conducts regular
compliance audits of branch office operations, loan services, collections and
other functional areas. The primary objective of the audits is to measure
compliance with our written policies and procedures as well as regulatory
matters. We conduct audits of branch office operations no less than every six
months and include a review of:
. compliance with underwriting policies;
. completeness of loan documentation;
. collateral value assessment; 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. Audit results and responses are also
reviewed on a quarterly basis by an audit committee comprised of senior
executive management.
Securitization of Loans
Since December 1994, we have pursued a strategy of securitizing our
receivables to diversify our funding, improve liquidity and obtain a cost-
effective source of funds for the purchase of additional automobile finance
contracts. We apply the net proceeds from securitizations to pay down borrowings
under our credit and warehouse
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<PAGE>
facilities, thereby increasing availability thereunder for further contract
purchases. Through March 31, 1999, we have securitized approximately $4.8
billion of automobile receivables.
In our securitizations, we, through one or more wholly-owned subsidiaries,
transfer automobile receivables to newly-formed securitization trusts, which
issue one or more classes of asset-backed securities. The asset-backed
securities are in turn sold to investors, except for certain subordinated
interests which we may retain.
When we transfer receivables to securitization trusts in securitization
transactions, we recognize a gain on sale of receivables and continue to service
such receivables. The gain on sale of receivables represents the difference
between the sales proceeds, net of transaction costs, and our net carrying value
of the receivables sold, plus the present value of estimated excess cash flows.
The estimated excess cash flows are the difference between the cash collected
from obligors on securitized receivables and the sum of principal and interest
paid to investors in the asset-backed securities, contractual servicing fees,
defaults, net of recoveries, and other expenses such as trustee fees and
financial guarantee insurance premiums. Concurrently with recognizing the gain
on sale of receivables, we record a corresponding asset, interest-only
receivables from Trusts, which includes the present value of estimated excess
cash flows as described above.
The calculation of interest-only receivables 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. We review the carrying value of interest-only receivables
quarterly on a disaggregated basis by Trust. If future losses or prepayment
rates exceed our original estimates, the asset will be adjusted through a charge
to operations. Favorable credit loss and prepayment experience compared to our
original estimates would result in additional income when realized. See "Risk
Factors--Default and Prepayment Risks."
In connection with our securitization program, we arrange for a financial
guaranty insurance policy to achieve a desired credit rating on the asset-backed
securities issued. The policies for each of our securitizations have been
provided by Financial Security Assurance, Inc., a monoline insurer, which
insures the timely payment of principal and interest due on the asset-backed
securities. We have limited reimbursement obligations to Financial Security
Assurance; however, credit enhancement requirements, including Financial
Security Assurance'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 Financial Security
Assurance for any claims which may be made under the policies issued with
respect to our securitizations.
The credit enhancement requirements for any securitization include
restricted cash accounts which are generally established with an initial deposit
and, in some cases, reinsurance or other alternative forms of credit
enhancement, 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 our 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
us. We are 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., our wholly-owned
subsidiary that owns the restricted cash accounts, interest-only receivables,
and any subordinated interests in the Trusts, such that, if the pledge is
exercised in the event of a payment by FSA under one of its insurance policies
or certain material adverse changes in our business, FSA would control all of
the restricted cash accounts, interest-only receivables and any subordinated
interests in the Trusts. 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 us until increased
minimum levels of credit enhancement requirements have been reached and
maintained.
Trade Names
We have obtained federal trademark protection for the "AmeriCredit" name
and the logo that incorporates the "AmeriCredit" name.
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<PAGE>
Regulation
Our operations are subject to regulation, supervision and licensing under
various federal, state and local statutes, ordinances and regulations.
In most states in which we operate, a consumer credit regulatory agency
regulates and enforces laws relating to consumer lenders and sales finance
agencies such as us. 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
restrictions on collection practices and creditors' rights. In certain states,
our branch offices are subject to periodic examination by state regulatory
authorities. Some states in which we operate do not require special licensing or
provide extensive regulation of our business.
We are 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 us 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, our
credit scoring system 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 us 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 that we purchase 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 us.
Management believes that we maintain all material licenses and permits
required for our current operations and are in substantial compliance with all
applicable local, state and federal regulations. There can be no assurance,
however, that we 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 our operations. Further, the adoption of additional,
or the revision of existing, rules and regulations could have a material adverse
effect on our business.
As a consumer finance company, we are subject to various consumer claims
and litigation seeking damages and statutory penalties based upon, among other
theories of liability, usury, disclosure inaccuracies, wrongful repossession,
fraud and discriminatory treatment of credit applicants, which could take the
form of a plaintiffs' class action complaint. We, 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 we have taken prudent steps to address the litigation risks
associated with our business activities. However, there can be no assurance that
we will be able to successfully defend against all such consumer claims, or that
the determination of any such claim in a manner adverse to us would not have a
material adverse effect on our indirect automobile finance business.
Mortgage Loan Operations
In November 1996, we acquired AMS. AMS originates and acquires home equity
loans through a network of mortgage brokers. AMS sells its home equity loans and
the related servicing rights in the wholesale markets. AMS does not currently
represent a material portion of our assets or revenues.
Properties
Our executive offices are located at 801 Cherry Street, Suite 3900, Fort
Worth, Texas, in a 113,000 square foot leased office space, under a 12-year
lease that commenced in July 1999. We utilize this building for branch office
support and administrative activities. We
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also lease 67,000 square feet of office space in Tempe, Arizona under a ten year
agreement with renewal options, 56,000 square feet of office space in Charlotte,
North Carolina under a ten year agreement with renewal options, and 65,000
square feet of office space in Fort Worth, Texas under four year agreements.
These facilities are used for loan servicing and collections activities. We
intend to consolidate various loan servicing, collection and operating
activities in a 250,000 square foot facility located in Arlington, Texas leased
under a five-year lease commencing August 1999.
Our executive offices were formerly located in a 43,000 square foot
building we purchased in 1994. We intend to sell this building.
We generally lease branch office facilities 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 March 31, 1999, we employed approximately 2,200 persons.
Legal Proceedings
In the normal course of its business, we are named as a defendant in legal
proceedings. These cases include, among other things, claims for alleged truth-
in-lending violations, nondisclosures, misrepresentations, and deceptive trade
practices. The relief requested by the plaintiffs varies but includes requests
for compensatory, statutory and punitive damages. One proceeding in which we are
a defendant has been brought as a putative class action and is pending in the
State of California. A class has yet to be certified in this case, in which the
plaintiffs allege certain defects in our post-repossession notice forms in the
State of California, and no court date has been set, nor are any hearings
presently scheduled.
On April 8, 1999, a class action complaint was filed against us and certain
of our officers and directors alleging violations of Section 10(b) of the
Securities Exchange Act of 1934 arising from our use of the cash-in method of
measuring and accounting for credit enhancement assets in our financial
statements for the second, third and fourth quarters of fiscal year 1997, fiscal
year 1998 and the first quarter of fiscal year 1999. Although counsel for the
plaintiff issued a press release on June 2 concerning the commencement of the
lawsuit, a summons and complaint has yet to be served on us. In the opinion of
management, this litigation is without merit and we intend to vigorously defend
against the complaint.
In the opinion of management, the resolution of the proceedings described
in this section will not have a material adverse effect on our consolidated
financial position, results of operations or liquidity.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information regarding the current
directors and executive officers of the Company as of September 11, 1998:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Clifton H. Morris, Jr................ 63 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...................... 35 Senior Vice President, General Counsel and
Secretary
Cheryl L. Miller..................... 34 Executive Vice President, Director of Collections
and Customer Service of AmeriCredit Financial
Services, Inc.
Michael T. Miller.................... 37 Executive Vice President and Chief Credit Officer
Preston A. Miller.................... 34 Executive Vice President and Treasurer
A. R. Dike........................... 62 Director
James H. Greer....................... 71 Director
Douglas K. Higgins................... 48 Director
Kenneth H. Jones, Jr................. 63 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, Inc., a publicly held
company which owns and operates funeral homes and related businesses, and Cash
America International, Inc., a publicly held pawn brokerage company.
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
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<PAGE>
1991 until November 1994. Mr. Berce is also a director of INSpire Insurance
Solutions, Inc., a publicly held company which provides policy and claims
administration services to the property and casualty insurance industry.
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 Executive Vice President, Director of Collections
and Customer Service of AFSI since July 1998 and was Senior Vice President,
Director of Collections and Customer Service of AFSI from March 1996 until July
1998 and Vice President, Director of Collections and Customer Service of AFSI
from October 1994 until March 1996. From May 1994 until 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 Executive Vice President and Chief Credit
Officer of the Company since July 1998 and was Senior Vice President and Chief
Credit Officer of the Company from November 1996 until July 1998. Mr. Miller was
Senior Vice President, Risk Management, Credit Policy and Planning and Chief of
Staff of AFSI since November 1994 until November 1996 and Vice President, Risk
Management, Credit Policy and Planning of AFSI from AFSI's formation in July
1992 until November 1994. Michael T. Miller is the brother of Cheryl L. Miller.
Preston A. Miller has been Executive Vice President and Treasurer of the
Company since July 1998 and was Senior Vice President and Treasurer of the
Company from November 1996 until July 1998. 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.
A.R. Dike has been President of Willis Corroon Life, Inc., of Texas (a
private insurance agency) since 1991. He was Chairman and Chief Executive
Officer of The Insurance Alliance, Inc. from January 1988 until September 1991.
Mr. Dike also serves on the Board of Directors of Cash America International,
Inc. and Hallmark Financial Services, Inc., a publicly held company engaged in
the insurance business.
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, Inc., and Tanknology
Environmental, Inc., a publicly held company engaged in the environmental
services industry.
Douglas K. Higgins is a private investor and owner of Higgins & Associates
and has been in that 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 that 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 that 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. Until June 26, 1995, Mr.
Jones was Chairman of the Board of RVAC, Inc., a privately held company engaged
in manufacturing and installing air conditioning products on recreational
vehicles and manufactured housing. An involuntary Chapter 7 bankruptcy petition
was filed against RVAC, Inc. in December 1995.
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<PAGE>
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
We have entered into employment agreements with all of our Named Executive
Officers. 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 our Board of Directors,
subject to minimum annual compensation for Mr. Morris, $500,000; Messrs.
Barrington and Berce $345,000; Mr. Esstman, $300,000; and Mr. Miller, $255,000.
Included in each agreement is a covenant of the employee not to compete with us
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 other
than for cause, in the event the employee resigns or is terminated other than
for cause within twelve months after a "change in control" of us (as that term
is defined in the employment agreements), we 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
(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).
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 (1)
recommending the selection of independent auditors, (2) reviewing the scope of
the audit conducted by those auditors, as well as the audit itself, and (3)
reviewing the Company's internal audit activities and matters concerning
financial reporting, accounting and audit procedures, and policies generally.
Members consist of Messrs. Dike, Greer, Higgins and Jones.
The Stock Option/Compensation Committee (1) administers the Company's
employee stock option plans and reviews and approves the granting of stock
options and (2) reviews and approves compensation for executive officers.
Members consist of Messrs. Dike, Greer, Higgins and Jones.
The Board of Directors held five regularly scheduled meetings during the
fiscal year ended June 30, 1998. 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 (1) the total number of
meetings of the Board of Directors; and (2) the total number of meetings held by
all committees of the Board on which that director served.
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, we adopted the 1990 Stock
Option Plan for Non-Employee Directors of AmeriCredit Corp. (the "1990 Director
Plan"), which provides for grants to our nonemployee directors of nonqualified
stock options and reserves, in the aggregate, a total of 1,500,000 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
20,000 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 4, 1998, options to purchase 20,000 shares
of Common Stock were granted under the 1990 Director Plan to each of Messrs.
Dike, Greer,
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<PAGE>
Higgins and Jones at an exercise price of $14.88 per share. The exercise price
for the options granted to Messrs. Dike, Greer, Higgins and Jones is equal to
the last reported sale price of the Common Stock on the New York Stock Exchange
("NYSE") on the day preceding the date of grant.
Executive Compensation
Summary Compensation Table
The following sets forth information concerning the compensation of our
Chief Executive Officer and each of our other four most highly compensated
executive officers (the "Named Executive Officers") for the fiscal years
shown.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
-------------
Shares of
Annual Common Stock All Other
Compensation Underlying Stock Compensation
-------------------
Name and Principal Position Year Salary($) Bonus($) Options (#) ($)(1)
- --------------------------- ---- --------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr. ..... 1998 523,000 500,000 1,420,000 79,761
Chairman and CEO 1997 397,230 379,230 -- 101,241
1996 320,921 181,764 600,000 41,771
Michael R. Barrington....... 1998 381,750 458,767 1,420,000 43,681
Vice Chairman, President 1997 276,704 258,704 -- 43,326
and Chief Operating Officer 1996 223,832 123,506 400,000 5,758
Daniel E. Berce ............ 1998 381,750 458,767 1,420,000 44,381
Vice Chairman and 1997 276,704 258,704 -- 44,120
Chief Financial Officer 1996 223,832 123,506 400,000 6,620
Edward H. Esstman........... 1998 334,250 307,890 990,000 45,916
President and Chief 1997 246,473 171,355 -- 45,655
Operating Officer--AFSI 1996 186,758 91,385 300,000 10,305
Michael T. Miller........... 1998 165,000 123,750 518,400 4,941
Senior Vice President 1997 119,822 59,911 140,000 730
and Chief Credit Officer 1996 97,500 39,000 30,000 624
</TABLE>
- -------------
(1) The amounts disclosed in this column for fiscal 1998 include:
(a) Our contributions to 401(k) retirement plans on behalf of each
executive officer in the amount of $4,761;
(b) Payment by us of premiums for term life insurance on behalf of Mr.
Barrington, $1,420; 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,
$37,500 each.
58
<PAGE>
Option Grants in Last Fiscal Year
The following table shows all individual grants of stock options to our Named
Executive Officers during the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
Shares of % of Total
Common Stock Options
Underlying Granted to Exercise Grant Date
Options Granted Employees in Price Expiration Present
(#) Fiscal Year ($/Sh) Date Value($)(1)
------------------ ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr. ......... 284,000(2) 3.45% $12.00 1/26/2005 $1,375,554
Chairman and CEO 1,136,000(3) 13.79% $12.00 1/26/2005 $5,502,216
Michael R. Barrington ......... 284,000(2) 3.45% $12.00 1/26/2005 $1,375,554
Vice Chairman, President and 1,136,000(3) 13.79% $12.00 1/26/2005 $5,502,216
Chief Operating Officer
Daniel E. Berce ................ 284,000(2) 3.45% $12.00 1/26/2005 $1,375,554
Vice Chairman and 1,136,000(3) 13.79% $12.00 1/26/2005 $5,502,216
Chief Financial Officer
Edward H. Esstman .............. 198,000(2) 2.40% $12.00 1/26/2005 $ 959,013
President and Chief 792,000(3) 9.61% $12.00 1/26/2005 $3,836,052
Operating Officer--AFSI
Michael T. Miller .............. 100,000(2) 1.21% $12.00 1/26/2005 $ 484,350
Executive Vice President and 400,000(3) 4.85% $12.00 1/26/2005 $1,937,400
Chief Credit Officer 18,400(4) 0.22% $16.38 4/28/2008 $ 166,888
</TABLE>
- ---------------
(1) As suggested by the Commission's rules on executive compensation disclosure,
we used the Black-Scholes model of option valuation to determine grant date
pre-tax present value. We do not advocate or necessarily agree that the
Black-Scholes model can properly determine the value of an option.
Calculations are based on a seven year option term for all grants (other
than the grant of 18,400 shares to Mr. Miller, which is based on a ten year
option term) and upon the following assumptions: annual dividend growth of 0
percent, volatility of approximately 32%, 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 under the 1995 Omnibus Stock and Incentive Plan
for AmeriCredit Corp. The options, which were granted in January 1998 and
expire seven years after the date of grant, were accelerated and became
fully exercisable following our achievement of earnings per share of $0.76
for fiscal 1998, an amount that exceeded the earnings per share target
required for accelerated vesting of this grant.
