<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-10667
-------
AMERICREDIT CORP.
-----------------
(Exact name of registrant as specified in its charter)
TEXAS 75-2291093
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
801 CHERRY STREET, SUITE 3900, FORT WORTH, TEXAS 76102
------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
(817) 302-7000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
There were 78,098,479 shares of common stock, $0.01 par value outstanding as of
October 31, 2000.
<PAGE>
AMERICREDIT CORP.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2000
and June 30, 2000 (unaudited) .................................................... 3
Consolidated Statements of Income and Comprehensive
Income - Three Months Ended September 30, 2000
and 1999 (unaudited) ............................................................. 4
Consolidated Statements of Cash Flows - Three Months
Ended September 30, 2000 and 1999 (unaudited) .................................... 5
Notes to Consolidated Financial Statements (unaudited)............................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................................ 17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk .................................................................... 30
Part II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................. 31
Item 2. Changes in Securities .......................................................... 31
Item 3. Defaults upon Senior Securities ................................................ 32
Item 4. Submission of Matters to a Vote of Security Holders ............................ 32
Item 5. Other Information .............................................................. 32
Item 6. Exhibits and Reports on Form 8-K ............................................... 32
SIGNATURE ................................................................................ 33
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICREDIT CORP.
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 128,897 $ 42,916
Receivables held for sale, net 1,057,408 871,511
Interest-only receivables from Trusts 230,624 229,059
Investments in Trust receivables 390,912 341,707
Restricted cash 284,976 253,852
Property and equipment, net 40,586 44,535
Other assets 113,636 78,689
------------ ------------
Total assets $ 2,247,039 $ 1,862,269
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ 766,195 $ 487,700
Credit enhancement facility 77,981 66,606
Senior notes 375,000 375,000
Other notes payable 17,745 19,691
Funding payable 52,843 61,664
Accrued taxes and expenses 101,481 70,627
Deferred income taxes 94,805 92,402
------------ ------------
Total liabilities 1,486,050 1,173,690
------------ ------------
Shareholders' equity:
Preferred stock, $0.01 par value per share;
20,000,000 shares authorized, none issued
Common stock, $0.01 par value per share;
120,000,000 shares authorized; 84,869,986
and 83,726,534 shares issued 849 837
Additional paid-in capital 422,672 401,979
Accumulated other comprehensive income 53,631 44,803
Retained earnings 304,384 262,111
------------ ------------
781,536 709,730
Treasury stock, at cost (6,808,859 and
7,008,859 shares) (20,547) (21,151)
------------ ------------
Total shareholders' equity 760,989 688,579
------------ ------------
Total liabilities and shareholders' equity $ 2,247,039 $ 1,862,269
============ ============
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
3
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Income and Comprehensive Income
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue
Finance charge income $ 45,400 $ 27,536
Gain on sale of receivables 61,586 48,928
Servicing fee income 59,270 34,787
Other income 3,085 1,368
------------ ------------
169,341 112,619
------------ ------------
Costs and expenses
Operating expenses 67,294 53,678
Provision for loan losses 6,054 3,487
Interest expense 27,256 14,276
------------ ------------
100,604 71,441
------------ ------------
Income before income taxes 68,737 41,178
Income tax provision 26,464 15,854
------------ ------------
Net income 42,273 25,324
------------ ------------
Other comprehensive income
Unrealized gain on
credit enhancement assets 30,314 14,981
Unrealized gain (loss) on cash
flow hedges (15,961) 814
Less related income tax provision (5,525) (6,055)
------------ ------------
Comprehensive income $ 51,101 $ 35,064
============ ============
Earnings per share
Basic $ 0.55 $ 0.38
============ ============
Diluted $ 0.51 $ 0.35
============ ============
Weighted average shares outstanding 77,253,522 67,503,547
============ ============
Weighted average shares and
assumed incremental shares 83,358,230 71,678,349
============ ============
The accompanying notes are an integral part of these consolidated financial statements
4
</TABLE>
<PAGE>
AMERICREDIT CORP.
Consolidated Statements of Cash Flows
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 42,273 $ 25,324
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,410 5,365
Provision for loan losses 6,054 3,487
Deferred income taxes 5,296 3,313
Non-cash servicing fee income (19,790) (8,777)
Non-cash gain on sale of auto receivables (49,436) (45,328)
Distributions from Trusts 49,060 14,230
Changes in assets and liabilities:
Other assets (2,356) (11,773)
Accrued taxes and expenses 24,964 15,347
----------- -----------
Net cash provided by operating activities 60,475 1,188
----------- -----------
Cash flows from investing activities
Purchases of auto receivables (1,402,469) (1,020,997)
Originations of mortgage receivables (93,781)
Principal collections and recoveries on receivables 17,458 5,384
Net proceeds from sale of auto receivables 1,184,239 890,985
Net proceeds from sale of mortgage receivables 80,259
Initial deposits to restricted cash (47,375) (27,000)
Net change in credit enhancement facility 11,375
Proceeds from sale (purchase) of property
and equipment 157 (5,636)
Change in other assets (26,701) (4,304)
----------- -----------
Net cash used by investing activities (263,316) (175,090)
----------- -----------
Cash flows from financing activities
Net change in warehouse credit facilities 278,495 66,902
Payments on other notes payable (2,564) (2,349)
Proceeds from issuance of common stock 12,891 112,173
----------- -----------
Net cash provided by financing activities 288,822 176,726
----------- -----------
Net increase in cash and cash equivalents 85,981 2,824
Cash and cash equivalents at beginning of period 42,916 21,189
----------- -----------
Cash and cash equivalents at end of period $ 128,897 $ 24,013
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements
5
</TABLE>
<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 transactions and accounts have been eliminated in
consolidation.
The consolidated financial statements as of September 30, 2000 and for the
three months ended September 30, 2000 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 for the year ended June 30,
2000.