(3) These options were granted under the terms of the 1998 Limited Stock Option
Plan for AmeriCredit Corp. (the "1998 Plan"). These options, which expire
seven years after the date of grant, become exercisable in full on January
1, 2005; provided, however, that the options will be accelerated and become
exercisable on a cumulative basis if we achieve specified earnings per share
targets over a four-year period according to the following schedule:
Earnings per Accelerated
Fiscal Year Share Target Vesting
----------- ------------ -------
June 30, 1999 ...................... $0.99 25%
June 30, 2000 ...................... 1.24 50%
June 30, 2001 ...................... 1.54 75%
June 30, 2002 ...................... 1.93 100%
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<PAGE>
The foregoing earnings per share targets require earnings per share growth of
30% in fiscal 1999 (as compared to earnings per share for fiscal 1998), and
earnings per share growth of 25% in each of fiscal years 2000, 2001, and 2002.
The options granted to Mr. Miller for 18,400 shares, which expire ten years
after the grant date, become exercisable 20% on April 28, 1998 and in 20%
increments thereafter on the anniversary date of the grant.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Shown below is information with respect to the Named Executive Officers
regarding option exercises during the fiscal year ended June 30, 1998, and the
value of unexercised options held as of September 11, 1998.
<TABLE>
<CAPTION>
Value of
Shares of Common Unexercised
Stock Underlying In-the-money
Unexercised Options at Options at
Shares Value Fy-end (#)(2) Fy-end ($)(2)
Acquired Realized Exercisable/ Exercisable/
on Exercise (#) ($)(1) Unexercisable Unexercisable
---------------- ---------- ---------------------- --------------
<S> <C> <C> <C> <C>
Clifton H. Morris, Jr........... -0- N/A 2,151,998/1,136,000 $13,519,024/$0
Chairman and CEO
Michael R. Barrington........... 200,000 $2,284,195 1,200,880/1,136,000 $ 5,273,298/$0
Vice Chairman and President
and Chief Operating Officer
Daniel E. Berce................. 100,000 $1,255,194 1,531,214/1,136,000 $ 8,397,933/$0
Vice Chairman and Chief
Financial Officer
Edward H. Esstman............... 160,000 $1,981,306 968,666/792,000 $ 5,106,151/$0
President and Chief Operating
Officer--AFSI
Michael T. Miller............... 155,000 $1,033,231 103,680/456,720 $ 0/$206,250
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 $11.75 per share of our common stock on the NYSE on September 11, 1998.
Compensation Committee Interlocks and Insider Participation
No member of the Stock Option/Compensation Committee is or has been an
officer or employee of us or any of our subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of Regulation S-K promulgated by the
Commission. 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 our Board of Directors.
60
<PAGE>
Certain Transactions
On October 15, 1998, Michael R. Barrington, the Vice Chairman, President and
Chief Operating Officer of the Company, borrowed $400,000 from the Company. Mr.
Barrington repaid the entire loan 26 days later on November 10, 1998, together
with all accrued interest at a rate of approximately 8.25 percent.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table and the notes thereto set forth certain information
regarding the beneficial ownership of our common stock as of February 28, 1999,
by (1) each current director of the Company; (2) each Named Executive Officer;
(3) all present executive officers and directors of the Company as a group; and
(4) each other person known to the Company to own beneficially more than five
percent of the presently outstanding Common Stock.
<TABLE>
<CAPTION>
Common Percent of
Stock Owned Class Owned
Beneficially(1) Beneficially(1)
---------------- ---------------
<S> <C> <C>
Regan Partners, L.P..................................... 4,920,500(2) 7.79%
Wanger Asset Management, L.P............................ 3,153,600(3) 5.00%
Clifton H. Morris, Jr................................... 2,345,894(4) 3.60%
Michael R. Barrington................................... 1,065,520(5) 1.66%
Daniel E. Berce......................................... 1,596,060(6) 2.47%
Edward H. Esstman....................................... 1,035,212(7) 1.61%
A. R. Dike.............................................. 66,476(8) *
James H. Greer.......................................... 460,000(9) *
Douglas K. Higgins...................................... 206,000(10) *
Kenneth H. Jones, Jr.................................... 300,000(11) *
Michael T. Miller....................................... 135,264(12) *
All Present Executive Officers and Directors (15 persons) 8,035,088 11.41%
</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 63,154,463 shares outstanding as of February 28,
1999, except for certain parties who hold options that are presently
exercisable or exercisable within 60 days of February 28, 1999. The
percentages for those parties who hold options that are presently
exercisable or exercisable within 60 days of February 28, 1999 are based
upon the sum of 63,154,463 shares outstanding plus the number of shares
subject to options that are presently exercisable or exercisable within 60
days of February 28, 1999 held by them, as indicated in the following
notes.
(2) A Form 13G filed with the Commission on February 9, 1999 reports that Regan
Partners, L.P. and Basil P. Regan hold an aggregate of 4,920,500 shares.
The address of Regan Partners and Basil P. Regan is 6 East 43rd Street, New
York, New York 10017.
(3) A Form 13G filed with the Commission dated February 8, 1999 reports that
Wanger Asset Management, L.P. and Wanger Asset Management, Ltd. hold an
aggregate of 3,153,600 shares. The address of Wanger Asset Management, L.P.
and Wanger Asset Management, Ltd. is 227 West Monroe Street, Suite 3000,
Chicago, Illinois 60606.
(4) This amount includes 2,066,666 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount also
includes 76,272 shares of Common Stock in the name of Sheridan C. Morris,
Mr. Morris' wife.
(5) This amount includes 1,049,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(6) This amount includes 1,531,214 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(7) This amount includes 968,666 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(8) This amount includes 7,000 shares of Common Stock held in the name of Sara
B. Dike, Mr. Dike's wife.
(9) This amount consists of 460,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 39,212 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 60,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 34,000 shares held in trust for the benefit of certain family
members of Mr. Higgins, as to which Mr. Higgins disclaims any beneficial
interest.
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<PAGE>
(11) This amount includes 260,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(12) This amount includes 131,040 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
63
<PAGE>
DESCRIPTION OF THE NEW NOTES
General
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the words
"Company" and "AmeriCredit" refer only to AmeriCredit Corp and not to any of its
subsidiaries.
The Old Notes were, and the New Notes will be, issued by AmeriCredit under
the Indenture dated April 20, 1999 (the "Indenture") among itself, the
Guarantors and Bank One, N.A., as trustee (the "Trustee"). The terms of the Old
Notes and the New Notes (collectively, the "Notes") include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The New Notes
are substantially identical to the terms and provisions of the Old Notes, except
for certain transfer restrictions and registration rights relating to the Old
Notes. The term "Notes" refers to both the Old Notes and the New Notes.
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. Because this is
a summary, we urge you to read the Indenture and the relevant portions of the
Trust Indenture Act because they, and not this description, define your rights
as holders of the Notes. We have filed copies of the Indenture as an exhibit to
the registration statement which includes this prospectus.
Brief Description of the Notes and the Guarantees
The Notes are:
. general obligations of the Company;
. rank equally in right of payment with the Original Notes, the
Secondary Notes and all current and future unsecured senior
Indebtedness of the Company;
. effectively subordinated to the secured Indebtedness of the Company
and its Subsidiaries;
. effectively subordinated to the Indebtedness of the Securitization
Trusts and certain obligations under Credit Enhancement Agreements;
and
. unconditionally guaranteed by the Guarantors.
These Notes are guaranteed by the following subsidiaries of the Company:
. AmeriCredit Financial Services, Inc.;
. ACF Investment Corporation;
. Americredit Corporation of California;
. AmeriCredit Management Company; and
. AmeriCredit Financial Services of Canada Ltd.
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.;
. CP Funding Corp.;
. AmeriCredit Funding Corp.; and
. AmeriCredit Warehouse Trust
will guarantee the Company's payment obligations under the Notes on a senior
unsecured basis. AFS Funding Corp., CP Funding Corp., AmeriCredit Funding Corp.
and AmeriCredit Warehouse Trust hold substantial assets.
See "Risk Factors--Holding Company Structure."
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
64
<PAGE>
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
Principal, Maturity and Interest
The Company issued the Old Notes with an aggregate principal amount of $200
million. The Company will issue Notes in denominations of $1,000 and integral
multiples of $1,000. The Notes will mature on April 15, 2006.
Interest on the Notes will accrue at the rate of 9.875% per annum and will
be payable semi-annually in arrears on April 15 and October 15, commencing on
October 15, 1999. The Company will make each interest payment to Holders of
record on the immediately preceding April 1 and October 1.
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.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company, the
Company will make all principal, premium and interest payments on those Notes in
accordance with those instructions. All other payments on these Notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless the Company elects to make interest payments by
check mailed to the Holders at their address set forth in the register of
Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders of
the Notes, and the Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
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.
Subsidiary Guarantees
The Guarantors will jointly and severally guarantee the Company's
obligations under the Notes. The Subsidiary Guarantees will rank equally with
the Original Guarantees and the Secondary Guarantees. The obligations of each
Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent
that Subsidiary Guarantee from constituting a fraudulent conveyance under
applicable law. See, "Risk Factors--Fraudulent Conveyance Matters."
A Guarantor may not 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:
(1) 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 that Guarantor
pursuant to a supplemental indenture satisfactory to the Trustee;
(2) immediately after giving effect to such transaction, no Default or
Event of Default exists;
65
<PAGE>
(3) 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
(4) 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 Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with the sale of other disposition of all of the assets
of that Guarantor (including by way of merger or consolidation), if
the Company applies the Net Proceeds of that sale or other
disposition in accordance with the applicable provisions of the
Indenture; or
(2) in connection with the sale or of other disposition of all of the
capital stock of that Guarantor, if the Company applies the Net
Proceeds of that sale or of the disposition in accordance with the
applicable provisions of the Indenture.
See "Repurchase at the Option of Holders-Asset Sales."
Optional Redemption
During the first 36 months after April 15, 1999, AmeriCredit may on any one
or more occasions redeem up to $66.67 million of the aggregate principal amount
of Notes at a redemption price of 109.875% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages, if any, to the redemption
date, with the net cash proceeds of a public offering of the Company's common
stock; provided that:
(1) at least $133.33 million in aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such
redemption; and
(2) the redemption shall occur within 45 days of the date of the closing
of the public offering of common stock.
Except pursuant to the preceding paragraph, the Company will not be able to
redeem the Notes prior to April 15, 2003. After April 15, 2003 the Company may
redeem all or part of the Notes upon not less than 30 nor more 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 to the
redemption date, if redeemed during the twelve-month period beginning on April
15 of the years indicated below:
Year Percentage
---- ----------
2003 ......................................... 104.938%
2004 ......................................... 102.469%
2005 and thereafter .......................... 100.000%
Selection and Notice
If the Company redeems less than all of the Notes at any time, the Trustee
will select the Notes for redemption as follows:
(1) If the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or,
(2) 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.
66
<PAGE>
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 that Note shall state the portion of the principal amount thereof to
be 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.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, 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 of $1,000) of that Holder's Notes pursuant to the Change of
Control Offer. In the Change of Control Offer, the Company will offer a cash
payment equal to 101% of the aggregate principal amount of Notes repurchased
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase. 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
Change of Control Payment Date specified in that notice, pursuant to the
procedures required by the Indenture and described in that 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 of the Notes 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 provisions described above that require the Company to make Change of
Control Offer following a Change of Control will be applicable regardless of
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.
67
<PAGE>
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 due to the
financial effect of such repurchases on the Company even if the Change of
Control itself does not. 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--Financing 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.
The definition of Change of Control includes a phrase relating to the sale,
all or substantially all" of the assets of the Company and its Subsidiaries
taken as a whole. Although there is a limited 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.
Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) 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 of the assets or Equity Interests issued or
sold or otherwise disposed of; and
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set
forth in an Officer's Certificate delivered to the Trustee;
(3) at least 85% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash; provided that
(a) 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) 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
(b) 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 at its option:
(a) permanently reduce the Specified Senior Indebtedness of the
Company and its Restricted Subsidiaries including the Original
Notes and the Secondary Notes; provided, however, that the
Company shall apply such Net Proceeds to all Specified Senior
Indebtedness of the Company and its Restricted Subsidiaries on a
pro rata basis, or
(b) to an Investment;
68
<PAGE>
(c) to make a capital expenditure or;
(d) to acquire 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 preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will make
an Asset Sale Offer to all Holders of Original Notes to purchase the maximum
principal amount of Original Notes that may be purchased out of the Excess
Proceeds. The offer price will be equal to 100% of the principal amount plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase and will be payable in cash.
If the Holders of Original Notes tender an aggregate amount of Original
Notes that is less than the Excess Proceeds, the Company will make a Secondary
Asset Sale Offer to all Holders of Secondary Notes to purchase the maximum
principal amount of Secondary Notes that may be purchased out of Excess
Proceeds. The offer price will be equal to 100% of the principal amount plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase, and will be payable in cash.
If the Holders of Secondary Notes tender an aggregate amount of Secondary
Notes that is less than the Excess Proceeds, the Company will make a Third Asset
Sale Offer to all Holders of Notes to purchase the maximum principal amount of
Notes that may be purchased out of Excess Proceeds. The offer price will be
equal to 100% of the principal amount plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase, and will be payable in
cash.
If any Excess Proceeds remain after the consummation of the Third Asset
Sale Offer, the Company may use such Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Original Notes, Secondary Notes
or Notes tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Original Notes, Secondary 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 Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) 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);
(2) 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);
(3) 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
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(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) 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
(3) 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 (b) of the next succeeding paragraph), is less than the sum
of:
(a) 25% of the aggregate cumulative Consolidated Net Income of the
Company for the period (taken as one accounting period) from
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
(b) 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 from
the issue or sale 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
(c) 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 (i) the cash return of capital
with respect to such Restricted Investment (less the cost of
disposition, if any); and (ii) the initial amount of such
Restricted Investment.
The preceding provisions will not prohibit:
(1) 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;
(2) 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 (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) 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
(5) 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
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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:
(1) the net book value of such Investments at the time of such designation;
or
(2) 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 assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors of the Company whose
resolution with respect thereto shall be delivered to the Trustee. The Board of
Directors' determination must 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 Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this "Restricted Payments" covenant 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 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 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), and
the Company and the Guarantors may issue Disqualified Stock or preferred stock
if the Consolidated Leverage Ratio of the Company, determined 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 will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the existence of Credit Facilities and the Guarantees thereof by the
Guarantors and the incurrence by the Company and any Guarantor of
revolving credit Indebtedness pursuant to one or more Credit Facilities
if the proceeds 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 (1) 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
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any Business Day shall cease to be Permitted Debt pursuant to this
clause (1) 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 (1) by the Company or such
Guarantor, as applicable, as of such third Business Day);
(2) 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;
(3) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(4) the incurrence by the Company of Indebtedness represented by the
Original Notes, the Secondary Notes and the Notes and the incurrence by
the Guarantors of the Original Guarantees, the Secondary Guarantees and
the Subsidiary Guarantees;
(5) obligations of the Company and its Restricted Subsidiaries under Credit
Enhancement Agreements;
(6) 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;
(7) 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
(a) 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
(b) (i) 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 (ii) 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 (7);
(8) 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 (8);
(9) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred:
(a) 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
(b) for the purpose of hedging, fixing or capping interest rate risk in
connection with any completed or pending Securitization;
(10) 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;
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(11) 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 (11);
and
(12) the incurrence by the Company of additional Indebtedness in an aggregate
principal amount (or accredit 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 (12), not to exceed $5.0 million.
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 (1) through (12) 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.
Limitation on Senior Subordinated Debt
The Company will not, and will not permit any of its Restricted Subsidiaries
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.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or suffer to exist any Lien of any kind 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, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of the Company's Restricted Subsidiaries; or with
respect to any other interest or participation in, or measured by, its
profits, or pay any Indebtedness owed to the Company or any of the
Company's Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) 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
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the case of Indebtedness, such Indebtedness was permitted by the
terms of the Indenture to be incurred;
(d) 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 on the property so
acquired of the nature described in clause (3) above;
(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 with such
Securitization;
(h) the requirements of any Credit Enhancement Agreement; or
(i) in the case of clause (3) above, Liens otherwise permitted to be
incurred under the Indenture.