NOTE 2 - RECEIVABLES HELD FOR SALE
Receivables held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
<S> <C> <C>
Auto receivables $1,084,646 $891,672
Less allowance for loan losses (30,994) (24,374)
---------- --------
Auto receivables, net 1,053,652 867,298
Mortgage receivables 3,756 4,213
---------- --------
$1,057,408 $871,511
========== ========
</TABLE>
A summary of the allowance for loan losses is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Balance at beginning of period $ 24,374 $ 11,841
Provision for loan losses 6,054 3,487
Acquisition fees 32,032 21,713
Allowance related to receivables sold to Trusts (28,631) (18,671)
Net charge-offs (2,835) (1,658)
-------- --------
Balance at end of period $ 30,994 $ 16,712
======== ========
</TABLE>
6
<PAGE>
NOTE 3 - CREDIT ENHANCEMENT ASSETS
As of September 30, 2000 and June 30, 2000, the Company was servicing $6,363.9
million and $5,758.3 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>
September 30, 2000 June 30, 2000
------------------ -------------
<S> <C> <C>
Interest-only receivables from Trusts $230,624 $229,059
Investments in Trust receivables 390,912 341,707
Restricted cash 284,976 253,852
-------- --------
$906,512 $824,618
======== ========
</TABLE>
A summary of activity in the credit enhancement assets is as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Balance at beginning of period $824,618 $494,862
Non-cash gain on sale of auto receivables 49,436 45,328
Accretion of present value discount 19,790 8,777
Initial deposits to restricted cash 47,375 27,000
Change in unrealized gain 14,353 15,795
Distributions from Trusts (49,060) (14,230)
-------- --------
Balance at end of period $906,512 $577,532
======== ========
</TABLE>
A summary of the allowance for loan losses included as a component of the
interest-only receivables is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Balance at beginning of period $563,102 $354,338
Assumptions for cumulative credit losses 123,353 92,952
Net charge-offs (62,712) (46,552)
-------- --------
Balance at end of period $623,743 $400,738
======== ========
</TABLE>
7
<PAGE>
NOTE 4 - WAREHOUSE CREDIT FACILITIES
Warehouse credit facilities consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
<S> <C> <C>
Commercial paper facilities $761,184 $483,039
Credit agreement 5,011 4,661
-------- --------
$766,195 $487,700
======== ========
</TABLE>
The Company has five separate funding agreements with administrative agents on
behalf of institutionally managed commercial paper conduits and bank groups with
aggregate structured warehouse financing availability of approximately $2
billion. The first and second facilities provide for available structured
warehouse financing of $525 million and $275 million, respectively, through
September 2001. The third facility provides for available structured warehouse
financing of $375 million through March 2001. The fourth and fifth facilities
provide for available structured warehouse financing of $500 million and $300
million, respectively, through June 2001.
Under these funding agreements, the Company transfers auto receivables to
special purpose finance subsidiaries of the Company, and these subsidiaries in
turn issue notes, collateralized by such auto receivables, to the agents. The
agents provide funding under the notes to the subsidiaries pursuant to an
advance formula and the subsidiaries forward the funds to the Company in
consideration for the transfer of auto receivables. While these subsidiaries are
included in the Company's consolidated financial statements, these subsidiaries
are separate legal entities and the auto receivables and other assets held by
the subsidiaries are legally owned by these subsidiaries and are not available
to creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the
funding agreements 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 agents. The funding agreements contain various covenants
requiring certain minimum financial ratios and results. The funding agreements
also require certain funds to be held in restricted cash accounts to provide
additional collateral for borrowings under the facilities. As of September 30,
2000 and June 30, 2000, these restricted cash accounts totaled $37,536,000 and
$16,262,000, respectively, and are included in other assets in the consolidated
balance sheets.
The Company's Canadian subsidiary has a convertible revolving term credit
agreement with a bank, under which the subsidiary may borrow up to $30 million
Cdn., subject to a defined borrowing base. Borrowings under the credit agreement
are collateralized by certain Canadian auto receivables and bear interest at the
Canadian prime rate. The credit agreement, which expires in March 2001, contains
various restrictive covenants requiring certain minimum financial ratios and
results.
8
<PAGE>
NOTE 5 - CREDIT ENHANCEMENT FACILITY
The Company has a credit enhancement facility with a financial institution
under which the Company may borrow up to $225 million to fund a portion of the
initial restricted cash deposit required in its securitization transactions.
Borrowings under the credit enhancement facility are available on a revolving
basis through October 2001 and are collateralized by the Company's credit
enhancement assets. The facility contains covenants requiring certain asset
performance ratios. The Company has alternatively utilized reinsurance
arrangements to reduce the initial restricted cash deposit. These reinsurance
arrangements do not represent funded debt, and therefore are not recorded as
such on the Company's consolidated balance sheets.
NOTE 6 - SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------
2000 1999
----------------- ------------------
<S> <C> <C>
Interest costs (none capitalized) $25,955 $14,059
Income taxes 14 2,795
</TABLE>
During the three months ended September 30, 2000 and 1999, the Company entered
into capital lease agreements for property and equipment of $618,000 and
$7,830,000 respectively.
NOTE 7 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company adopted Statement of Financial Accounting Standards No. 138,
Accounting for Certain Derivative Instruments and Hedging Activities - an
amendment of FASB Statement No. 133 ("SFAS 138"), on July 1, 2000. Pursuant
to SFAS 138, all derivative instruments are recognized as either assets or
liabilities in the balance sheet and are measured at fair value. The Company
formally documents all relationships between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking
various hedge transactions.
Derivative instruments are utilized to manage the gross interest rate spread
on the Company's securitization transactions, thereby hedging the estimated
future excess cash flows to be received by the Company over the life of the
securitization. The Company sells fixed rate auto receivables to Trusts that,
in turn, sell either fixed rate or floating rate securities to investors. The
interest rates on the floating rate securities issued by the Trusts are
indexed to the one-month London Interbank Offered Rates. The Company uses
interest rate swap agreements to convert the floating rate exposures on these
securities to a fixed rate.
9
<PAGE>
The Company monitors the cash flow hedge effectiveness at interim and annual
reporting dates. At September 30, 2000, the amount of ineffectiveness related
to the interest rate swaps is not considered to be material. The fair value
of the interest rate swaps is included in the valuation of interest-only
receivables from Trusts in the Company's consolidated balance sheets. Changes
in the fair value of the interest rate swaps is generally offset by a change
in the fair value of the Company's credit enhancement assets.
The Company also utilizes interest rate caps as part of its interest-rate
risk-management strategy for securitization transactions as well as for
warehouse credit facilities. The purchaser of the interest rate cap pays a
premium in return for the right to receive the difference in the interest cost
at any time a specified index of market interest rates rises above the
stipulated "cap" rate. The interest rate cap purchaser bears no obligation or
liability if interest rates fall below the "cap" rate. The Company's special
purpose finance subsidiaries are contractually required to purchase interest
rate cap agreements as credit enhancement in connection with securitization
transactions and warehouse credit facilities. The Company simultaneously sells
a corresponding interest rate cap agreement in order to offset the purchased
interest rate cap agreement. The fair value of the interest rate cap agreements
are included in other assets and accrued taxes and expenses on the Company's
consolidated balance sheets.
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.
The following consolidating financial statement schedules present consolidating
financial data 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 using the
equity method for purposes of this presentation. Earnings of subsidiaries are
therefore reflected in the parent company's investment accounts and earnings.