Merger, Consolidation, or Sale of Assets
The Company may not; (1) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation); (2) 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 Person
unless:
(1) either (a) the Company is the surviving corporation; or (b) 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 ;
(2) the 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
reasonably satisfactory to the Trustee ;
(3) immediately before and after such transaction no Default or Event of
Default exists; and
(4) the Company or Person formed by or surviving any such consolidation or
merger (if other than the Company), or the Company or Person 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 Consolidated Net Worth
of the Company immediately preceding the transaction and
(b) will, at the time of such transaction after giving pro forma
effect thereto as if such transaction had occurred at the end of
the applicable four quarter period, 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." This "Merger,
Consolidation, or Sale of Assets" covenant will not apply to a
sale, assignment, transfer, lease, conveyance or other
disposition of assets between or among the Company and any of its
Wholly-Owned Subsidiaries.
Transactions with Affiliates
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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 an "Affiliate Transaction"), unless;
(1) 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
(2) 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
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; 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.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) 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;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries; and
(3) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments."
Limitation on Issuances and Sales of Capital Stock of Wholly-Owned
Restricted Subsidiaries
The Company will not, and will not permit any Wholly-Owned Restricted
Subsidiary of the Company to:
(1) 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
(2) 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
If the Company or any of its Subsidiaries acquires or creates another
Subsidiary after the date of the Indenture, then that newly acquired or created
Subsidiary must become a Guarantor and execute a Subsidiary Guarantee and
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deliver an opinion of counsel, in accordance with the terms of the Indenture.
This covenant shall not apply to Subsidiaries that (1) have properly been
designated as Unrestricted Subsidiaries in accordance with the Indenture for so
long as they continue to constitute Unrestricted Subsidiaries; or (2) qualify as
Securitization Trusts for so long as they continue to constitute Securitization
Trusts.
Business Activities
The Company will not permit any Restricted Subsidiary to engage in any
business other than Permitted Businesses, unless such business would not be
material to the Company and its Subsidiaries taken as a whole.
Payments for Consent
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, to or for the
benefit of to any Holder of 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
Whether or not required by the Commission, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes within the time
periods specified in the Commission's rules and regulations:
(1) 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 on the annual financial statements by the Company's
certified independent accountants; and
(2) 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 Commission, the Company will
file a copy of all of the information and reports referred to in clauses (1) and
(2) above 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 will furnish the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to the Holders, securities analysts and
prospective investors upon request so long as any Notes remain outstanding.
Limitation on Investment Company Status
The Company will not, and its Subsidiaries will 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
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes;
(2) default in payment when due of the principal of or premium, if any, on
the Notes;
(3) failure by the Company or any of its Subsidiaries to comply with the
provisions described under the cap--Repurchase at the Option
of Holders," "--Certain Covenants--Incurrence of Indebtedness
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and Issuance of Preferred Stock," or "--Dividend and Other Payment
Restrictions Affecting Subsidiaries;"
(4) failure by the Company or any of its Subsidiaries for 30 days after
written notice by the Trustee or the holders of at least 25% in
principal amount of the then outstanding Notes to comply with any of
the other covenants or agreements in the Indenture;
(5) 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, if that
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;
(6) 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;
(7) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in a judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full 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
(8) certain events of bankruptcy or insolvency with respect to the Company
or any of its Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Subsidiary that is a
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. If any other 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.
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.
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.
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 April 15, 2003
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
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on redemption of the Notes prior to April 15, 2003, 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 Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required 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. The
waiver may not be effective to waive liabilities under the federal securities
laws.
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;
(1) 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;
(2) 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;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(4) 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 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 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:
(1) 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;
(2) 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
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(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;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel 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;
(4) no Default or Event of Default shall have occurred and be continuing
either:
(a) 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
(b) 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;
(5) 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;
(6) 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;
(7) 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
(8) 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.
Amendment, Supplement and Waiver
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).
However, without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) 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");
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(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) 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),
(5) make any Note payable in money other than that stated in the Notes;
(6) 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;
(7) 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
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to Holders
of Notes in the case of a merger or consolidation;
(4) 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
(5) 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
If the Trustee becomes a creditor of the Company, the Indenture limits its
rights 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 and be continuing, 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.
Book-Entry, Delivery and Form
The New Notes will initially be issued as one Global Note (the "Global
Note") but, as described below, may be exchanged for "Certified Securities".
Accordingly Cede & Co. as nominee of the Depository Trust Company will initially
be the sole registered holder of the Notes for all purposes under the Indenture.
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
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Note has 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 through the Depository's
Participants or the Depository's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depository:
(1) 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
(2) 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
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(1) 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
(2) 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 relying on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depository for all purposes.
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. The Company expects that secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
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
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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 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.
"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 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
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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.
"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 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.
"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.
"Credit Agreement" means the Restated Revolving Credit Agreement, dated as
of October 3, 1997, as amended, by and among the Company, certain of its
Restricted Subsidiaries and the several banks named therein, providing for up to
$115 million of revolving credit borrowings, including all related notes,
Guarantees, security agreements, collateral documents, and other instruments and
agreements executed in connection therewith.
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"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 $11.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement, the Original Notes, the Secondary Notes
and the Original Guarantees and the Secondary Guarantees) in existence on
December 31, 1998, 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, ACF Investment Corp., a Delaware corporation, Americredit
Corporation of California, a California corporation, AmeriCredit Management
Company, a Delaware corporation and AmeriCredit Financial Services of Canada
Ltd., a Canadian corporation chartered in the Province of Ontario 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
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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.
"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.
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"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, 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 credit enhancement assets,
Liens on the stock of Restricted Subsidiaries of the Company substantially all
of the assets of which are spread accounts and credit enhancement assets 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 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
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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.
"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.
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"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Secondary Guarantees" means each of the Guarantees of the Secondary Notes
by the Guarantors pursuant to the Secondary Indenture.
"Secondary Indenture" means the Indenture, dated as of January 29, 1998,
among the Company, Bank One, NA, as trustee, and the Guarantors, with respect to
the Secondary Notes and the Secondary Guarantees.
"Secondary Notes" means the $50,000,000 in aggregate principal amount of
the Company's 9-1/4% Senior Notes due 2004, issued pursuant to the Secondary
Indenture on January 29, 1998.
"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) (i) 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 and (ii) 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., CP Funding Corp., AmeriCredit Funding Corp. and AmeriCredit
Warehouse Trust 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.
"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 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:
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(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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DESCRIPTION OF OTHER DEBT
The $505 Million Warehouse Facility
We have a $505 million warehouse facility (the "$505 Million Warehouse
Facility") which expires in September 1999. Under the $505 Million Warehouse
Facility, AmeriCredit Financial Services, Inc., our subsidiary, sells
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 $505 Million Warehouse Facility.
The amount of financing available under the $505 Million Warehouse Facility
is governed by an advance formula subject to downward adjustment upon certain
defined financial performance ("Trigger Events"). Aggregate borrowings of $233.7
million were outstanding as of March 31, 1999. All financings under the $505
Million Warehouse Facility are secured by a first priority security 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 is not a guarantor of the Notes and the auto receivables sold to CP
Funding Corp. and 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 $150 Million Warehouse Facility
The Company has a $150 million warehouse facility (the "$150 Million
Warehouse Facility") which expires in March 2000. Under the $150 Million
Warehouse Facility, AmeriCredit Corporation of California, AmeriCredit Funding
Corp. and AmeriCredit Financial Services, Inc. sell receivables to AmeriCredit
Warehouse Trust, a special purpose subsidiary. AmeriCredit Financial Services,
Inc. will manage, service, administer and make collections on such auto
receivables. AmeriCredit Warehouse Trust finances the purchase of the auto
receivables with borrowings under the $150 Million Warehouse Facility.
The amount of financing available under the $150 Million Warehouse Facility
is governed by an advance formula subject to Trigger Events. As of March 31,
1999, there were no outstanding borrowings under the $150 Million Warehouse
Facility. All financings under the $150 Million Warehouse Facility are secured
by a first priority security interest in the receivables and related assets held
by AmeriCredit Warehouse Trust and bear interest at rates based on the funding
source plus specified fees. While AmeriCredit Warehouse Trust is a subsidiary of
the Company, AmeriCredit Warehouse Trust is a separate legal entity and is not a
guarantor of the Notes and the receivables sold to AmeriCredit Warehouse Trust
and other assets of AmeriCredit Warehouse Trust are legally owned by AmeriCredit
Warehouse Trust and are not available to satisfy the claims of creditors of the
Company or its other subsidiaries.
The Credit Agreement
AmeriCredit, AmeriCredit Financial Services, Inc., and Americredit
Corporation of California are the borrowers under the Credit Agreement, pursuant
to which the borrowers may borrow up to $115 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 Non-Guarantor Special Purpose Finance Vehicles and certain other
subsidiaries. The Credit Agreement matures in March 2000. As of March 31, 1999,
there were no outstanding borrowings under the Credit Agreement. Approximately
$76.3 million was available for borrowing under the Credit Agreement pursuant to
the terms of such agreement in accordance with borrowing base requirements.
The Credit Agreement contains covenants and provisions that will restrict,
among other things, any of the borrowers' ability to:
. merge or consolidate with another entity;
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. incur liens on its property other than Permitted Liens (as defined in the
Credit Agreement);
. engage in certain asset sales or other dispositions;
. engage in material acquisitions and other investments;
. pay dividends, repurchase stock or make other restricted payments;
. engage in certain transactions with affiliates;
. make certain changes in its line of business; and
. enter into any negative pledges, subject to the extent permitted by the
Credit Agreement.
The Credit Agreement also requires the satisfaction of certain financial
performance criteria, including:
. that the ratio of recourse indebtedness to tangible net worth not exceed
2.5 to 1.0;
. that the sum of EBIT (as defined in the Credit Agreement) and the
amortization of credit enhancement assets less the gain on sale of
receivables divided by interest expense on a trailing 12-month basis not
be less than 1.85 to 1.0;
. that we not incur a net loss on a consolidated basis during any calendar
quarter;
. 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
. 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:
. any failure of the borrowers to pay principal, interest or fees
thereunder when due;
. payment default or other default under other Indebtedness;
. noncompliance with or breach of certain covenants contained in the Credit
Agreement and certain related documents;
. material inaccuracy of any representation or warranty when made by
borrowers in the Credit Agreement and certain related documents;
. certain events of bankruptcy or insolvency; and
. imposition of judgment or ERISA liens.
The Canadian Facility
Our subsidiary, AmeriCredit Financial Services of Canada Ltd., has a
convertible revolving term credit facility. The borrower may convert the
facility to a non-revolving term credit facility with a maturity of two years
from the effective date of the conversion. The agreement provides borrowings of
up to $20 million Cdn., subject to specified borrowing base restrictions, to
fund the general corporate purposes of the borrower. Borrowings under this
facility are secured by a first lien security interest on the qualified finance
contracts and related assets, and are guaranteed by the Company. The borrower
will cause any subsidiary acquired or incorporated after the date of the
agreement to execute and deliver a guarantee in favor of the lender for the
indebtedness and obligations under the facility. As of March 31, 1999, there was
$0.6 million of borrowings outstanding under the Canadian facility.
The Canadian facility contains covenants that restricts the borrower's
ability to, among other things, create liens on collateral owned or acquired,
including the right to receive income from the collateral. The facility matures
in November 1999, unless extended or converted to a non-revolving term credit
facility.
The Mortgage Subsidiary Credit Agreement
Our 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 million, subject to specified borrowing base
requirements, to fund AMS's origination and acquisition of 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 us
and certain of our Subsidiaries. Aggregate borrowings of $21.3 million were
outstanding as of March 31, 1999. The facility expires in November 1999.
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<PAGE>
The Mortgage Subsidiary Credit Agreement contains covenants and provisions
typical of a revolving credit facility, including restrictions on AMS's ability
to:
. incur additional indebtedness, including guarantees,
. incur liens on its properties,
. make loans and advances to and investments in entities other than
affiliates,
. pay dividends and other distributions to entities other than affiliates,
. merge or consolidate,
. liquidate or otherwise dispose of its assets,
. engage in transactions with affiliates, or
. engage in any new business.
The Mortgage Subsidiary Credit Agreement also contains covenants which require
AMS to satisfy certain financial criteria.
Financial Guarantee Insurance Policies
We have 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. We have 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, we have 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. Our 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 credit enhancement assets
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 that we
established to facilitate Company-sponsored securitizations and the credit
enhancement thereof and our 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. 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 March 31, 1999, restricted
cash was approximately $82.8 million (all of which was held in spread accounts
owned by AFS Funding Corp.) and AFS Funding Corp.'s other principal assets,
investment in Trust receivables and interest-only receivables, were $157.2
million and $173.6 million, respectively. See "Risk Factors--AmeriCredit Corp.
as a Holding Company."
Existing Notes
On February 4, 1997, we issued $125 million in aggregate principal amount
of 9-1/4% Senior Notes, due 2004, pursuant to an indenture, among us, the
Guarantors and Bank One, Columbus, N.A., as trustee. On January 29, 1998, we
issued an additional $50 million in aggregate principal amount of 9-1/4% Senior
Notes, due 2004, on substantially the same terms as the 9-1/4% Senior Notes
issued on February 4, 1997. All of these 9-1/4% Senior Notes are guaranteed on a
senior unsecured basis by each of the Guarantors.
On April 20, 1999, we issued $200 million in aggregate principal amount of
9.875% Senior Notes, due 2006, pursuant to an indenture, among us, the
Guarantors and Bank One, Columbus, N.A., as trustee. All of these 9.875% Senior
Notes are guaranteed on a senior unsecured basis by each of the Guarantors.
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<PAGE>
Capitalized Equipment Leases
We have, from time to time, financed the acquisition of data processing and
telecommunications equipment with capitalized equipment leases. As of March 31,
1999, such leases totaled $12.8 million.
REGISTRATION RIGHTS
THE SUMMARY SET FORTH BELOW OF CERTAIN PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND IS
QUALIFIED IN ITS ENTIRETY BY, ALL THE PROVISIONS OF THE REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT.
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on April 20, 1999 (the "Issue Date") pursuant to
which each of the Company and the Guarantors agreed that they will, at their
expense, for the benefit of holders of the Old Notes (the "Holders"), (i) within
60 days after the Issue Date (the "Filing Date"), file a registration statement
on an appropriate registration form (the "Exchange Offer Registration
Statement") with respect to a registered offer (the "Exchange Offer") to
exchange the Old Notes for these New Notes, guaranteed on a senior subordinated
basis by the Guarantors, which New Notes will have terms substantially identical
in all material respects to the Old Notes (except that the New Notes will not
contain terms with respect to transfer restrictions) and (ii) cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 150 days after the Issue Date. Upon the Exchange Offer Registration
Statement being declared effective, the Company will offer these New Notes (and
related securities) in exchange for surrender of the Old Notes. The Company will
keep the Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
Holders. For each of the Old Notes surrendered to the Company pursuant to the
Exchange Offer, the Holder who surrendered such Old Note will receive a New Note
having a principal amount equal to that of the surrendered Old Note. Interest on
each New Note will accrue (a) from the later of (i) the last interest payment
date on which interest was paid on the Old Note surrendered in exchange
therefor, or (ii) if the Old Note is surrendered for exchange on a date in a
period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date or (b) if no interest has been paid on such
Old Note, from the Issue Date.
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by Holders thereof (other than any holder which is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act, or a broker-dealer who purchased Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that the New
Notes are acquired in the ordinary course of business of the Holder and the
Holder does not have an arrangement or understanding with any person to
participate in the distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes cannot rely on this interpretation by the Commission's staff and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. 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 activities 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." Broker-dealers who acquired Old Notes directly from us and not
as a result of market-making activities or other trading activities may not rely
on the staff's interpretations discussed above or participate in the Exchange
Offer and must comply with the prospectus delivery requirements of the
Securities Act in order to sell the Old Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company is not permitted to
effect an exchange offer, (ii) the Exchange Offer is not consummated within 150
days of the Issue Date or (iii) in certain circumstances, certain holders of
unregistered Old Notes so request, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive New Notes on
the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Company within the meaning of the Securities Act), then in
each case, the
94
<PAGE>
Company will (x) promptly deliver to the Holders and the Trustee written notice
thereof and (y) at its sole expense, (a) as promptly as practicable, file a
shelf registration statement covering resales of the Old Notes (the "Shelf
Registration Statement"); and (b) use their best efforts to keep effective the
Shelf Registration Statement until the earlier of two years after its effective
date or such time as all of the applicable Old Notes have been sold thereunder.