The principal elimination entries set forth below eliminate investments in
subsidiaries and intercompany balances and transactions.
10
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
September 30, 2000
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 122,541 $ 6,356 $ 128,897
Receivables held for sale, net 231,300 826,108 1,057,408
Interest-only receivables
from Trusts $ 741 229,883 230,624
Investments in Trust
receivables 390,912 390,912
Restricted cash 284,976 284,976
Property and equipment, net 349 40,237 40,586
Other assets 15,061 51,528 47,047 113,636
Due (to) from affiliates 680,653 (1,365,052) 684,399
Investment in affiliates 372,553 1,294,030 8,780 $(1,675,363)
--------------- --------------- --------------- --------------- ---------------
Total assets $1,069,357 $ 374,584 $2,478,461 $(1,675,363) $2,247,039
=============== =============== =============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ 5,011 $ 761,184 $ 766,195
Credit enhancement facility 77,981 77,981
Senior notes $ 375,000 375,000
Other notes payable 17,745 17,745
Funding payable 52,613 230 52,843
Accrued taxes and expenses 36,047 59,706 5,728 101,481
Deferred income taxes (120,424) (61,668) 276,897 94,805
--------------- --------------- --------------- --------------- ---------------
Total liabilities 308,368 55,662 1,122,020 1,486,050
--------------- --------------- --------------- --------------- ---------------
Shareholders' equity:
Common stock 849 30 $ (30) 849
Additional paid-in capital 422,672 40,090 891,986 (932,076) 422,672
Accumulated other
comprehensive income 53,631 53,631 (53,631) 53,631
Retained earnings 304,384 278,802 410,824 (689,626) 304,384
--------------- --------------- --------------- --------------- ---------------
781,536 318,922 1,356,441 (1,675,363) 781,536
Treasury stock (20,547) (20,547)
--------------- --------------- --------------- --------------- ---------------
Total shareholders' equity 760,989 318,922 1,356,441 (1,675,363) 760,989
--------------- --------------- --------------- --------------- ---------------
Total liabilities and
shareholders' equity $1,069,357 $ 374,584 $2,478,461 $(1,675,363) $2,247,039
=============== =============== =============== =============== ===============
</TABLE>
11
<PAGE>
AmeriCredit Corp.
Consolidating Balance Sheet
June 30, 2000
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 30,705 $ 12,211 $ 42,916
Receivables held for sale, net 284,851 586,660 871,511
Interest-only receivables
from Trusts $ 1,019 228,040 229,059
Investments in Trust
receivables 341,707 341,707
Restricted cash 253,852 253,852
Property and equipment, net 349 44,186 44,535
Other assets 11,529 40,781 26,379 78,689
Due (to) from affiliates 675,339 (701,473) 26,134
Investment in affiliates 318,749 632,534 2,641 $(953,924)
--------------- --------------- --------------- --------------- ---------------
Total assets $1,006,985 $ 331,584 $1,477,624 $(953,924) $1,862,269
=============== =============== =============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ 4,661 $ 483,039 $ 487,700
Credit enhancement facility 66,606 66,606
Senior notes $ 375,000 375,000
Other notes payable 19,691 19,691
Funding payable 61,519 145 61,664
Accrued taxes and expenses 14,058 49,837 6,732 70,627
Deferred income taxes (90,343) (60,323) 243,068 92,402
--------------- --------------- --------------- --------------- ---------------
Total liabilities 318,406 55,694 799,590 1,173,690
--------------- --------------- --------------- --------------- ---------------
Shareholders' equity:
Common stock 837 30 $ (30) 837
Additional paid-in capital 401,979 40,096 267,618 (307,714) 401,979
Accumulated other
comprehensive income 44,803 44,803 (44,803) 44,803
Retained earnings 262,111 235,764 365,613 (601,377) 262,111
--------------- --------------- --------------- --------------- ---------------
709,730 275,890 678,034 (953,924) 709,730
Treasury stock (21,151) (21,151)
--------------- --------------- --------------- --------------- ---------------
Total shareholders' equity 688,579 275,890 678,034 (953,924) 688,579
--------------- --------------- --------------- --------------- ---------------
Total liabilities and
shareholders' equity $1,006,985 $ 331,584 $1,477,624 $(953,924) $1,862,269
=============== =============== =============== =============== ===============
</TABLE>
12
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 2000
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue
Finance charge income $ 20,069 $ 25,331 $ 45,400
Gain on sale of receivables $ (97) 2,639 59,044 61,586
Servicing fee income 56,991 18,605 $(16,326) 59,270
Other income 11,263 2,625 460 (11,263) 3,085
Equity in income of
affiliates 43,038 45,211 (88,249)
--------------- --------------- --------------- --------------- ---------------
54,204 127,535 103,440 (115,838) 169,341
--------------- --------------- --------------- --------------- ---------------
Costs and expenses
Operating expenses 29 83,564 27 (16,326) 67,294
Provision for loan losses 1,949 4,105 6,054
Interest expense 12,381 344 25,794 (11,263) 27,256
--------------- --------------- --------------- --------------- ---------------
12,410 85,857 29,926 (27,589) 100,604
--------------- --------------- --------------- --------------- ---------------
Income before income taxes 41,794 41,678 73,514 (88,249) 68,737
Income tax provision (479) (1,360) 28,303 26,464
--------------- --------------- --------------- --------------- ---------------
Net income $ 42,273 $ 43,038 $ 45,211 $(88,249) $ 42,273
=============== =============== =============== =============== ===============
</TABLE>
13
<PAGE>
AmeriCredit Corp.