The Company will, in the event that a Shelf Registration Statement is filed,
provide to each Holder copies of the prospectus that is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit unrestricted resales of the Old Notes. A Holder that
sells Old Notes pursuant to the Shelf Registration Statement will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a Holder (including certain indemnification rights and obligations).
If the Company fails to comply with the above provisions or if the Exchange
Offer Registration Statement or the Shelf Registration Statement fails to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable in respect of the Old Notes as follows:
(i) if (a) neither the Exchange Offer Registration Statement or Shelf
Registration Statement is filed with the Commission on or prior to the
applicable filing date or (b) notwithstanding that the Company has consummated
or will consummate an exchange offer, the Company is required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed on or
prior to the date required by the Registration Rights Agreement, then commencing
on the day after either such required filing date, Additional Interest shall
accrue on the principal amount of the Old Notes at a rate of 0.50% per annum for
the first 90 days immediately following each such filing date, such Additional
Interest rate increasing an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (a) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission on or prior to 90
days after the applicable filing deadline set for such filing in the
Registration Rights Agreement or (b) notwithstanding that the Company has
consummated or will consummate an exchange offer, the Company is required to
file a Shelf Registration Statement and such Shelf Registration Statement is not
declared effective by the Commission on or prior to the 90th day following the
filing date deadline set for such filing in the Registration Rights Agreement,
then, commencing on the day after such 90th day following the filing deadline
set for such filing in the Registration Rights Agreement, Additional Interest
shall accrue on the principal amount of the Old Notes at a rate of 0.50% per
annum for the first 90 days immediately following such date, such Additional
Interest rate increasing by an additional 0.50% per annum at the beginning of
each subsequent 90-day period; or
(iii) if (a) the Company has not exchanged New Notes for all Old Notes
validly tendered in accordance with the terms of the Exchange Offer on or prior
to the 150th day after the Issue Date or (b) if applicable, the Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of the Issue Date (other than after such time as all Old Notes have
been disposed of thereunder), then Additional Interest shall accrue on the
principal amount of the Old Notes at a rate of 0.50% per annum for the first 90
days commencing on (x) the 150th day after the Issue Date, in the case of (a)
above, or (y) the day such Shelf Registration Statement ceases to be effective
in the case of (b) above, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Old Notes may not
accrue under more than one of the foregoing clauses (i)-(iii) at any one time
and at no time shall the aggregate amount of Additional Interest accruing exceed
in the aggregate 1.0% per annum; provided, further, however, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration Statement or a Shelf Registration Statement (in the
case of clause (ii) above), or (3) upon the exchange of New Notes for all Old
Notes tendered (in the case of clause (iii)(a) above), or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(b) above), Additional Interest on the Old Notes as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
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<PAGE>
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the original interest payment dates for
the Old Notes.
96
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material United States
federal income tax aspects of the exchange offer to holders of the Old Notes.
This discussion is for general information only and does not consider all
aspects of exchange offer that might impact owners of the Old Notes in light of
such holder's personal circumstances. This discussion deals only with Old Notes
held as "capital assets" within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code") (generally property held for
investment and not for sale to customers in the ordinary course of a trade or
business). This discussion also does not address the U.S. federal income tax
consequences to holders subject to special treatment under the U.S. federal
income tax laws, such as dealers in securities, or foreign currency, tax-exempt
entities, banks, thrifts, insurance companies, persons that hold the Old Notes
as part of a "straddle", a "hedge" against currency risk or a "conversion
transaction"; persons that have a "functional currency" other than the U.S.
dollar, and investors in pass-through entities. In addition, this discussion
does not address any of the United States federal income tax consequences of
owning or disposing of New Notes, nor does it address any tax consequences
arising out of the tax laws of any state, local or foreign jurisdiction.
This discussion is based upon the Internal Revenue Code of 1986, as
amended, 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. The Company has not and will not
seek any rulings or opinions from the IRS or counsel with respect to the matters
discussed below. There can be no assurance that the IRS will not take positions
concerning the tax consequences of the exchange offer which are different from
those discussed herein.
The exchange of Old Notes for New Notes pursuant to the exchange offer
should not constitute a taxable exchange. As a result, a holder (1) should not
recognize taxable gain or loss as a result of exchanging Old Notes for New
Notes pursuant to the exchange offer, (2) the holding period of the New Notes
should include the holding period of the Old Notes exchanged therefor and (3)
the adjusted tax basis of the New Notes should be the same as the adjusted tax
basis of the Old Notes exchanged therefore immediately before the exchange.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS OF OLD NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE IN LIGHT OF
THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS, INCLUDING THE EFFECTS OF CHANGES IN SUCH LAWS.
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. We have agreed that, starting on the expiration date and
ending on the close of business one year after the expiration date, we will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until August 27, 1999, all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
We 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
97
<PAGE>
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.
We have agreed to pay all expenses incident to our performance of, or
compliance with, the Registration Rights Agreement and will indemnify the
holders of Old Notes (including any broker-dealers), and certain parties related
to such holders, against certain liabilities, including liabilities under the
Securities Act.
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 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, 1997 and 1998 and the
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended June 30, 1998 included in this
Registration Statement have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
98
<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, 1997 and 1998........................................ F-3
Consolidated Statements of Income for the years ended June 30, 1996, 1997 and 1998.............. F-4
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1997 and 1998 F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1997 and 1998.......... F-6
Notes to Consolidated Financial Statements...................................................... F-7
Consolidated Balance Sheets as of June 30, 1998 and March 31, 1999 (unaudited).......................... F-22
Consolidated Statements of Income and Comprehensive Income for the nine months ended
March 31, 1998 and 1999 (unaudited).................................................................... F-23
Consolidated Statements of Cash Flows for the nine months ended March 31, 1998 and 1999
(unaudited)............................................................................................ F-24
Notes to Consolidated Financial Statements (unaudited).................................................. F-25
Consolidating Financial Information..................................................................... F-35
Report of Independent Accountants on Supplementary Information.......................................... F-36
Consolidating Balance Sheets as of June 30, 1997 and 1998....................................... F-37
Consolidating Statements of Income for the years ended June 30, 1996, 1997 and 1998............. F-39
Consolidating Statements of Cash Flows for the years ended June 30, 1996, 1997 and 1998......... F-42
</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, 1998 and 1997, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended June 30, 1998. 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, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30, 1998, 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.
As discussed in Note 2 to the consolidated financial statements, AmeriCredit
Corp. retroactively changed its method of measuring and accounting for credit
enhancement assets.
PricewaterhouseCoopers LLP
Fort Worth, Texas
August 4, 1998, except as to the information presented in Note 14 for which the
date is September 30, 1998 and except as to the information presented in Note 2
for which the date is January 14, 1999.
F-2
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents................................................... $ 6,027 $ 33,087
Receivables held for sale, net.............................................. 266,657 342,853
Interest-only receivables from Trusts....................................... 53,465 131,694
Investments in Trust receivables............................................ 50,788 98,857
Restricted cash............................................................. 57,142 55,758
Property and equipment, net................................................. 13,884 23,385
Other assets................................................................ 27,530 28,037
--------- ---------
Total assets.............................................................. $ 475,493 $ 713,671
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities.............................................. $ 72,045 $ 165,608
Senior notes............................................................. 125,000 175,000
Other notes payable...................................................... 27,206 6,410
Accrued taxes and expenses............................................... 34,858 47,132
Deferred income taxes.................................................... 8,123 31,673
--------- ---------
Total liabilities........................................................ 267,232 425,823
--------- ---------
Commitments and contingencies (Note 7)
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;
and 66,510,346 and 69,272,948 shares issued.............................. 667 693
Additional paid-in capital................................................ 203,531 230,269
Unrealized gain on credit enhancement assets, net of income taxes......... 4,355 7,234
Retained earnings......................................................... 23,469 72,770
--------- ---------
232,022 310,966
Treasury stock, at cost (7,918,142 and 7,667,318 shares).................. (23,761) (23,118)
--------- ---------
Total shareholders' equity................................................ 208,261 287,848
--------- ---------
Total liabilities and shareholders' equity................................ $ 475,493 $ 713,671
========= =========
</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
-------------------------------------
June 30, June 30, June 30,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Finance charge income................................... $ 51,706 $ 44,910 $ 55,837
Gain on sale of receivables............................. 21,405 52,323 103,194
Servicing fee income.................................... 3,892 23,492 47,910
Other income............................................ 2,632 2,631 2,395
----------- ----------- -----------
79,635 123,356 209,336
----------- ----------- -----------
Costs and expenses:
Operating expenses...................................... 25,681 51,915 94,484
Provision for losses.................................... 7,912 6,595 7,555
Interest expense........................................ 13,129 16,312 27,135
----------- ----------- -----------
46,722 74,822 129,174
----------- ----------- -----------
Income before income taxes................................. 32,913 48,534 80,162
Income tax provision....................................... 12,148 18,685 30,861
----------- ----------- -----------
Net income................................................. $ 20,765 $ 29,849 $ 49,301
=========== =========== ===========
Earnings per share:
Basic.................................................... $ 0.36 $ 0.52 $ 0.82
=========== =========== ===========
Diluted.................................................. $ 0.34 $ 0.48 $ 0.76
=========== =========== ===========
Weighted average shares outstanding........................ 57,049,142 57,774,724 60,188,788
=========== =========== ===========
Weighted average shares and assumed incremental............ 60,406,596 61,574,548 65,203,460
shares.................................................... =========== =========== ===========
</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>
Retained
Common Stock Paid-in Unrealized Earnings Treasury Stock
------------------ --------------------
Shares Amount Capital Gain (Deficit) Shares Amount
---------- ------ --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1995.............................. 64,234,402 $ 643 $ 185,572 $ $ (27,145) 6,800,078 $ (11,844)
Common stock issued on exercise of options........... 1,047,524 10 3,040
Income tax benefit from exercise of options.......... 1,387
Purchase of treasury stock........................... 1,658,000 (10,710)
Common stock issued for employee benefit plans....... (217,112) 681
Net income........................................... 20,765
---------- ------ --------- ---------- ---------- --------- ---------
Balance at June 30, 1996............................. 65,281,926 653 189,999 (6,380) 8,240,966 (21,873)
Common stock issued on exercise of options........... 1,228,420 14 5,639
Common stock issued for acquisition.................. 4,700 (800,000) 2,400
Income tax benefit from exercise of options.......... 2,652
Unrealized gain on credit enhancement assets,
net of income taxes of $2,726 ..................... 4,355
Purchase of treasury stock........................... 630,400 (4,387)
Common stock issued for employee benefit plans....... 541 (153,224) 99
Net income........................................... 29,849
---------- ------ --------- ---------- ---------- --------- ---------
Balance at June 30, 1997 ........................... 66,510,346 667 203,531 4,355 23,469 7,918,142 (23,761)
Common stock issued on exercise of options........... 2,762,602 26 15,994
Income tax benefit from exercise of options.......... 9,575
Unrealized gain on credit enhancement assets,
net of income taxes of $1,845 ..................... 2,879
Common stock issued for employee benefit plans....... 1,169 (250,824) 643
Net income........................................... 49,301
---------- ------ --------- ---------- ---------- --------- ---------
Balance at June 30, 1998............................. 69,272,948 $ 693 $ 230,269 $ 7,234 $ 72,770 7,667,318 $ (23,118)
========== ====== ========= ========== ========== ========= =========
</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,
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 20,765 $ 29,849 $ 49,301
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................................ 1,528 2,203 4,498
Provision for losses................................................. 7,912 6,595 7,555
Deferred income taxes................................................ 11,164 18,886 30,974
Non-cash servicing fee income........................................ (1,079) (7,991) (10,867)
Non-cash gain on sale of auto receivables............................ (15,417) (52,534) (96,405)
Distributions from Trusts............................................ 1,235 19,347 43,807
Changes in assets and liabilities:
Other assets.................................................... (984) (2,341) (3,324)
Accrued taxes and expenses...................................... 9,406 21,989 12,274
--------- --------- -----------
Net cash provided by operating activities.................. 34,530 36,003 37,813
--------- --------- -----------
Cash flows from investing activities:
Purchases of auto receivables........................................ (417,235) (896,711) (1,717,006)
Originations of mortgage receivables................................. (53,770) (137,169)
Principal collections and recoveries on receivables.................. 94,948 64,389 18,384
Net proceeds from sale of auto receivables........................... 262,243 814,107 1,632,357
Net proceeds from sale of mortgage receivables....................... 52,489 119,683
Initial deposits to restricted cash.................................. (2,939) (71,400) (56,725)
Purchases of property and equipment.................................. (3,162) (4,511) (9,456)
Decrease in other assets............................................. 3,396 2,460 5,064
--------- --------- -----------
Net cash provided by investing activities.................. (62,749) (92,947) (144,868)
--------- --------- -----------
Cash flows from financing activities:
Net change in warehouse credit facilities............................ 86,000 (17,264) 93,563
Proceeds from issuance of senior notes............................... 120,894 47,762
Payments on other notes payable...................................... (66,971) (44,710) (25,042)
Proceeds from issuance of common stock............................... 3,731 6,293 17,832
Purchase of treasury stock........................................... (10,710) (4,387)
--------- ---------
Net cash provided by financing activities.................. 12,050 60,826 134,115
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents...................... (16,169) 3,882 27,060
Cash and cash equivalents at beginning of year............................ 18,314 2,145 6,027
--------- --------- -----------
Cash and cash equivalents at end of year.................................. $ 2,145 $ 6,027 $ 33,087
========= ========= ===========
</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 129 auto
lending branch offices in 36 states as of June 30, 1998. The Company also
acquired a subsidiary in November 1996 which originates and sells mortgage
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. Certain prior year amounts have
been reclassified to conform to the current year presentation.
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, assumptions for cumulative credit losses, timing of
cash flows, discount rates and to a lesser extent, anticipated prepayments on
receivables sold in securitization transactions and the determination of the
allowance for losses on receivables held for sale.
Cash Equivalents
Investments in highly liquid securities with original maturities of 90
days or less are included in cash and cash equivalents.
Receivables Held for Sale
Receivables held for sale are carried at the lower of cost or fair value.
Finance charge income related to receivables held for sale is recognized using
the interest method. Accrual of finance charge income is suspended on accounts
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 receivables 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 receivables held for sale portfolio. Automobile sales
finance 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. Receivables are charged-off to the allowance for
losses when the Company repossesses and disposes of the collateral or the
account is otherwise deemed uncollectible.
Credit Enhancement Assets
The Company periodically sells auto 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
receivables sold in the form of a residual or interest-only strip and may also
retain other subordinated interests in the receivables sold to 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 receivables and the interest paid to the
investors in the asset-backed securities, net of credit losses, servicing fees
and other expenses.
F-7
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Upon the transfer of receivables to the Trusts, the Company removes the
net book value of the 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 is classified as either
interest-only receivables from Trusts, investments in Trust receivables or
restricted cash in the Company's consolidated balance sheets depending upon the
form of interest retained by the Company. These interests are collectively
referred to as credit enhancement assets.
Since the interests retained by the Company can be contractually prepaid
or otherwise settled in such a way that the holder would not recover all of its
recorded investment, these assets are classified as available for sale and are
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 is deemed other than
temporary, the assets are written down through a charge to operations.
The fair value of credit enhancement assets is estimated by calculating
the present value of the excess cash flows from the Trusts using discount rates
commensurate with the risks involved. Such calculations include estimates of
cumulative credit losses and prepayment rates for the remaining term of the
receivables transferred to the Trusts since these factors impact the amount and
timing of future excess cash flows. If cumulative credit losses and prepayment
rates exceed the Company's original estimates, the assets are 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.
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. In connection with the
issuance of the policies, the Company is required to establish a separate cash
account with a trustee for the benefit of the Insurer for each series of
securities and related receivables pools. Monthly cash collections from the
pools of receivables in excess of required principal and interest payments on
the asset-backed securities and servicing fees and other expenses are either
added to the restricted cash accounts or used to repay the outstanding asset-
backed securities on an accelerated basis, thus creating additional credit
enhancement through over-collateralization in the Trusts. This over
collateralization is recognized as investments in Trust receivables in the
Company's consolidated balance sheets. When the credit enhancement levels reach
specified percentages of the pools of receivables, excess cash flows are
distributed to the Company. In the event that monthly cash collections from any
pool of 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 receivables supporting the asset-backed
securities exceed certain targets, the specified levels of credit enhancement
would be increased and, in certain cases, the Company would be removed as
servicer of the receivables.
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 arrangements to manage the gross
interest rate spread on its securitization transactions. These arrangements
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
F-8
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
correspond to the principal amount and average maturities of receivables
expected to be sold to the Trusts and the related asset-backed 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
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 to a fixed rate. The notional amounts of these agreements approximate the
outstanding balance of certain 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 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
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") effective for periods
ended December 31, 1997 and thereafter. SFAS 128 establishes new 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. All prior period
earnings per share and related weighted average share amounts have been restated
to conform to the requirements of SFAS 128.
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
established accounting and reporting standards for transfers of financial assets
and applies to the Company's sales of auto receivables to the Trusts. Adoption
of SFAS 125, which was applied prospectively to transactions occurring
subsequent to December 1996, resulted in increases of $2,577,000 in credit
enhancement assets, $992,000 in deferred income taxes and $1,585,000 in
shareholders' equity as of June 30, 1997.
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
interest-only receivables, in its consolidated financial statements for the year
ending 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 Company's auto finance business is currently the only
segment reportable under SFAS 131.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting
F-9
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The new standard
requires that all derivatives be recognized as either assets or liabilities in
the consolidated balance sheets and that those instruments be measured at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedging instrument. The accounting for changes in the fair value
of a derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. While the new
standard will apply to the Company's derivative financial instruments, the
Company does not believe that adoption of SFAS 133 will have a material effect
on the Company's consolidated financial position or results of operations.
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,
1996, 1997 and 1998. As required by the 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.
F-10
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The restatement resulted in the following changes to prior period financial
statements:
<TABLE>
<CAPTION>
Years Ended
-------------------------------------
June 30, June 30, June 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenue
Previous.............................................................. $ 80,978 $ 137,747 $ 227,940
As restated........................................................... 79,635 123,356 209,336
Net Income
Previous.............................................................. $ 21,591 $ 38,699 $ 60,741
As restated........................................................... 20,765 29,849 49,301
Earnings per share
Previous.............................................................. $ 0.36 $ 0.63 $ 0.93
As restated........................................................... 0.34 0.48 0.76
Credit enhancement assets (end of period)
Previous.............................................................. $ 43,079 $ 179,355 $ 321,199
As restated........................................................... 41,736 161,395 286,309
Shareholders' equity (end of period)
Previous.............................................................. $ 163,225 $ 216,536 $ 306,161
As restated........................................................... 162,399 208,261 287,848
</TABLE>
3. Receivables Held for Sale
Receivables held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
--------- ---------
<S> <C> <C>
Auto receivables................................................ $ 275,249 $ 334,110
Less allowance for losses....................................... (12,946) (12,756)
--------- ---------
Auto receivables, net........................................... 262,303 321,354
Mortgage receivables............................................ 4,354 21,499
--------- ---------
$ 266,657 $ 342,853
========= =========
</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 $12,704,000 and
$8,729,000 of delinquent auto receivables as of June 30, 1997 and 1998,
respectively.
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended
---------------------------------
June 30, June 30, June 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year......................................... $ 19,951 $ 13,602 $ 12,946
Provision for losses................................................. 7,912 6,595 7,555
Acquisition fees..................................................... 18,097 30,688 49,859
Allowance related to receivables sold to Trusts...................... (13,461) (20,974) (48,464)
Net charge-offs-auto receivables..................................... (18,322) (16,965) (9,140)
Net charge-offs-other................................................ (575)
--------- --------- ---------
Balance at end of year............................................ $ 13,602 $ 12,946 $ 12,756
========= ========= =========
</TABLE>
F-11
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Credit Enhancement Assets
As of June 30, 1997 and 1998, the Company was servicing $863.0 million and
$1,968.4 million, respectively, of auto receivables which have been sold to 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>
June 30, June 30,
1997 1998
--------- ---------
<S> <C> <C>
Interest-only receivables from Trusts........................................ $ 53,465 $ 131,694
Investments in trust receivables............................................. 50,788 98,857
Restricted cash.............................................................. 57,142 55,758
--------- ---------
$ 161,395 $ 286,309
========= =========
</TABLE>
A summary of credit enhancement assets is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
June 30, June 30, June 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year............................................ $ $ 41,736 $ 161,395
Non-cash gain on sale of auto receivables............................... 15,417 52,534 96,405
Accretion of present value discount..................................... 1,079 7,991 19,717
Initial deposits to restricted cash..................................... 2,939 71,400 56,725
Change in unrealized gain............................................... 7,081 4,724
Distributions from Trusts............................................... (1,235) (19,347) (43,807)
Retained certificates................................................... 23,536
Permanent impairment write-down......................................... (8,850)
--------- --------- ---------
Balance at end of year................................................ $ 41,736 $ 161,395 $ 286,309
========= ========= =========
</TABLE>
A summary of the allowance for losses included as a component of the
interest-only receivables is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended
------------------------------
June 30, June 30, June 30,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year............................................. $ $ 25,616 $ 74,925
Assumptions for cumulative credit losses................................. 27,268 75,575 174,446
Permanent impairment write-down.......................................... 8,850
Net charge-offs.......................................................... (1,652) (26,266) (78,862)
-------- -------- --------
Balance at end of year................................................... $ 25,616 $ 74,925 $179,359
======== ======== ========
</TABLE>
5. Warehouse Credit Facilities
Warehouse credit facilities consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
-------- --------
<S> <C> <C>
Commercial paper facility................................................... $140,708
Bank credit agreement....................................................... $ 71,700
Mortgage facility........................................................... 345 24,900
-------- --------
$ 72,045 $165,608
======== ========
</TABLE>
F-12
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has a funding agreement with an administrative 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.
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 October 1998,
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 $265 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 (8.5% as of June 30, 1998) 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.
The Company also has a mortgage warehouse facility with a bank under which
the Company may borrow up to $75 million, subject to a defined borrowing base.
Borrowings under the facility are collateralized by certain mortgage receivables
and bear interest, based upon the Company's option, at either the prime rate or
LIBOR plus 1%. The Company is also required to pay an annual commitment fee
equal to 1/8 of the unused portion of the facility. The facility expires in
February 1999.
6. Senior Notes
The Company has outstanding $175 million of senior notes which are due in
February 2004. Interest on the notes is payable semi-annually at a rate of 9
1/4% per annum. The notes, which are uncollateralized, 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 collateralized indebtedness, pay cash dividends
and repurchase common stock. Debt issuance costs are being amortized over the
term of the notes, and unamortized costs of $3,983,000 and $5,478,000 as of June
30, 1997 and 1998, respectively, are included in other assets in the
consolidated balance sheets.
F-13
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Commitments and Contingencies
Leases
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 and other operations under leases
with terms up to ten years with renewal options. Lease expense was $875,000,
$2,132,000 and $4,206,000 for the years ended June 30, 1996, 1997 and 1998,
respectively. Lease commitments for years ending June 30 are as follows (in
thousands):
<TABLE>
<S> <C>
1999............................................ $ 5,608
2000............................................ 5,218
2001............................................ 4,557
2002............................................ 3,638
2003............................................ 2,461
Thereafter...................................... 5,744
--------
$ 27,226
========
</TABLE>
Derivative Financial Instruments
As of June 30, 1998, the Company had Forward U.S. Treasury rate lock
agreements to sell $150 million of U.S. Treasury Notes due August 2001 and $150
million of U.S. Treasury Notes due November 2001. The agreements expire August
20, 1998 and November 20, 1998, respectively. Any gain or loss on these
agreements will be recognized as a component of the gain on sale of receivables
upon transfers of receivables to the Trusts subsequent to June 30, 1998.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash equivalents, restricted cash,
derivative financial instruments and managed auto receivables, which include
auto receivables held for sale and auto receivables serviced by the Company on
behalf of the Trusts. The Company's cash equivalents and restricted cash
represent investments in highly rated securities placed through various major
financial institutions. The counterparties to the Company's derivative financial
instruments are various major financial institutions. Managed auto receivables
represent contracts with consumers residing throughout the United States, with
borrowers located in California and Texas accounting for 14% and 11%,
respectively, of the managed auto receivables portfolio as of June 30, 1998. No
other state accounted for more than 10% of managed auto receivables.
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.
8. Stock Options
General
The Company has certain stock-based compensation plans for employees, non-
employee directors and key executive officers.
F-14
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A total of 18,000,000 shares have been authorized for grants of options
under the employee plans, of which 3,617,144 shares remain available for future
grants as of June 30, 1998. 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 2,605,000 shares have been authorized for grants of options
under the non-employee director plans, of which 960,000 shares remain available
for future grants as of June 30, 1998. 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 1,700,000 shares have been authorized for grants of options
under the key executive officer plan, none of which remain available for future
grants as of June 30, 1998. The exercise price of each option under this plan is
$8 per share and the term of each option is seven years. These options became
fully vested when the Company's common stock traded above certain targeted price
levels for a specified time period.
The Company has elected not to adopt the fair value-based method of
accounting for stock based awards and, accordingly, no compensation expense has
been recognized for options granted under the plans described above. Had
compensation expense for the Company's plans been determined using the fair
value-based method, pro forma net income would have been $14,398,000,
$24,367,000 and $45,598,000 and pro forma diluted earnings per share would have
been $0.24, $0.40 and $0.70 for the years ended June 30, 1996, 1997 and 1998,
respectively.
F-15
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following tables present information related to the Company's stock-
based compensation plans. The fair value of each option grant was estimated
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
Years Ended
-------------------------------
June 30, June 30, June 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected dividends................................................... 0 0 0
Expected volatility.................................................. 20% 20% 32%
Risk-free interest rate.............................................. 5.87% 5.87% 5.68%
Expected life........................................................ 5 Years 5 Years 5 Years
</TABLE>
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,
1996 1997 1998
----------------- ----------------- -----------------
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............................ 6,820 $ 2.50 7,328 $ 3.61 8,752 $ 4.68
Granted..................................................... 1,344 6.80 2,502 7.74 3,640 13.14
Exercised................................................... (746) 2.61 (846) 3.96 (2,034) 5.29
Forfeited................................................... (90) 3.48 (232) 5.84 (288) 8.31
------- -------- ------- -------- ------- --------
Outstanding at end of year.................................. 7,328 $ 3.61 8,752 $ 4.68 10,070 $ 7.51
======= ======== ======= ======== ======= ========
Options exercisable at end of year.......................... 5,622 $ 2.26 6,322 $ 3.89 6,030 $ 5.11
======= ======== ======= ======== ======= ========
Weighted average fair value of options granted during year.. $ 1.86 $ 2.11 $ 5.06
======== ======== ========
</TABLE>
A summary of options outstanding under employee plans as of June 30, 1998
is as follows (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ ---------------------
Weighted
Average Years Weighted Weighted
of Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Outstanding Price
- -------------------------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.25 to 2.32.......................................... 1,754 3.14 $ 1.68 1,754 $ 1.68
$2.75 to 4.57.......................................... 2,280 6.34 3.68 2,198 3.67
$5.50 to 7.88.......................................... 1,988 7.32 6.98 1,146 6.88
$8.19 to 9.19.......................................... 582 8.53 8.39 216 8.34
$10.13 to 13.07........................................ 2,114 9.46 11.63 244 11.20
$13.38 to 16.38........................................ 1,352 9.71 15.69 472 15.64
----------- -----------
10,070 6,030
=========== ===========
</TABLE>
F-16
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, 1996 June 30, 1997 June 30, 1998
---------------------- ---------------------- ----------------------
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...................... 1,892 $ 1.40 1,826 $ 1.80 1,708 $ 2.21
Granted............................................... 80 6.44 80 9.38 80 14.63
Exercised............................................. (146) 1.40 (198) 1.40 (262) 2.17
-------- ----------- -------- ----------- -------- -----------
Outstanding at end of year............................ 1,826 $ 1.80 1,708 $ .21 1,526 $ 2.87
======== =========== ======== =========== ======== ===========
Options exercisable at end of year.................... 1,746 $ 1.77 1,708 $ 2.21 1,526 $ 2.87
======== =========== ======== =========== ======== ===========
Weighted average fair value of options granted
during year........................................... $ 1.77 $ 2.57 $ 5.66
=========== =========== ===========
</TABLE>
A summary of options outstanding under non-employee director plans as
of June 30, 1998 is as follows (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding
-------------------------------------------------------------------------------
Weighted
Average
Years of Weighted Weighted
Remaining Average Average
Range of Exercise Prices Number Contractual Exercise Number Exercise
Outstanding Life Price Outstanding Price
------------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
$1.40 to 3.25....................... 1,306 3.05 $ 1.58 1,306 $ 1.58
$6.44 to 9.38....................... 140 7.97 8.14 140 8.14
$14.63.............................. 80 9.35 14.63 80 14.63
--------- ---------
1,526 1,526
========= =========
</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, 1996 June 30, 1997 June 30, 1998
---------------------- ---------------------- ----------------------
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...................... 1,700 $8.00 1,700 $8.00
Granted............................................... 1,700 $8.00
------- ---------- ------- ---------- ------- ----------
Outstanding at end of year............................ 1,700 $8.00 1,700 $8.00 1,700 $8.00
======= ========== ======= ========== ======= ==========
Options exercisable at end of year.................... 1,700 $8.00
======= ==========
Weighted average fair value of options granted
during year.......................................... $2.19
==========
</TABLE>
F-17
<PAGE>
A summary of options outstanding under the key executive officer plan as of
June 30, 1998 is as follows (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------------
Weighted Weighted
Average Years Average
Range of Number of Remaining Exercise
Exercise Prices Outstanding Contractual Life Price
----------------- ----------- ---------------- ----------
<S> <C> <C> <C>
$8.00............... 1,700 4.81 $8.00
</TABLE>
9. Employee Benefit Plans
The Company has a defined contribution retirement plan covering
substantially all employees. The Company's contributions to the plan were
$133,000, $201,000 and $358,000 for the years ended June 30, 1996, 1997 and
1998, 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 market value at specified dates. A total of
1,000,000 shares have been reserved for issuance under the plan. Shares
purchased under the plan were 194,286, 208,430 and 260,892 for the years ended
June 30, 1996, 1997 and 1998, respectively.
10. Income Taxes
The income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended
------------------------------------
June 30, June 30, June 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Current......................................... $ 984 $ (201) $ (113)
Deferred........................................ 11,164 18,886 30,974
--------- --------- ---------
$ 12,148 $ 18,685 $30,861
========= ========= =========
</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,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
U.S statutory tax rate.......................... 35.0% 35.0% 35.0%
Other........................................... 2.0 3.5 3.5
------ ------ ------
37.0% 38.5% 38.5%
====== ====== ======
</TABLE>
The deferred income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
Years Ended
------------------------------------
June 30, June 30, June 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net operating loss carry forward................ $ 8,387 $ 5,501 $(9,051)
Allowance for losses............................ 1,556 (1,046) 993
Gain on sale of receivables..................... (517) 9,282 32,606
Change in valuation allowance................... (320)
Other........................................... 2,058 5,149 6,426
--------- --------- ---------
$11,164 $18,886 $30,974
========= ========= =========
</TABLE>
F-18
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effects of temporary differences that give rise to deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
--------- ----------
<S> <C> <C>
Deferred tax liabilities:
Gain on sale of receivables.................................. $ (8,766) $ (41,372)
Unrealized gain on credit enhancement assets................. (2,726) (4,571)
Other........................................................ (2,613) (2,340)
--------- ----------
(14,105) (48,283)
--------- ----------
Deferred tax assets:
Net operating loss carry forward............................. 3,468 12,519
Alternative minimum tax credits.............................. 1,873 1,567
Other........................................................ 641 2,524
--------- ----------
5,982 16,610
--------- ----------
Net deferred tax liability..................................... $ (8,123) $ (31,673)
========= ==========
</TABLE>
As of June 30, 1998, the Company has a net operating loss carry forward of
approximately $28,700,000 for federal income tax reporting purposes which
expires between June 30, 2008 and 2013 and an alternative minimum tax credit
carry forward of approximately $1,600,000 with no expiration date.