Consolidating Income Statement
Three Months Ended September 30, 1999
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION>
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue
Finance charge income $ 18,877 $ 8,659 $ 27,536
Gain on sale of receivables 1,182 47,746 48,928
Servicing fee income 34,749 8,249 $ (8,211) 34,787
Other income $ 11,170 1,222 145 (11,169) 1,368
Equity in income of
affiliates 25,110 30,956 (56,066)
--------------- --------------- --------------- --------------- ---------------
36,280 86,986 64,799 (75,446) 112,619
--------------- --------------- --------------- --------------- ---------------
Costs and expenses
Operating expenses 676 61,211 2 (8,211) 53,678
Provision for loan losses 2,022 1,465 3,487
Interest expense 10,146 2,302 12,997 (11,169) 14,276
--------------- --------------- --------------- --------------- ---------------
10,822 65,535 14,464 (19,380) 71,441
--------------- --------------- --------------- --------------- ---------------
Income before income taxes 25,458 21,451 50,335 (56,066) 41,178
Income tax provision 134 (3,659) 19,379 15,854
--------------- --------------- --------------- --------------- ---------------
Net income $ 25,324 $ 25,110 $ 30,956 $(56,066) $ 25,324
=============== =============== =============== =============== ===============
</TABLE>
14
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 2000
(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 $ 42,273 $ 43,038 $ 45,211 $ (88,249) $ 42,273
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,410 4,410
Provision for loan losses 1,949 4,105 6,054
Deferred income taxes (21,663) (1,345) 28,304 5,296
Non-cash servicing fee income (19,790) (19,790)
Non-cash gain on sale of
auto receivables (49,436) (49,436)
Distributions from Trusts 49,060 49,060
Equity in income of affiliates (43,038) (45,211) 88,249
Changes in assets and liabilities:
Other assets (3,532) 181 995 (2,356)
Accrued taxes and expenses 21,989 3,979 (1,004) 24,964
--------------- -------------- --------------- --------------- ---------------
Net cash provided by
operating activities (3,971) 7,001 57,445 60,475
--------------- -------------- --------------- --------------- ---------------
Cash flows from investing activities:
Purchase of auto receivables (1,402,469) (1,449,291) 1,449,291 (1,402,469)
Principal collections and
recoveries on receivables (4,126) 21,584 17,458
Net proceeds from sale of
auto receivables 1,449,291 1,184,239 (1,449,291) 1,184,239
Initial deposits to
restricted cash (47,375) (47,375)
Net change in credit
enhancement facility 11,375 11,375
Proceeds from sale of property
and equipment 157 157
Change in other assets (5,038) (21,663) (26,701)
Net change in investment in
affiliates (1,938) (616,285) (6,139) 624,362
--------------- -------------- --------------- --------------- ---------------
Net cash used by investing
activities (1,938) (578,470) (307,270) 624,362 (263,316)
--------------- -------------- --------------- --------------- ---------------
Cash flows from financing activities:
Net change in warehouse
credit facilities 350 278,145 278,495
Payments on other notes payable (2,564) (2,564)
Proceeds from issuance of
common stock 12,891 (6) 624,368 (624,362) 12,891
Net change in due (to) from
affiliates (4,418) 662,961 (658,543)
--------------- -------------- --------------- --------------- ---------------
Net cash provided by
financing activities 5,909 663,305 243,970 (624,362) 288,822
--------------- -------------- --------------- --------------- ---------------
Net increase in cash and
cash equivalents 91,836 (5,855) 85,981
Cash and cash equivalents at
beginning of period 30,705 12,211 42,916
--------------- -------------- --------------- --------------- ---------------
Cash and cash equivalents at
end of period $ $ 122,541 $ 6,356 $ $ 128,897
=============== ============== =============== =============== ===============
</TABLE>
15
<PAGE>
AmeriCredit Corp.
Consolidating Statement of Cash Flow
Three Months Ended September 30, 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 $ 25,324 $ 25,110 $ 30,956 $ (56,066) $ 25,324
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,365 5,365
Provision for loan losses 2,022 1,465 3,487
Deferred income taxes (12,403) (3,663) 19,379 3,313
Non-cash servicing fee income (8,777) (8,777)
Non-cash gain on sale of
auto receivables (45,328) (45,328)
Distributions from Trusts 14,230 14,230
Equity in income of affiliates (25,110) (30,956) 56,066
Changes in assets and liabilities:
Other assets 163 (8,380) (3,556) (11,773)
Accrued taxes and expenses 11,685 3,492 170 15,347
--------------- -------------- --------------- --------------- ---------------
Net cash provided by
operating activities (341) (7,010) 8,539 1,188
--------------- -------------- --------------- --------------- ---------------
Cash flows from investing activities:
Purchase of auto receivables (1,020,997) (894,838) 894,838 (1,020,997)
Originations of mortgage
receivables (93,781) (93,781)
Principal collections and
recoveries on receivables (4,600) 9,984 5,384
Net proceeds from sale of
auto receivables 894,838 890,985 (894,838) 890,985
Net proceeds from sale of
mortgage receivables 80,259 80,259
Initial deposits to
restricted cash (27,000) (27,000)
Purchases of property and
equipment (5,636) (5,636)
Change in other assets 1,521 (5,825) (4,304)
Net change in investment in
affiliates (1,169) (88,920) 273 89,816
--------------- -------------- --------------- --------------- ---------------
Net cash used by investing
activities (1,169) (237,316) (26,421) 89,816 (175,090)
--------------- -------------- --------------- --------------- ---------------
Cash flows from financing activities:
Net change in warehouse
credit facilities (7,988) 74,890 66,902
Payments on other notes payable (2,349) (2,349)
Proceeds from issuance of
common stock 112,173 89,816 (89,816) 112,173
Net change in due (to) from
affiliates (108,314) 256,995 (148,681)
--------------- -------------- --------------- --------------- ---------------
Net cash provided by
financing activities 1,510 249,007 16,025 (89,816) 176,726
--------------- -------------- --------------- --------------- ---------------
Net increase in cash and
cash equivalents 4,681 (1,857) 2,824
Cash and cash equivalents at
beginning of period 20,246 943 21,189
--------------- -------------- --------------- --------------- ---------------
Cash and cash equivalents at
end of period $ $ 24,927 $ (914) $ $ 24,013
=============== ============== =============== =============== ===============
</TABLE>
16
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates earnings and cash flow primarily from the purchase,
securitization and servicing of auto receivables. The Company purchases auto
finance contracts from franchised and select independent automobile dealerships.
To fund the acquisition of receivables prior to securitization, the Company
utilizes borrowings under its warehouse credit facilities. The Company generates
finance charge income on its receivables pending securitization ("receivables
held for sale") and pays interest expense on borrowings under its warehouse
credit facilities.
The Company sells receivables to securitization trusts ("Trusts") that, in turn
sell asset-backed securities to investors. By securitizing its receivables, the
Company is able to lock in the gross interest rate spread between the yield on
such receivables and the interest rate payable on the asset-backed securities.
The Company recognizes a gain on the sale of receivables to the Trusts, which
represents the difference between the sale proceeds to the Company, net of
transaction costs, and the Company's net carrying value of the receivables, plus
the present value of the estimated future excess cash flows to be received by
the Company over the life of the securitization. Excess cash flows result from
the difference between the interest received from the obligors on the
receivables and the interest paid to investors in the asset-backed securities,
net of credit losses and expenses.
Excess cash flows from the Trusts are initially utilized to fund credit
enhancement requirements to secure financial guaranty insurance policies issued
by an insurance company to protect investors in the asset-backed securities from
losses. Once predetermined credit enhancement requirements are reached and
maintained, excess cash flows are distributed to the Company. In addition to
excess cash flows, the Company earns monthly base servicing fee income of 2.25%
per annum on the outstanding principal balance of receivables securitized
("serviced receivables").