11. Earnings Per Share
A reconciliation of weighted average shares used to compute basic and
diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
June 30, June 30, June 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average shares outstanding..................................... 57,049,142 57,774,724 60,188,788
Incremental shares resulting from assumed exercise of stock options..... 3,357,454 3,799,824 5,014,672
---------- ---------- ----------
Weighted average shares and assumed incremental shares.................. 60,406,596 61,574,548 65,203,460
========== ========== ==========
</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.
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,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Interest costs (none capitalized)...................................... $ 12,179 $ 15,196 $ 26,369
Income taxes........................................................... 1,447 599 14,804
</TABLE>
F-19
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the years ended June 30, 1997 and 1998, the Company entered into
lease agreements for property and equipment of $3,651,000 and $4,246,000,
respectively.
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 non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments are set forth below (in
thousands):
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
-------------------- --------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents............................... (a) $ 6,027 $ 6,027 $ 33,087 $ 33,087
Receivables held for sale, net.......................... (b) 266,657 283,386 342,853 367,613
Interest-only receivables from Trusts................... (c) 53,465 53,465 131,694 131,694
Investments in Trust receivables........................ (c) 50,788 50,788 98,857 98,857
Restricted cash......................................... (c) 57,142 57,142 55,758 55,758
Financial liabilities:
Warehouse credit facilities............................. (d) 72,045 72,045 165,608 165,608
Senior notes............................................ (e) 125,000 123,825 175,000 177,625
Other notes payable..................................... (f) 27,206 28,299 6,410 6,410
Interest rate swaps..................................... (g) 735 236 (269) 170
Unrecognized financial instruments:
Forward U.S. Treasury Note sales........................ (h) 164 473
Forward interest rate swaps............................. (g) 489
</TABLE>
- ---------------
(a) The carrying value of cash and cash equivalents is considered to be a
reasonable estimate of fair value since these investments bear interest at
market rates and have maturities of less than 90 days.
(b) Since the Company periodically sells its receivables, fair value is
estimated by discounting future net cash flows expected to be realized from
the sale of the receivables using interest rate, prepayment and credit loss
assumptions similar to the Company's historical experience.
(c) The fair value of interest-only receivables from Trusts, investments in
Trust receivables and restricted cash 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.
(d) The warehouse credit facilities 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.
(e) The fair value of the senior notes is based on the quoted market price.
(f) The fair value of other notes payable is estimated based on rates currently
available for debt with similar terms and remaining maturities.
(g) The fair value of the interest rate swaps is based on the quoted
termination cost.
(h) The fair value of the forward U.S. Treasury Note sales are estimated based
upon market prices for similar financial instruments.
F-20
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Stock Split
On August 6, 1998, the Company's Board of Directors approved a two for one
stock split to be effected in the form of a 100% stock dividend for shareholders
of record on September 11, 1998, paid on September 30, 1998. All share data for
the periods presented, except shares authorized, have been adjusted to reflect
the stock split on a retroactive basis.
F-21
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
---------- ----------
ASSETS
<S> <C> <C>
Cash and cash equivalents..................................................... $ 33,087 $ 36,846
Receivables held for sale, net............................................. 342,853 415,421
Interest-only receivables from Trusts...................................... 131,694 173,643
Investments in Trust receivables.............................................. 98,857 157,201
Restricted cash............................................................ 55,758 82,809
Property and equipment, net................................................... 23,385 34,115
Other assets............................................................... 28,037 37,947
---------- ----------
Total assets........................................................... $ 713,671 $ 937,982
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities................................................ $ 165,608 $ 255,531
Senior notes............................................................... 175,000 175,000
Other notes payable........................................................ 6,410 12,759
Accrued taxes and expenses................................................. 47,132 72,396
Deferred income taxes...................................................... 31,673 61,532
---------- ----------
Total liabilities...................................................... 425,823 577,218
---------- ----------
Shareholders' equity:
Preferred stock, $.01 par value per share;
20,000,000 authorized, none issued..................................... - -
Common stock, $.01 par value per share; 120,000,000 shares authorized;
69,272,948 and 70,790,686 issued....................................... 693 708
Additional paid-in capital................................................. 230,269 244,194
Accumulated other comprehensive income..................................... 7,234 13,319
Retained earnings.......................................................... 72,770 125,133
---------- ----------
310,966 383,354
Treasury stock, at cost (7,667,318 and 7,486,585 shares)..................... (23,118) (22,590)
---------- ----------
Total shareholders' equity............................................. 287,848 360,764
---------- ----------
Total liabilities and shareholders' equity............................. $ 713,671 $ 937,982
========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-22
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1998 1999
------------ -----------
<S> <C> <C>
Revenues:
Finance charge income............................ $ 40,052 $ 51,538
Gain on sale of receivables...................... 71,838 116,551
Servicing fee income............................. 34,389 61,702
Other income..................................... 1,901 3,361
----------- -----------
148,180 233,152
----------- -----------
Costs and expenses:
Operating expenses.............................. 66,102 115,760
Provision for losses............................ 5,546 6,589
Interest expense................................ 18,973 25,660
----------- -----------
90,621 148,009
----------- -----------
Income before income taxes............................. 57,559 85,143
Income tax provision................................... 22,159 32,780
----------- -----------
Net income............................................. 35,400 52,363
----------- -----------
Other comprehensive income:
Unrealized gain on credit enhancement assets.... (1,487) 9,895
Less related income tax provision............... 572 (3,810)
----------- -----------
Comprehensive income............................ $ 34,485 $ 58,448
=========== ===========
Earnings per share:
Basic........................................... $ .59 $ .83
=========== ===========
Diluted......................................... $ .55 $ .78
=========== ===========
Weighted average shares................................ 59,732,984 62,872,858
=========== ===========
Weighted average shares and assumed incremental shares. 64,644,030 66,822,426
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-23
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1998 1999
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 35,400 $ 52,363
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 3,084 6,902
Provision for losses............................................... 5,546 6,589
Deferred income taxes.............................................. 1,561 33,041
Non-cash servicing fee income...................................... (9,246) (10,739)
Non-cash gain on sale of auto receivables.......................... (64,378) (107,642)
Distributions from Trusts.......................................... 27,083 35,182
Changes in assets and liabilities:
Other assets................................................... (6,162) (2,746)
Accrued taxes and expenses..................................... 18,274 25,264
----------- -----------
Net cash provided by operating activities.................................... 11,162 38,214
----------- -----------
Cash flows from investing activities:
Purchases of auto receivables............................................. (1,162,952) (1,983,758)
Originations of mortgage receivables...................................... (94,537) (203,518)
Principal collections and recoveries on receivables....................... 30,187 14,783
Net proceeds from sale of auto receivables................................ 1,102,614 1,894,383
Net proceeds from sale of mortgage receivables............................ 70,729 198,953
Initial deposits to restricted cash....................................... (43,400) (57,250)
Return of deposits from restricted cash................................... 23,000
Purchases of property and equipment....................................... (5,971) (8,431)
Increase in other assets.................................................. (2,490) (7,387)
----------- -----------
Net cash used by investing activities........................................ (105,820) (129,225)
----------- -----------
Cash flows from financing activities:
Net change in warehouse credit facilities................................. 51,983 89,923
Proceeds from issuance of senior notes.................................... 47,762
Payments on other notes payable........................................... (13,857) (2,629)
Proceeds from issuance of common stock.................................... 11,837 7,476
----------- -----------
Net cash provided by financing activities.................................... 97,725 94,770
----------- -----------
Net increase in cash and cash equivalents.................................... 3,067 3,759
Cash and cash equivalents at beginning of period............................. 6,027 33,087
----------- -----------
Cash and cash equivalents at end of period................................... $ 9,094 $ 36,846
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-24
<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 March 31, 1999 and for the periods
ended March 31, 1998 and 1999 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.
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,
1996, 1997, and 1998 as well as for the first quarter of fiscal 1999. Interim
periods in the fiscal years ended June 30, 1996, 1997 and 1998 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.
F-25
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED
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.
NOTE 3 -- RECEIVABLES HELD FOR SALE
Receivables held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
---------- ----------
<S> <C> <C>
Auto receivables..................................... $ 334,110 $ 400,722
Less allowance for losses............................ (12,756) (10,549)
---------- ----------
Auto receivables, net................................ 321,354 390,173
Mortgage receivables................................. 21,499 25,248
---------- ----------
$ 342,853 $ 415,421
========== ==========
</TABLE>
The Company has established an allowance for losses with respect to auto
receivables held for sale to provide for potential credit losses on such
receivables prior to their sale in a securitization transaction.
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
Balance at beginning of period....................... $ 12,946 $ 12,756
Provision for losses................................. 5,546 6,589
Acquisition fees..................................... 35,545 44,614
Allowance related to auto receivables sold to Trusts. (34,030) (47,702)
Net charge-offs...................................... (7,528) (5,708)
--------- ---------
Balance at end of period............................. $ 12,479 $ 10,549
========= =========
</TABLE>
NOTE 4 -- CREDIT ENHANCEMENT ASSETS
As of June 30, 1998 and March 31, 1999, the Company was servicing $1,968.4
million and $3,152.5 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>
June 30, March 31,
1998 1999
--------- ---------
<S> <C> <C>
Interest-only receivables from Trusts................ $131,694 $173,643
Investments in Trust receivables..................... 98,857 157,201
Restricted cash...................................... 55,758 82,809
--------- ---------
$286,309 $413,653
========= =========
</TABLE>
F-26
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED
A summary of credit enhancement assets is as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Balance at beginning of period..................... $161,395 $286,309
Non-cash gain on sale of auto receivables.......... 64,378 107,642
Accretion of present value discount................ 13,646 24,139
Initial deposits to restricted cash................ 43,400 57,250
Return of deposits from restricted cash............ (23,000)
Change in unrealized gain.......................... (1,487) 9,895
Distributions from Trusts.......................... (27,083) (35,182)
Permanent impairment write-down.................... (4,400) (13,400)
---------- ----------
Balance at end of period........................... $249,849 $413,653
========== ==========
</TABLE>
A summary of the allowance for losses included as a component of the
interest-only receivables is as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Balance at beginning of period..................... $ 74,925 $ 179,359
Assumptions for cumulative credit losses........... 116,192 204,441
Permanent impairment write-down.................... 4,400 13,400
Net charge-offs.................................... (53,390) (98,183)
---------- ----------
Balance at end of period........................... $ 142,127 $ 299,017
========== ==========
</TABLE>
NOTE 5 -- WAREHOUSE CREDIT FACILITIES
Warehouse credit facilities consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
---------- ----------
<S> <C> <C>
Bank lines of credit............................... $ 603
Commercial paper facilities........................ $140,708 233,661
Mortgage facility.................................. 24,900 21,267
---------- ----------
$165,608 $ 255,531
========== ==========
</TABLE>
In September 1998, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks and increased the amount of structured warehouse
financing available under the agreement from $245 million to $505 million.
Under the funding agreement, the Company transfers auto receivables to CP
Funding Corp. ("CPFC"), a special purpose finance subsidiary of the Company, and
CPFC in turn issues a note, collateralized by such auto receivables, to the
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. Borrowings of $233,661,000 were outstanding under this agreement as of
March 31, 1999.
F-27
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED
In March 1999, the Company entered into a funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a bank under which up to $150 million of structured warehouse
financing is available. Advances under the facility bear interest at commercial
paper rates plus specified fees. The funding agreement, which expires in March
2000, contains various covenants requiring certain minimum financial ratios and
results. There were no outstanding balances under this agreement as of March
31, 1999.
In March 1999, the Company renewed its revolving credit agreement with a
group of banks under which the Company may borrow up to $115 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 credit
agreement, which expires in April 2000, 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 March 31, 1999.
In November 1998, the Company's Canadian subsidiary entered into a revolving
credit agreement with a bank under which the Company may borrow up to (Cdn)$20
million, subject to a defined borrowing base. Borrowings under the credit
facility are collateralized by certain Canadian auto receivables and bear
interest at the Canadian prime rate. The credit agreement, which expires in
November 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. Borrowings of (U.S.) $603,000 were outstanding under this
agreement as of March 31, 1999.
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 facility expires in July 1999.
Borrowings of $21,267,000 were outstanding under this agreement as of March 31,
1999.
NOTE 6 - SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------
1998 1999
-------- ---------
<S> <C> <C>
Interest costs (none capitalized)...................... $22,577 $ 29,237
Income taxes........................................... 14,520 (14,000)
</TABLE>
During the nine months ended March 31, 1998 and 1999, the Company entered into
lease agreements for property and equipment of $3,574,000 and $8,978,000,
respectively.
NOTE 7 - SUBSEQUENT EVENT
In April 1999, the Company issued $200 million of senior notes which are due
in April 2006. Interest on the notes is payable semi-annually at the rate of
9.875% per annum, commencing in October 1999. The notes, which are unsecured,
may be redeemed at the option of the Company after April 2003 at a premium
declining to par in April 2005. 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.
F-28
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
UNAUDITED
NOTE 8 -- 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.
F-29
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
March 31, 1999
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ $ 30,955 $ 5,891 $ $ 36,846
Receivables held for sale, net......... 50,354 365,067 415,421
Interest-only receivables from Trusts.. (661) 1,730 172,574 173,643
Investments in Trust receivables....... 564 156,637 157,201
Restricted cash........................ (87) 82,896 82,809
Property and equipment, net............ 34,115 34,115
Other assets........................... 7,145 23,686 7,116 37,947
Due (to) from affiliates............... 347,248 (148,776) (198,472)
Investment in affiliates............... 173,331 13,921 2 (187,254)
----------- ---------- ---------- ------------ ------------
Total assets........................ $ 527,063 $ 6,462 $ 591,711 $ (187,254) $ 937,982
=========== ========== ========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities............ $ $ 21,870 $ 233,661 $ $ 255,531
Senior notes........................... 175,000 175,000
Other notes payable.................... 12,737 22 12,759
Accrued taxes and expenses............. 4,979 66,873 544 72,396
Deferred income taxes.................. (26,417) (35,707) 123,656 61,532
----------- ---------- ---------- ------------ ------------
Total liabilities................... 166,299 53,058 357,861 577,218
----------- ---------- ---------- ------------ ------------
Shareholders' equity:
Common stock........................... 708 203 3 (206) 708
Additional paid-in capital............. 244,194 108,485 13,921 (122,406) 244,194
Accumulated other comprehensive income. 13,319 13,319 (13,319) 13,319
Retained earnings...................... 125,133 (155,284) 206,607 (51,323) 125,133
----------- ---------- ---------- ------------ ------------
383,354 (46,596) 233,850 (187,254) 383,354
Treasury stock......................... (22,590) (22,590)
----------- ---------- ---------- ------------ ------------
Total shareholders' equity.......... 360,764 (46,596) 233,850 (187,254) 360,764
----------- ---------- ---------- ------------ ------------
Total liabilities and shareholders'
equity ............................ $ 527,063 $ 6,462 $ 591,711 ($ 187,254) $ 937,982
=========== ========== ========== ============ ============
</TABLE>
F-30
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
Nine Months Ended March 31, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income.......... $ $ 29,421 $ 10,631 $ $ 40,052
Gain on sale of receivables.... (5,199) 1,653 75,384 71,838
Servicing fee income........... 65,131 9,513 (40,255) 34,389
Other income................... 22,335 965 627 (22,026) 1,901
Equity in income of affiliates. 36,111 (36,111)
----------- ---------- ---------- ------------ ------------
53,247 97,170 96,155 (98,392) 148,180
----------- ---------- ---------- ------------ ------------
Costs and expenses:
Operating expenses............. 7,801 98,566 (10) (40,255) 66,102
Provision for losses........... 5,546 5,546
Interest expense............... 10,325 17,923 12,751 (22,026) 18,973
----------- ---------- ---------- ------------ ------------
18,126 122,035 12,741 (62,281) 90,621
----------- ---------- ---------- ------------ ------------
Income before income taxes...... 35,121 (24,865) 83,414 (36,111) 57,559
Income tax provision............ (279) (7,991) 30,429 22,159
----------- ---------- ---------- ------------ ------------
Net income...................... $ 35,400 $ (16,874) $ 52,985 $ (36,111) $ 35,400
=========== ========== ========== ============ ============
</TABLE>
F-31
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
Nine Months Ended March 31, 1999
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income............ $ $ 27,503 $ 24,035 $ $ 51,538
Gain on sale of receivables...... (6,394) 3,202 119,743 116,551
Servicing fee income............. 80,403 7,975 (26,676) 61,702
Other income..................... 22,134 2,657 584 (22,014) 3,361
Equity in income of affiliates... 56,474 (56,474)
----------- ---------- ---------- ------------ ------------
72,214 113,765 152,337 (105,164) 233,152
----------- ---------- ---------- ------------ ------------
Costs and expenses:
Operating expenses............... 7,513 134,886 37 (26,676) 115,760
Provision for losses............. 2,471 4,118 6,589
Interest expense................. 13,566 16,918 17,190 (22,014) 25,660
----------- ---------- ---------- ------------ ------------
21,079 154,275 21,345 (48,690) 148,009
----------- ---------- ---------- ------------ ------------
Income before income taxes........ 51,135 (40,510) 130,992 (56,474) 85,143
Income tax provision.............. (1,228) (18,654) 52,662 32,780
----------- ---------- ---------- ------------ ------------
Net income........................ $ 52,363 $ (21,856) $ 78,330 $ (56,474) $ 52,363
=========== ========== ========== ============ ============
</TABLE>
F-32
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
Nine Months Ended March 31, 1998
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income................................. $ 35,400 $ (16,874) $ 52,985 $ (36,111) $ 35,400
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization........... 35 3,049 3,084
Provision for losses.................... 5,546 5,546
Deferred income taxes................... (14,830) (8,298) 24,689 1,561
Non-cash servicing fee income........... (9,246) (9,246)
Non-cash gain on sale of auto
receivables.......................... (64,378) (64,378)
Distributions from Trusts............... 27,083 27,083
Equity in income of affiliates.......... (36,111) 36,111
Changes in assets and liabilities:
Other assets......................... (953) (2,216) (2,993) (6,162)
Accrued taxes and expenses........... 473 16,359 1,442 18,274
------------ ------------ ------------ ------------- -------------
Net cash provided by operating activities... (15,986) (2,434) 29,582 11,162
------------ ------------ ------------ ------------- -------------
Cash flows from investing activities:
Purchases of auto receivables........... (1,162,952) (1,356,973) 1,356,973 (1,162,952)
Originations of mortgage receivables.... (94,537) (94,537)
Principal collections and recoveries
on receivables....................... (23,328) 53,515 30,187
Net proceeds from sale of auto
receivables.......................... 1,356,973 1,102,614 (1,356,973) 1,102,614
Net proceeds from sale of mortgage
receivables.......................... 70,729 70,729
Initial deposits to restricted cash..... (43,400) (43,400)
Purchases of property and equipment..... (53) (5,918) (5,971)
Net change in investment in affiliates.. (9,998) (3,921) (2) 13,921
Increase in other assets................ (2,490) (2,490)
------------ ------------ ------------ ------------- -------------
Net cash used by investing activities....... (10,051) 137,046 (246,736) 13,921 (105,820)
------------ ------------ ------------ ------------- -------------
Cash flows from financing activities:
Net change in warehouse credit
facilities........................... (45,609) 97,592 51,983
Proceeds from issuance of senior
notes................................ 47,762 47,762
Payments on other notes payable......... (888) (5) (12,964) (13,857)
Proceeds from issuance of common
stock................................ 11,837 13,921 (13,921) 11,837
Net change in due (to) from
affiliates............................ (32,674) (85,430) 118,104
------------ ------------ ------------ ------------- -------------
Net cash provided by financing activities... 26,037 (131,044) 216,653 (13,921) 97,725
------------ ------------ ------------ ------------- -------------
Net increase in cash and cash equivalents... 3,568 (501) 3,067
Cash and cash equivalents at beginning of
period.................................... 3,988 2,039 6,027
------------ ------------ ------------ ------------- -------------
Cash and cash equivalents at end of period.. $ $ 7,556 $ 1,538 $ $ 9,094
============ ============ ============ ============= =============
</TABLE>
F-33
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
Nine Months Ended March 31, 1999
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income............................... $ 52,363 $ (21,856) $ 78,330 $ (56,474) $ 52,363
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 41 6,861 6,902
Provision for losses..................... 2,471 4,118 6,589
Deferred income taxes.................... (955) (19,070) 53,066 33,041
Non-cash servicing fee income............ (10,739) (10,739)
Non-cash gain on sale of auto
receivables............................ (107,642) (107,642)
Distributions from Trusts................ 35,182 35,182
Equity in income of affiliates........... (56,474) 56,474
Changes in assets and liabilities:
Other assets........................... 1,766 (6,811) 2,299 (2,746)
Accrued taxes and expenses............. 7,259 12,923 5,082 25,264
------------ ------------ ------------ ------------- -------------
Net cash provided by operating activities.... 4,000 ( 25,482) 59,696 38,214
------------ ------------ ------------ ------------- -------------
Cash flows from investing activities:
Purchases of auto receivables............ (1,983,758) (2,121,174) 2,121,174 (1,983,758)
Originations of mortgage
receivables............................ (203,518) (203,518)
Principal collections and recoveries
on receivables......................... (6,744) 21,527 14,783
Net proceeds from sale of auto
receivables............................ 2,121,174 1,894,383 (2,121,174) 1,894,383
Net proceeds from sale of mortgage
receivables............................ 198,953 198,953
Initial deposits to restricted cash...... (57,250) (57,250)
Return of deposits from restricted
cash................................... 23,000 23,000
Purchase of property and
equipment.............................. 134 (8,565) (8,431)
Increase in other assets................. (4,094) (3,293) (7,387)
------------ ------------ ------------ ------------- -------------
Net cash used by investing activities........ 134 113,448 (242,807) (129,225)
------------ ------------ ------------ ------------- -------------
Cash flows from financing activities:
Net change in warehouse credit
facilities............................. (3,030) 92,953 89,923
Payments on other notes payable.......... (2,625) (4) (2,629)
Proceeds from issuance of common
stock.................................. 7,327 149 7,476
Net change in due (to) from
affiliates.............................. (8,836) (84,283) 93,119
------------ ------------ ------------ ------------- -------------
Net cash provided by financing activities.... (4,134) (87,168) 186,072 94,770
------------ ------------ ------------ ------------- -------------
Net increase in cash and cash equivalents.... 798 2,961 3,759
Cash and cash equivalents at beginning of
period...................................... 30,157 2,930 33,087
------------ ------------ ------------ ------------- -------------
Cash and cash equivalents at end of period... $ $ 30,955 $ 5,891 $ $ 36,846
============ ============ ============ ============= =============
</TABLE>
F-34
<PAGE>
CONSOLIDATING FINANCIAL INFORMATION
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 information presents consolidating financial data
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, 1998 and 1997 and for each of the three
years in the period ended June 30, 1998.
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-35
<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, 1998 and 1997 and for the three years ended June 30, 1998,
1997 and 1996 is included on page F-2. These audits were conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The supplementary information appearing on pages F-37 to F-44 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such supplementary 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, when considered
in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Fort Worth, Texas
August 4, 1998, except as to Note 14 and Note 2
to the consolidated financial statements for which
the dates are September 30, 1998 and January 14, 1999,
respectively.
F-36
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
June 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 3,988 $ 2,039 $ 6,027
Receivables held for sale, net............ 240,912 25,745 266,657
Interest-only receivables from Trusts..... $ (777) 4,136 50,106 53,465
Investments in Trust receivables.......... 7,432 43,356 50,788
Restricted cash........................... 57,142 57,142
Property and equipment, net............... 136 13,748 13,884
Other assets.............................. 10,947 12,564 4,019 27,530
Due (to) from affiliates.................. 277,369 (197,957) (79,412)
Investment in affiliates.................. 47,567 $(47,567)
-------- --------- -------- -------- --------
Total assets.......................... $335,242 $ 84,823 $102,995 $(47,567) $475,493
======== ========= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities............... $ 72,045 $ 72,045
Senior notes.............................. $125,000 125,000
Other notes payable....................... 3,484 33 $ 23,689 27,206
Accrued taxes and expenses................ 8,088 27,987 (1,217) 34,858
Deferred income taxes..................... (9,591) (4,811) 22,525 8,123
-------- --------- -------- -------- --------
Total liabilities..................... 126,981 95,254 44,997 267,232
-------- --------- -------- -------- --------
Shareholders' equity:
Common stock.............................. 667 203 3 $ (206) 667
Additional paid-in capital................ 203,531 98,336 (98,336) 203,531
Unrealized gain on credit enhancement
assets................................... 4,355 4,355 (4,355) 4,355
Retained earnings......................... 23,469 (108,970) 53,640 55,330 23,469
-------- --------- -------- -------- --------
232,022 (10,431) 57,998 (47,567) 232,022
Treasury stock............................ (23,761) (23,761)
-------- --------- -------- -------- --------
Total shareholders' equity............... 208,261 (10,431) 57,998 (47,567) 208,261
-------- --------- -------- -------- --------
Total liabilities and shareholders'
equity .............................. $335,242 $ 84,823 $102,995 $(47,567) $475,493
======== ========= ======== ======== ========
</TABLE>
F-37
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors 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 from Trusts ... $ (2,151) 3,623 130,222 131,694
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
Unrealized gain on credit enhancement
assets................................... 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>
F-38
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income.............. $32,050 $19,656 $51,706
Gain on sale of receivables........ 11,459 9,946 21,405
Servicing fee income............... 26,398 161 $(22,667) 3,892
Other income....................... $11,499 1,780 653 (11,300) 2,632
Equity in income of affiliates..... 24,571 (24,571)
------- ------- ------- -------- -------
36,070 71,687 30,416 (58,538) 79,635
------- ------- ------- -------- -------
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.......... 31,999 7,204 18,281 (24,571) 32,913
Income tax provision................ 11,234 914 12,148
------- ------- ------- -------- -------
Net income.......................... $20,765 $ 6,290 $18,281 $(24,571) $20,765
======= ======= ======= ======== =======
</TABLE>
F-39
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors 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 50,239 52,323
Servicing fee income..................... 56,343 6,230 $(39,081) 23,492
Other income............................. 18,348 1,280 914 (17,911) 2,631
Equity in income of affiliates........... 24,119 (24,119)
------- -------- ------- -------- --------
41,612 97,195 65,660 (81,111) 123,356
------- -------- ------- -------- --------
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................ 31,214 (10,599) 52,038 (24,119) 48,534
Income tax provision...................... 1,365 (2,481) 19,801 18,685
------- -------- ------- -------- --------
Net income................................ $29,849 $ (8,118) $32,237 $(24,119) $ 29,849
======= ======== ======= ======== ========
</TABLE>
F-40
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Finance charge income...................... $ 39,114 $ 16,723 $ 55,837
Gain on sale of receivables................ $(6,729) 1,350 108,573 103,194
Servicing fee income....................... 91,682 9,822 $(53,594) 47,910
Other income............................... 31,029 1,268 741 (30,643) 2,395
Equity in income of affiliates............. 50,179 (50,179)
------- -------- -------- -------- --------
74,479 133,414 135,859 134,416 209,336
------- -------- -------- -------- --------
Costs and expenses:
Operating expenses......................... 10,800 137,273 5 (53,594) 94,484
Provision for losses....................... 7,555 7,555
Interest expense........................... 14,776 24,192 18,810 (30,643) 27,135
------- -------- -------- -------- --------
25,576 169,020 18,815 (84,237) 129,174
------- -------- -------- -------- --------
Income before income taxes.................. 48,903 (35,606) 117,044 (50,179) 80,162
Income tax provision........................ (398) (11,148) 42,407 30,861
------- -------- -------- -------- --------
Net income.................................. $49,301 $(24,458) $ 74,637 $(50,179) $ 49,301
======= ======== ======== ======== ========
</TABLE>
F-41
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 20,765 $ 6,290 $ 18,281 $ (24,571) $ 20,765
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..................................... 13,596 (2,432) 11,164
Non-cash servicing fee income............................. (1,079) (1,079)
Non-cash gain on sale of auto
receivables............................................... 1,014 (16,431) (15,417)
Distributions from Trusts................................. 1,235 1,235
Equity in income of affiliates............................ (24,571) 24,571
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 21,012 2,044 34,530
-------- --------- --------- ------------ ---------
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.......................................... 262,243 115,646 (115,646) 262,243
Initial deposits to restricted cash....................... (2,939) (2,939)
Purchases of property and equipment....................... 2,536 (5,698) (3,162)
Decrease in other assets.................................. 3,707 (311) 3,396
Net change in investment in affiliates.................... (2,746) 2,743 3
-------- --------- --------- ------------ ---------
Net cash used by investment activities.................... 3,497 (120,053) 53,807 (62,749)
-------- --------- --------- ------------ ---------
Cash flows from financing activities
Net change in warehouse credit facilities................. 86,000 86,000
Payments on other notes payable........................... (298) (66,673) (66,971)
Proceeds from issuance of common stock............ 3,731 3,731
Purchase of treasury stock................................ (10,710) (10,710)
Net change in due (to) from affiliates.................... (29,794) 19,348 10,446
-------- --------- --------- ------------ ---------
Net cash provided by financing activities................. (37,071) 105,348 (56,227) 12,050
-------- --------- --------- ------------ ---------
Net increase (decrease) in cash and cash
equivalents.......................................... (22,100) 6,307 (376) (16,169)
Cash and cash 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-42
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................... $ 29,849 $ (8,118) $ 32,237 $ (24,119) $ 29,849
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........................ 135 (1,048) 19,799 18,886
Non-cash servicing fee income................ (7,991) (7,991)
Non-cash gain on sale of auto
receivables............................. (52,534) (52,534)
Distributions from Trusts.................... 19,347 19,347
Equity in income of affiliates............... (24,119) 24,119
Changes in assets and liabilities
Other assets............................ 917 (3,083) (175) (2,341)
Accrued taxes and expenses.............. 4,835 18,278 (1,124) 21,989
----------- ----------- ----------- ------------- -------------
Net cash provided by operating activities..... 11,645 (37,735) 62,093 36,003
----------- ----------- ----------- ------------- -------------
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............................. 814,107 814,107 (814,107) 814,107
Net proceeds from sale of mortgage
receivables............................. 52,489 52,489
Initial deposits to restricted cash.......... (71,400) (71,400)
Decrease in other assets..................... 58 2,402 2,460
Purchases of property and equipment.......... (81) (4,430) (4,511)
Net change in investment in affiliates........ 25,605 (22,981) (2,624)
----------- ----------- ----------- ------------- -------------
Net cash used by investment activities....... 25,582 (88,624) (29,905) (92,947)
----------- ----------- ----------- ------------- -------------
Cash flows from financing activities
Net change in warehouse credit facilities.... (17,264) (17,264)
Proceeds from issuance of senior notes....... 120,894 120,894
Payments on other notes payable.............. (552) (44,158) (44,710)
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....... (154,562) 147,698 6,864
----------- ----------- ----------- ------------- -------------
Net cash provided by financing activities.... (32,314) 130,434 (37,294) 60,826
----------- ----------- ----------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents.................................. 4,913 4,075 (5,106) 3,882
Cash and cash 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-43
<PAGE>
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................ $ 49,301 $ (24,458) $ 74,637 $ (50,179) $ 49,301
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization............. 50 4,448 4,498
Provision for losses...................... 7,555 7,555
Deferred income taxes..................... 390 (11,826) 42,410 30,974
Non-cash servicing fee income............. (10,867) (10,867)
Non-cash gain on sale of auto
receivables.......................... (96,405) (96,405)
Distributions from Trusts................. 43,807 43,807
Equity in income of affiliates............ (50,179) 50,179
Changes in assets and liabilities
Other assets......................... (420) (739) (2,165) (3,324)
Accrued taxes and expenses........... (10,368) 25,963 (3,321) 12,274
------------ ----------- ------------ ------------ ------------
Net cash provided by operating activities.. (11,226) 943 48,096 37,813
------------ ----------- ------------ ------------ ------------
Cash flows from investing activities
Purchases of auto receivables............. (1,717,006) (1,777,748) 1,777,748 (1,717,006)
Originations of mortgage receivables...... (137,169) (137,169)
Principal collections and recoveries on
receivables............................... 11,984 6,400 18,384
Net proceeds from sale of auto
receivables............................ 1,777,748 1,632,357 (1,777,748) 1,632,357
Net proceeds from sale of mortgage
receivables............................. 119,683 119,683
Initial deposits to restricted cash....... (56,725) (56,725)
Purchases of property and equipment....... 11 (9,467) (9,456)
Decrease in other assets.................. 5,000 64 5,064
Net change in investment in affiliates.... (9,998) (3,921) (2) 13,921
------------ ----------- ------------ ------------ ------------
Net cash used by investment activities.... (4,987) 41,852 (195,654) 13,921 (144,868)
------------ ----------- ------------ ------------ ------------
Cash flows from financing activities
Net change in warehouse credit
facilities.............................. (47,145) 140,708 93,563
Proceeds from issuance of senior notes.... 47,762 47,762
Payments on other notes payable........... (1,346) (7) (23,689) (25,042)
Proceeds from issuance of common
stock................................... 17,832 13,921 (13,921) 17,832
Net change in due (to) from affiliates.... (48,035) 30,526 17,509
------------ ----------- ------------ ------------
Net cash provided by financing............ 16,213 (16,626) 148,449 (13,921) 134,115
activities............................... ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents............................. 26,169 891 27,060
Cash and cash equivalents at beginning of
year.................................... 3,988 2,039 6,027
------------ ------------ ------------ ------------- ----------
Cash and cash equivalents at end of year... $ $ 30,157 $ 2,930 $ $ 33,087
============ ============ ============ ============= ==========
</TABLE>
F-44
<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)
We have not authorized anyone to give you any information or to make any
representations about the transactions we discussed in this prospectus other
than those contained herein or in the documents we incorporate herein by
reference. If you are given any information or representations about these
matters that is not discussed or incorporated in this prospectus, you must not
rely on that information. This prospectus is not an offer to sell or a
solicitation of an offer to buy securities anywhere or to anyone where or to
whom we are not permitted to offer or sell securities under applicable law. The
delivery of this prospectus offered hereby does not, under any circumstances,
mean that there has not been a change in our affairs since the date hereof. It
also does not mean that the information in this prospectus or in the documents
we incorporate herein by reference is correct after this date.