In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"),
which originated and sold mortgage loans. Receivables originated in this
business are referred to as mortgage receivables. Such receivables were
generally packaged and sold for cash on a servicing released whole-loan basis.
Deterioration in the wholesale loan markets caused premiums received by AMS for
the sale of mortgage loans to decrease. As a result, during October 1999,
Company management assessed various options with respect to the operations of
AMS and decided to cease the operations of AMS. The AMS wholesale mortgage loan
production and processing offices were closed, and the assets of AMS are being
liquidated.
17
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1999
REVENUE:
The Company's average managed receivables outstanding consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Auto:
Held for sale $ 800,684 $ 460,748
Serviced 6,238,610 3,953,034
------------ ------------
7,039,294 4,413,782
Mortgage 4,011 40,326
------------ ------------
$7,043,305 $4,454,108
============ ============
</TABLE>
Average managed receivables outstanding increased by 58% as a result of higher
loan purchase volume. The Company purchased $1,406.8 million of auto loans
during the three months ended September 30, 2000, compared to purchases of
$1,031.8 million during the three months ended September 30, 1999. This growth
resulted from loan production at branches open during both periods as well as
expansion of the Company's branch network. Loan purchases at branch offices
opened prior to September 30, 1998, were 22% higher for the twelve months ended
September 30, 2000, versus the twelve months ended September 30, 1999. The
Company operated 198 auto lending branch offices as of September 30, 2000,
compared to 180 as of September 30, 1999.
The average new loan size was $15,098 for the three months ended September
30, 2000, compared to $14,002 for the three months ended September 30, 1999.
The average percentage rate for loans purchased during the three months ended
September 30, 2000 was 19.2%, compared to 18.3% during the three months ended
September 30, 1999. The increased annual percentage rate is the result of
pricing increases implemented in the third quarter 2000 in response to rising
short-term interest rates.
18
<PAGE>
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Auto $45,400 $26,479
Mortgage 1,057
---------- ----------
$45,400 $27,536
========== ==========
</TABLE>
The increase in finance charge income was due primarily to an increase of 74% in
average auto receivables held for sale in the three months ended September 30,
2000, versus the three months ended September 30, 1999. The Company's effective
yield on its auto receivables held for sale decreased to 22.5% for the three
months ended September 30, 2000, from 22.8% for the three months ended September
30, 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 auto finance contract is originated by the automobile
dealership and the date the auto finance contract is funded by the Company.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Auto $61,586 $47,417
Mortgage 1,511
---------- ----------
$61,586 $48,928
========== ==========
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$1,200.0 million of receivables in the three months ended September 30, 2000, as
compared to $900.0 million of receivables sold in the three months ended
September 30, 1999. The gain as a percentage of the sales proceeds decreased to
5.1% for the three months ended September 30, 2000, from 5.3% for the three
months ended September 30, 1999.
19
<PAGE>
Significant assumptions used in determining the gain on sale of auto
receivables and fair value of credit enhancement assets were as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cumulative credit losses (including
deferred gains) 10.8% 10.9%
Discount rate used to estimate
present value:
Interest-only receivables from Trusts 14.0% 12.0%
Investment in Trust receivables 9.8% 7.8%
Restricted cash 9.8% 7.8%
</TABLE>
The discount rates used to estimate 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.
As a result of generally higher market interest rates and wider credit spreads,
the Company increased the discount rate used in determining the gain on sale of
auto receivables effective for auto receivables sold subsequent to June 1, 2000.
The discount rate used to estimate the present value of interest-only
receivables from Trusts increased to 14.0% from 12.0% and the discount rate used
to estimate the present value of investments in Trust receivables and restricted
cash increased to 9.8% from 7.8%. The increased discount rate results only in a
difference in the timing of revenue recognition from securitizations and has no
effect on the Company's estimate of expected excess cash flows from such
transactions. While the total amount of revenue recognized over the term of a
securitization transaction is the same, a higher discount rate results in (i)
lower initial gains on the sale of receivables and (ii) higher subsequent
servicing fee income from accretion of the additional discount.
Servicing fee income increased to $59.3 million, or 3.8% of average serviced
auto receivables, for the three months ended September 30, 2000, compared to
$34.8 million, or 3.5% of average serviced auto receivables, for the three
months ended September 30, 1999. Servicing fee income represents accretion of
the present value discount on estimated future excess cash flows from the
Trusts, base servicing fees and other fees earned by the Company as servicer of
the auto receivables sold to the Trusts. The growth in servicing fee income is
attributable to the increase in average serviced auto receivables outstanding
for the three months ended September 30, 2000, compared to the three months
ended September 30, 1999.
20
<PAGE>
COSTS AND EXPENSES:
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased to 3.8% (due to the closing of the mortgage business there
were no mortgage operating expenses incurred) for the three months ended
September 30, 2000, compared to 4.8% (4.6% excluding operating expenses of $2.1
million related to the mortgage business) for the three months ended September
30, 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 $13.6
million, or 25%, primarily due to the addition of auto branch offices and loan
processing and servicing staff.
The provision for loan losses increased to $6.1 million for the three months
ended September 30, 2000, from $3.5 million for the three months ended September
30, 1999, due to higher average amounts of receivables held for sale. As a
percentage of average receivables held for sale, the provision for loan losses
was 3.0% for the three months ended September 30, 2000 and 1999.
Interest expense increased to $27.3 million for the three months ended September
30, 2000, from $14.3 million for the three months ended September 30, 1999, due
to higher debt levels and effective interest rates. Average debt outstanding was
$1,020.8 million and $595.4 million for the three months ended September 30,
2000 and 1999, respectively. The Company's effective rate of interest paid on
its debt increased to 10.6% from 9.5% as a result of higher short-term market
interest rates and fees paid on higher unutilized borrowing capacity under the
Company's warehouse credit facilities.
The Company's effective income tax rate was 38.5% for the three months ended
September 30, 2000 and 1999.
PRO FORMA PORTFOLIO-BASED EARNINGS DATA
In addition to reporting results of operations in accordance with generally
accepted accounting principles ("GAAP"), the Company has elected to present pro
forma results of operations which treat securitization transactions as
financings rather than sales of receivables. The Company refers to this
presentation as pro forma portfolio-based earnings data.
In its consolidated financial statements prepared in accordance with GAAP, the
Company records a gain on the sale of receivables in securitization transactions
primarily representing the present value of estimated future excess cash flows
related to the receivables sold. Future excess cash flows consist of finance
charges and fees to be collected on the receivables less interest payable on the
asset-backed securities, credit losses and expenses of the Trusts. The Company
also earns servicing fees for managing the receivables sold.