OFFER TO EXCHANGE ALL
OUTSTANDING 9.875% SENIOR NOTES DUE 2006
($200,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR REGISTERED 9.875% SENIOR NOTES DUE 2006
AMERICREDIT CORP.
- - - - - - - - - - - - - - - -
PROSPECTUS
- - - - - - - - - - - - - - - -
August 2, 1999
<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 with
the scope of the directors 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.
Exhibit No. Description
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 (8) -- Bylaws of the Company, as amended (Exhibit 3.4)
4.1 (4) -- Specimen stock certificate evidencing the Common Stock
(Exhibit 4.1)
4.2 (10) -- Rights Agreement, dated August 28, 1997, between the Company
and ChaseMellon Shareholder Services, L.L.C. (Exhibit 1)
4.3 (17) -- Indenture, dated as of April 20, 1999, between AmeriCredit
Corp. and subsidiaries and Bank One, Columbus, NA, with form
of 9.875% Senior Notes due 2006
5.1 (17) -- Opinion of Jenkens & Gilchrist, a Professional Corporation
10.1 (1) -- 1989 Stock Option Plan (with Stock Appreciation Rights) for
the Company (Exhibit 10.5)
10.2 (2) -- Amendment No. 1 to the 1989 Stock Option Plan (with Stock
Appreciation Rights) for the Company (Exhibit 4.6)
10.3 (3) -- 1990 Stock Option Plan for Non-Employee Directors of the
Company (Exhibit 10.14)
10.4 (4) -- 1991 Key Employee Stock Option Plan of the Company (Exhibit
10.10)
10.5 (4) -- 1991 Non-employee Director Stock Option Plan of the Company
(Exhibit 10.11)
10.6 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Clifton H. Morris, Jr. (Exhibit 10.18)
10.6.1 (8) -- Amendment No. 1 to Executive Employment Agreement, dated May
1, 1997, between the Company and Clifton H. Morris, Jr.
(Exhibit 10.7.1)
10.7 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Michael R. Barrington (Exhibit 10.19)
10.7.1 (8) -- Amendment No. 1 to Executive Employment Agreement, dated May
1, 1997, between the Company and Michael R. Barrington
(Exhibit 10.8.1)
10.8 (4) -- Executive Employment Agreement, dated January 30, 1991 between
the Company and Daniel E. Berce (Exhibit 10.20)
10.8.1 (8) -- Amendment No. 1 to Executive Employment Agreement, dated May
1, 1997, between the Company and Daniel E. Berce (Exhibit
10.9.1)
10.9 (8) -- Amended and Restated Employment Agreement, dated October 15,
1996, between the Company and Edward H. Esstman (Exhibit
10.10)
10.9.1 (8) -- Amendment No. 1 to Amended and Restated Employment Agreement,
dated May 1, 1997, between the Company and Edward H. Esstman
(Exhibit 10.10.1)
10.10 (8) -- Amended and Restated Employment Agreement, dated July 1, 1997,
between the Company and Michael T. Miller (Exhibit 10.11)
10.10.1 (14) -- Amendment No. 1 to Amended and Restated Employment Agreement,
dated as of August 1, 1998, between the Company and Michael T.
Miller
10.11 (11) -- 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)
10.11.1 (17) -- Amendment No. 1 to Sale and Servicing Agreement, dated as of
September 29, 1998, between CP Funding Corp., AmeriCredit
Financial Services, Inc. and The Chase Manhattan Bank
10.12 (11) -- 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)
II-2
<PAGE>
10.12.1 (17) -- Extension, Consent and Amendment Agreement, dated as of
September 29, 1998, between CP Funding Corp., Park Avenue
Receivables Corporation, The Chase Manhattan Bank and other
financial institutions named therein
10.13 (11) -- Restated Revolving Credit Agreement, dated October 3, 1997,
between AmeriCredit Corp. and subsidiaries and Wells Fargo
Bank (Texas), National Association, Bank One, Texas, N.A. and
other banks named therein (Exhibit 10.1)
10.13.1 (14) -- First Amendment to Restated Revolving Credit Agreement, dated
January 21, 1998, between AmeriCredit Corp. and subsidiaries
and Wells Fargo Bank (Texas), National Association, Bank One,
Texas, N.A. and other banks named therein (Exhibit 10.13.1)
10.13.2 (14) -- Second Amendment to Restated Revolving Credit Agreement, dated
April 30, 1998, between AmeriCredit Corp. and subsidiaries and
Wells Fargo Bank (Texas), National Association, Bank One,
Texas, N.A. and other banks named therein (Exhibit 10.13.2)
10.13.3 (14) -- Third Amendment to Restated Revolving Credit Agreement, dated
August 31, 1998, between AmeriCredit Corp. and subsidiaries
and Wells Fargo Bank (Texas), National Association and other
banks named therein (Exhibit 10.13.3)
10.13.4 (17) -- Fourth Amendment to Restated Revolving Credit Agreement, dated
April 1, 1999, between AmeriCredit Corp. and subsidiaries and
Wells Fargo Bank (Texas), National Association and other banks
named therein
10.14 (12) -- Indenture, dated February 4, 1997, between AmeriCredit Corp.
and subsidiaries and Bank One, Columbus, NA, with respect to
Series A and Series B 9 1/4% Senior Notes due 2004 (Exhibit
10.2)
10.15 (12) -- Purchase Agreement, dated 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)
10.16 (12) -- A/B Exchange Registration Rights Agreement, dated 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)
10.17 (6) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp.
10.18 (9) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for
AmeriCredit Corp.
10.19 (7) -- 1996 Limited Stock Option Plan for AmeriCredit Corp.
10.20 (13) -- Indenture, dated January 29, 1998, between AmeriCredit Corp.
and subsidiaries and Bank One, N.A., with respect to Series C
and Series D 9 1/4% Senior Notes due 2004 (Exhibit 10.24)
10.21 (13) -- Purchase Agreement, dated January 26, 1998, between
AmeriCredit Corp. and subsidiaries and Salomon Brothers, Inc.
and Credit Suisse First Boston Corporation (Exhibit 10.25)
10.22 (13) -- 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
Corporation (Exhibit 10.26)
10.23 (15) -- 1998 Limited Stock Option Plan for AmeriCredit Corp.
10.24 (17) -- Receivables Financing Agreement, dated as of March 31, 1999,
among AmeriCredit Warehouse Trust, AmeriCredit Financial
Services, Inc., AmeriCredit Funding Corp., Americredit
Corporation of California, Credit Suisse First Boston, New
York Branch, and Bank One, N.A.
10.25 (17) -- Master Receivables Purchase Agreement, dated as of March 31,
1999, among AmeriCredit Warehouse Trust, AmeriCredit Financial
Services, Inc., AmeriCredit Funding Corp., Americredit
Corporation of California and Bank One, N.A.
10.26 (17) -- Security and Collateral Agent Agreement, dated as of March 31,
1999, among Credit Suisse First Boston, New York Branch, Bank
One, N.A., AmeriCredit Financial Services, Inc. and
AmeriCredit Warehouse Trust
10.27 (17) -- Purchase Agreement, dated as of April 15, 1999, between
AmeriCredit Corp. and subsidiaries and Salomon Smith Barney
Inc., Bear, Stearns & Co. Inc. and ING Baring Furman Selz LLC
10.28 (17) -- A/B Exchange Registration Rights Agreement, dated as of April
20, 1999, between AmeriCredit Corp. and subsidiaries and
Salomon Smith Barney Inc., Bear, Stearns & Co. Inc., and ING
Baring Furman Selz LLC
11.1 (16) -- Statement Re Computation of Per Share Earnings
12.1 (17) -- Statement Re Computation of Ratios
21.1 (17) -- Subsidiaries of the Company
23.1 (18) -- Consent of PricewaterhouseCoopers LLP
23.2 (17) -- Consent of Jenkens & Gilchrist, a Professional Corporation
(included in its opinion filed in Exhibit 5.1)
24.1 (17) -- Power of Attorney (included on signature page hereto)
25.1 (17) -- Statement of Eligibility under the Trust Indenture Act of 1939
on Form T-1
27.1 (16) -- Financial Data Schedule
II-3
<PAGE>
________________________________________________________________________________
(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.
(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 from the Company's Proxy Statement 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, 1996, filed by the Company with the Securities and
Exchange Commission.
(8) 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.
(9) 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.
(10) 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.
(11) 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, 1997 filed by the Company with the Securities and
Exchange Commission.
(12) 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.
(13) Incorporated by reference to the exhibit shown in parenthesis included
in the Company's Registration Statement on Form S-4, dated March 26,
1998, 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 Annual Report as Form 10-K for the period ended June
30, 1998, filed by the Company with the Securities and Exchange
Commission.
(15) Incorporated by reference from the Company's Proxy Statement for the
year ended June 30, 1998, filed by the Company with the Securities and
Exchange Commission.
(16) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999 filed by the Company
with the Securities and Exchange Commission
(17) Previously filed.
(18) Filed herewith.
II-4
<PAGE>
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 registrant has been advised that in the opinion of
the Securities and Exchange 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 registrant 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 the registration statement through the
date of responding to the request.
(c) The undersigned registrant 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 the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
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 amendment no. 1 to 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.* July 28, 1999
- ----------------------------
Clifton H. Morris, Jr. Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
/s/ MICHAEL R. BARRINGTON* July 28, 1999
- ----------------------------
Michael R. Barrington Vice Chairman of the Board, Chief
Operating Officer and President
Vice Chairman of the Board and
President
/s/ DANIEL E. BERCE* July 28, 1999
- ----------------------------
Daniel E. Berce Chief Financial Officer
(Principal Financial and Accounting
Officer)
/s/ EDWARD H. ESSTMAN* July 28, 1999
- ----------------------------
Edward H. Esstman President of AmeriCredit Financial
Services, Inc., Executive Vice
President-Auto Finance Division and
Director
/s/ A.R. DIKE* July 28, 1999
- ----------------------------
A.R. Dike Director
/s/ JAMES H. GREER* July 28, 1999
- ----------------------------
James H. Greer Director
________, 1999
- ----------------------------
Douglas K. Higgins Director
/s/ KENNETH H. JONES, JR.* July 28, 1999
- ----------------------------
Kenneth H. Jones, Jr. Director
</TABLE>
By: *
---------------------------
Chris A. Choate,
Agent and Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
AMERICREDIT FINANCIAL SERVICES, INC.
By: /s/ MICHAEL R. BARRINGTON*
-------------------------------------
Michael R. Barrington
Vice Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment no. 1 to 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 July 28, 1999
- ------------------------- and Chief Executive Officer
Michael R. Barrington (Principal Executive Officer)
/s/ DANIEL E. BERCE* Vice Chairman of the Board July 28, 1999
- ------------------------- and Chief Financial Officer
Daniel E. Berce (Principal Financial and
Accounting Officer)
/s/ EDWARD H. ESSTMAN* President, Chief Operating July 28, 1999
- ------------------------- Officer and Director
Edward H. Esstman
/s/ CLIFTON H. MORRIS, JR.* Chairman of the Board July 28, 1999
- -------------------------
Clifton H. Morris, Jr.
By: *
--------------------------
Chris A. Choate,
Agent and Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
AMERICREDIT MANAGEMENT COMPANY
By: /s/ MICHAEL R. BARRINGTON*
--------------------------------------
Michael R. Barrington
Vice Chairman of the Board,
Chief Operating Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment no. 1 to 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, July 28, 1999
- -------------------------- Chief Operating Officer and
Michael R. Barrington President
/s/ DANIEL E. BERCE* Vice Chairman of the Board July 28, 1999
- ------------------------- and Chief Financial Officer
Daniel E. Berce
/s/ CLIFTON H. MORRIS, JR.* Chairman of the Board July 28, 1999
- -------------------------
Clifton H. Morris, Jr.
By: *
--------------------------
Chris A. Choate,
Agent and Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
ACF INVESTMENT 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 amendment no. 1 to 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 July 28, 1999
- --------------------------- Chief Executive Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ DANIEL E. BERCE* Vice Chairman of the Board July 28, 1999
- --------------------------- and Chief Financial Officer
Daniel E. Berce (Principal Financial and
Accounting Officer)
/s/ MICHAEL R. BARRINGTON* Vice Chairman of the Board, July 28, 1999
- --------------------------- President and Chief Operating
Michael R. Barrington Officer
</TABLE>
By: *
------------------------
Chris A. Choate,
Agent and Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
AMERICREDIT FINANCIAL SERVICES OF CANADA LTD.
By: /s/ MICHAEL R. BARRINGTON*
----------------------------------
Michael R. Barrington
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment no.1 to 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* Chief Executive Officer July 28, 1999
- --------------------------
Michael R. Barrington
/s/ NORMAN E. MAY* Director July 28, 1999
- --------------------------
Norman E. May
</TABLE>
By: *
--------------------------
Chris A. Choate,
Agent and Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this amendment no. 1 to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas on July 28, 1999.
AMERICREDIT CORPORATION OF CALIFORNIA
By: /s/ MICHAEL R. BARRINGTON*
--------------------------------
Michael R. Barrington
Vice Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment no. 1 to 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 July 28, 1999
- ---------------------------
Clifton H. Morris, Jr.
/s/ MICHAEL R. BARRINGTON* Vice Chairman of the Board July 28, 1999
- --------------------------- (Principal Executive Officer)
Michael R. Barrington
/s/ DANIEL E. BERCE* Vice Chairman of the Board July 28, 1999
- --------------------------- and Chief Financial Officer
Daniel E. Berce (Principal Financial and
Accounting Officer)
President, Chief Operating _______, 1999
- --------------------------- Officer and Director
Robert J. Frye
</TABLE>
By: *
----------------------------
Chris A. Choate,
Agent and Attorney-in-fact
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Amendment No. 1
to Form S-4 of AmeriCredit Corp. of our reports dated August 4, 1998, except as
to the information presented in Note 14 for which the date is September 30, 1998
and except as to the information presented in Note 2 for which the date is
January 14, 1999 relating to the financial statements and supplementary
information of AmeriCredit Corp., which appear in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
Fort Worth, Texas
July 29, 1999