21
<PAGE>
The pro forma portfolio-based earnings data presents the Company's operating
results under the assumption that securitization transactions are financings and
no gain on sale or servicing fee income is recognized. Instead, finance charges
and fees are recognized over the life of the securitized receivables as accrued
and interest and other costs related to the asset-backed securities are also
recognized as accrued. Credit losses are recorded as incurred.
While the pro forma portfolio-based earnings data does not purport to present
the Company's operating results in accordance with GAAP, the Company believes
such presentation provides another measure for assessing the Company's
performance.
The pro forma portfolio-based earnings data were as follows(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
--------- --------
<S> <C> <C>
Finance charge, fee and other income $ 355,826 $218,325
Funding costs (142,397) (78,172)
--------- --------
Net margin 213,429 140,153
Operating expenses (67,294) (53,678)
Credit losses (65,547) (48,210)
--------- --------
Pre-tax portfolio-based income 80,588 38,265
Income taxes (31,026) (14,732)
--------- --------
Net portfolio-based income $ 49,562 $ 23,533
========= ========
Diluted portfolio-based earnings per share $ 0.59 $ 0.33
========= ========
</TABLE>
The pro-forma return on managed assets for the Company's auto business was as
follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
--------- --------
<S> <C> <C>
Finance charge, fee and other income 20.0% 19.4%
Funding costs (8.0) (7.0)
--------- --------
Net margin 12.0 12.4
Credit losses (3.7) (4.3)
--------- --------
Risk adjusted margin 8.3 8.1
Operating expenses (3.8) (4.6)
--------- --------
Pre-tax return on managed assets 4.5 3.5
Income taxes (1.7) (1.4)
--------- --------
Return on managed assets 2.8% 2.1%
========= ========
</TABLE>
22
<PAGE>
CREDIT QUALITY
The Company provides financing in relatively high-risk markets, and, therefore,
charge-offs are anticipated. The Company records a periodic provision for loan
losses as a charge to operations and a related allowance for loan losses in the
consolidated balance sheets as a reserve against estimated probable 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 and collects a non-refundable acquisition fee on a
non-recourse basis. Such acquisition fees are also recorded in the consolidated
balance sheets as an allowance for loan losses. When the Company sells auto
receivables to the Trusts, the calculation of the gain on sale of receivables is
reduced by an estimate of cumulative credit losses expected over the life of the
auto receivables sold.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports, estimates
of the value of the underlying collateral, economic conditions and trends and
other information in order to make the necessary judgments as to the
appropriateness of the assumptions for cumulative credit losses, provisions for
loan losses and allowance for loan losses. Although the Company uses many
resources to assess the adequacy of loss reserves, there is no precise method
for estimating the ultimate losses in the receivables portfolio.
The following table presents certain data related to the receivables portfolio
(dollars in thousands):
<TABLE>
<CAPTION>
September 30, 2000
-------------------------------------------------------------------------
Held for Sale
-------------------------------------- Auto Managed Auto
Auto Mortgage Total Serviced Portfolio
---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables $1,084,646 $ 3,756 $1,088,402 $6,363,907 $7,448,553
========== ==========
Allowance for loan losses (30,994) (30,994) $ (623,743) (a) $ (654,737)
---------- -------- ---------- ========== ==========
Receivables, net $1,053,652 $ 3,756 $1,057,408
========== ======== ==========
Number of outstanding contracts 73,882 40 552,470 626,352
========== ======== ========== ==========
Average principal amount of
outstanding contract (in dollars) $ 14,681 $ 93,900 $ 11,519 $ 11,892
========== ======== ========== ==========
Allowance for loan losses as a
percentage of receivables 2.9% 9.8% 8.8%
========== ========== ==========
</TABLE>
(a) The allowance for loan losses related to serviced auto receivables is
factored into the valuation of interest-only receivables from Trusts in
the Company's consolidated balance sheets.
23
<PAGE>
The following is a summary of managed auto receivables which are (i) more than
30 days delinquent, but not yet in repossession, and (ii) in repossession
(dollars in thousands):
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
---------------------- ----------------------
Amount Percent Amount Percent
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Delinquent contracts:
31 to 60 days $542,041 7.3% $368,075 7.8%
Greater than 60 days 178,209 2.4 109,837 2.3
-------- -------- -------- --------
720,250 9.7 477,912 10.1
In repossession 58,666 0.8 38,404 0.8
-------- -------- -------- --------
$778,916 10.5% $516,316 10.9%
======== ======== ======== ========
</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 4.7% and 4.6% for the three months ended September 30, 2000 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>
Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Net charge-offs:
Held for sale $ 2,835 $ 1,658
Serviced 62,712 46,552
---------- ----------
$65,547 $48,210
========== ==========
Net charge-offs as an annualized
percentage of average managed
auto receivables outstanding 3.7% 4.3%
========== ==========
Net recoveries as a percentage of
gross repossession charge-offs 52.4% 54.4%
========== ==========
</TABLE>
Delinquency and charge-off ratios typically fluctuate over time as a portfolio
matures. Accordingly, the delinquency and charge-off data above is not
necessarily indicative of delinquency and charge-off experience that could be
expected for a portfolio with a different level of seasoning.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
2000 1999
------------- -------------
<S> <C> <C>
Operating activities $ 60,475 $ 1,188
Investing activities (263,316) (175,090)
Financing activities 288,822 176,726
------------- -------------
Net increase in cash and cash equivalents $ 85,981 $ 2,824
============= =============
</TABLE>
The Company's primary sources of cash have been cash flows from operating
activities, including cash distributions from the Trusts, borrowings under its
warehouse credit facilities, sales of auto receivables to Trusts in
securitization transactions, and proceeds from issuance of debt and equity. The
Company's primary uses of cash have been purchases of receivables and funding
credit enhancement requirements for securitization transactions.
The Company required cash of $1,402.5 million and $1,021.0 million for the
purchase of auto finance contracts during the three months ended September 30,
2000 and 1999, respectively. These purchases were funded initially utilizing
warehouse credit facilities and subsequently through the sale of auto
receivables in securitization transactions.
The Company has five separate warehouse credit facilities with combined funding
capacity of approximately $2 billion, which are used to fund domestic auto
receivables pending securitization.
The Company has a funding agreement with an administrative agent on behalf of an
institutionally managed commercial paper conduit and a bank under which up to
$500 million of structured warehouse financing is available. The facility
matures in June 2001. A total of $401.6 million was outstanding under this
facility as of September 30, 2000.
The Company has another funding agreement with an administrative agent on behalf
of an institutionally managed commercial paper conduit and a bank under which up
to $300 million of structured warehouse financing is available. The facility
matures in June 2001. A total of $135.3 million was outstanding under this
facility as of September 30, 2000.
In September 2000, the Company renewed its funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a group of banks under which up to $525 million of structured
warehouse financing is available. The facility matures in September 2001. There
were no outstanding balances under this facility as of September 30, 2000.
25
<PAGE>
In September 2000, the Company renewed another funding agreement with an
administrative agent on behalf of an institutionally managed commercial paper
conduit and a bank under which up to $275 million of structured warehouse
financing is available. The facility matures in September 2001. A total of
$224.3 million was outstanding under this facility as of September 30, 2000.
The Company also has a funding agreement with an administrative agent on behalf
of an institutionally managed commercial paper conduit and a bank under which up
to $375 million of structured warehouse financing is available. The facility
matures in March 2001. There were no outstanding balances under this facility as
of September 30, 2000.
The Company's Canadian subsidiary has a convertible revolving term credit
agreement with a bank that provides for borrowings thereunder of up to $30.0
million Cdn., subject to a defined borrowing base. The Company utilizes this
facility to fund Canadian auto lending activities. The facility matures in March
2001. A total of $5.0 million was outstanding under the Canadian facility as of
September 30, 2000.
As is customary in the Company's industry, the above warehouse 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 was unable to renew these facilities on acceptable terms, there could be
a material adverse effect on the Company's financial position, results of
operations and liquidity.
The Company has completed twenty-two auto receivable securitization transactions
through September 30, 2000. The proceeds from the transactions were primarily
used to repay borrowings outstanding under the Company's warehouse credit
facilities.
26
<PAGE>
A summary of these transactions is as follows:
<TABLE>
<CAPTION>
Original Balance at
Amount September 30, 2000
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 Paid in full
1996-B May 1996 115.9 Paid in full
1996-C August 1996 175.0 Paid in full
1996-D November 1996 200.0 Paid in full
1997-A March 1997 225.0 $ 22.1
1997-B May 1997 250.0 31.6
1997-C August 1997 325.0 55.1
1997-D November 1997 400.0 86.3
1998-A February 1998 425.0 109.7
1998-B May 1998 525.0 158.4
1998-C August 1998 575.0 209.8
1998-D November 1998 625.0 259.7
1999-A February 1999 700.0 334.2
1999-B May 1999 1,000.0 559.2
1999-C August 1999 1,000.0 678.6
1999-D October 1999 900.0 661.8
2000-A February 2000 1,300.0 1,078.2
2000-B May 2000 1,200.0 1,104.6
2000-C August 2000 1,100.0 1,082.5
---------------- ------------------
$ 11,345.5 $ 6,431.8
================ ==================
</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 overcollateralization 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.
Although the aggregate amount of excess cash flow does not change, the timing of
the Company's receipt of excess cash flow distributions is dependent on the type
of structure used. Since November 1997, the Company has employed a structure
that utilizes reinsurance and other alternative credit enhancements. Under this
structure, the Company expects to begin to receive excess cash flow
distributions approximately 14 to 16 months after receivables are securitized.
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The reinsurance used to reduce the Company's initial cash deposit in the
structure described above has typically been arranged by the insurer of the
asset-backed securities. As of September 30, 2000, the Company had commitments
from the insurer for an additional $408 million of reinsurance to reduce initial
cash deposits in future securitization transactions. These commitments expire in
December 2002. In addition, the Company has a credit enhancement facility with a
financial institution under which the Company may borrow up to $225 million to
fund a portion of the initial cash deposit in future securitization
transactions, similar to the amount covered by the reinsurance described above.
Borrowings under the credit enhancement facility, which matures in October 2001,
are collateralized by the Company's credit enhancement assets. A total of $78.0
million was outstanding under this facility at September 30, 2000.
Initial deposits to restricted cash accounts were $47.4 million ($36.0 million
net of borrowings under the credit enhancement facility) and $27.0 million for
the three months ended September 30, 2000 and 1999, respectively. Excess cash
flows distributed to the Company were $49.1 million and $14.2 million for the
three months ended September 30, 2000 and 1999 respectively.
Certain agreements with the insurer provide that if delinquency, default and net
loss ratios in a Trust's pool of receivables exceed certain targets, the
specified credit enhancement levels would be increased. As of September 30,
2000, none of the Company's securitizations had default or net loss ratios in
excess of the targeted levels. While certain of the Company's Trusts had
delinquency ratios in excess of the targeted levels, the requirement for
increased credit enhancement levels was waived by the insurer.
The Company operated 198 auto lending branch offices as of September 30, 2000,
and plans to open an additional 18 to 23 branches through the remainder of
fiscal 2001 and expand loan production capacity at existing auto lending branch
offices where appropriate. While the Company has been able to establish and grow
its auto finance business thus far, there can be no assurance that future
expansion will be successful due to competitive, regulatory, market, economic or
other factors.
As of September 30, 2000, the Company had $128.9 million in cash and cash
equivalents. The Company also had available borrowing capacity of $146.7 million
under its warehouse credit facilities pursuant to the borrowing base
requirements of such agreements. The Company believes that its existing capital
resources along with expected cash flows from operating activities will be
sufficient to fund the Company's liquidity needs, exclusive of the purchase of
auto finance contracts, for fiscal 2001.
However, the Company anticipates that it will require additional external
capital in the form of securitization transactions, renewal and expansion of its
existing warehouse credit facilities and implementation of new warehouse credit
facilities in order to fund auto loan purchases in fiscal 2001. There can be no
assurance that funding will be available to the Company through
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these sources or, if available, that it will be on terms acceptable to the
Company.
INTEREST RATE RISK
The Company's earnings are affected by changes in interest rates as a result of
its dependence upon the issuance of interest-bearing securities and the
incurrence of debt to fund its lending activities. Several factors can influence
the Company's ability to manage interest rate risk. First, auto finance
contracts are purchased at fixed interest rates, while the amounts borrowed
under warehouse credit facilities bear interest at variable rates that are
subject to frequent adjustment to reflect prevailing market interest rates.
Second, the interest rate demanded by investors in securitizations is a function
of prevailing market rates for comparable transactions and the general interest
rate environment. Because the auto finance contracts purchased by the Company
have fixed interest rates, the Company bears the risk of smaller gross interest
rate spreads in the event interest rates increase during the period between the
date receivables are purchased and the completion and pricing of securitization
transactions.
The Company utilizes several strategies to minimize the risk of interest rate
fluctuations, including the use of derivative financial instruments, the regular
sale of auto receivables to the Trusts and pre-funding of securitization
transactions. Pre-funding securitizations is the practice of issuing more
asset-backed securities than the amount of receivables initially sold to the
Trust. The proceeds from the pre-funded portion are held in an escrow account
until additional receivables are sold to the Trust in amounts up to the balance
of the pre-funded escrow account. In pre-funded securitizations, borrowing costs
are locked in with respect to the loans subsequently delivered 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.
Derivative financial instruments are utilized to manage the gross interest rate
spread on the Company's securitization transactions. The Company sells fixed
rate auto receivables to Trusts that, in turn, sell either fixed rate or
floating rate securities to investors. The fixed rates on securities issued by
the Trusts are indexed to either rates on U.S. Treasury Notes with similar
average maturities, market interest rate swap spreads for transactions of
similar duration, or various London Interbank Offered Rates ("LIBOR"). The
floating rates on securities issued by the Trusts are indexed to LIBOR. The
Company uses Interest Rate Swap agreements to convert the floating rate
exposures on these securities to a fixed rate. The Company utilizes these
derivative financial instruments to modify its net interest sensitivity to
levels deemed appropriate based on the Company's risk tolerance.
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The Company also utilizes interest rate caps as part of its interest-rate
risk-management strategy for securitization transactions as well as for
warehouse credit facilities. The purchaser of the interest rate cap pays a
premium in return for the right to receive the difference in the interest
cost at any time a specified index of market interest rates rises above the
stipulated "cap" rate. The interest rate cap purchaser bears no obligation or
liability if interest rates fall below the "cap" rate. The Company's special
purpose finance subsidiaries are contractually required to purchase interest
rate cap agreements as credit enhancement in connection with securitization
transactions and warehouse credit facilities. The Company simultaneously
sells a corresponding interest rate cap agreement in order to offset the
purchased interest rate cap agreement.
Management monitors the Company's hedging activities to ensure that the value
of hedges, their correlation to the contracts being hedged and the amounts
being hedged continue to provide effective protection against interest rate
risk. All transactions are entered into for purposes other than trading.
There can be no assurance that the Company's strategies will be effective in
minimizing interest rate risk or that increases in interest rates will not
have an adverse effect on the Company's profitability.
FORWARD LOOKING STATEMENTS
The preceding Management's Discussion and Analysis of Financial Condition and
Results of Operations section contains several "forward-looking statements".
Forward-looking statements are those which use words such as "believe",
"expect", "anticipate", "intend", "plan", "may", "will", "should",
"estimate", "continue" or other comparable expressions. These words indicate
future events and trends. Forward-looking statements are the Company's
current views with respect to future events and financial performance. These
forward-looking statements are subject to many risks and uncertainties which
could cause actual results to differ significantly from historical results or
from those anticipated by the Company. The most significant risks are
detailed from time to time in the Company's filings and reports with the
Securities and Exchange Commission including the Company's Annual Report on
Form 10-K for the year ended June 30, 2000. It is advisable not to place
undue reliance on the Company's forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because 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. Therefore, the Company employs various
hedging strategies to minimize the risk of interest rate fluctuations. See
"Management's Discussion and Analysis - Interest Rate Risk" for additional
information regarding such market risks.
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Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As a consumer finance company, the Company is subject to various consumer claims
and litigation seeking damages and statutory penalties, based upon, among other
things, usury, disclosure inaccuracies, wrongful repossession, fraud and
discriminatory treatment of credit applicants, which could take the form of a
plaintiffs' class action complaint. The Company, as the assignee of finance
contracts originated by dealers, may also be named as a co-defendant in lawsuits
filed by consumers principally against dealers. The damages and penalties
claimed by consumers in these types of matters can be substantial. The relief
requested by the plaintiffs varies but includes requests for compensatory,
statutory and punitive damages.
One proceeding in which the Company is a defendant has been brought in the form
of a class action complaint. This lawsuit, pending in the United States District
Court in the State of California, claims that certain loan pricing structures
used by the Company and other banks and finance companies violate various
California laws. In the opinion of management, this lawsuit is without merit and
the Company intends to defend vigorously.
Management believes that the Company has taken prudent steps to address the
litigation risks associated with the Company's business activities. However,
there can be no assurance that the Company will be able to successfully defend
against all such claims or that the determination of any such claim in a manner
adverse to the Company would not have a material adverse effect on the Company's
automobile finance business.
On April 8, 1999, a putative class action complaint was filed against the
Company and certain of the Company's officers and directors alleging violations
of Section 10(b) of the Securities Exchange Act of 1934 arising from the
Company's use of the cash-in method of measuring and accounting for credit
enhancement assets in the Company's financial statements through the first
quarter of fiscal 1999. The United States District Court granted the Company's
motion to dismiss the litigation with prejudice on April 21, 2000. The
plaintiffs have appealed the dismissal to the United States Court of Appeals for
the Fifth Circuit, where the matter is presently pending. In the opinion of
management this litigation is without merit, as evidenced by the District
Court's dismissal, and the Company intends to vigorously contest the plaintiff's
appeal of such dismissal.
In the opinion of management, the resolution of the proceedings described in
this section will not have a material adverse effect on the Company's
consolidated financial position, liquidity or results of operations.
Item 2. CHANGES IN SECURITIES
Not Applicable
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Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Second Amendment to Security Agreement and Note Purchase
Agreement, dated as of September 27, 2000, by and among
AmeriCredit BOA Trust, Americredit Financial Services,
Inc., Americredit Funding Corp. II, Kitty Hawk Funding
Corporation, and Bank of America, N.A.
10.2 Third Amendment to Receivables Financing Agreement, dated
as of October 5, 2000, among Americredit Financial Services,
Inc., Americredit Warehouse Trust, Americredit Funding
Corp., Americredit Corporation of California, Bank One, N.A.,
and Credit Suisse First Boston, New York Branch, to that
Receivables Financing Agreement, dated as of March 31, 1999
10.3 Sale and Servicing Agreement, dated as of September 14,
2000, among Americredit Manhattan Trust, Americredit
Financial Services, Inc., Americredit Funding Corp. V, and
The Chase Manhattan Bank
10.4 Security and Funding Agreement, dated as of September 14,
2000, by and among Americredit Manhattan Trust, The Chase
Manhattan Bank, and the several Secured Parties and Funding
Agents party thereto
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the quarterly period ended September 30,
2000.
Certain subsidiaries and affiliates of the Company
filed reports on Form 8-K during the quarterly
period ended September 30, 2000 reporting monthly
information related to securitization trusts.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AmeriCredit Corp.
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(Registrant)
Date: November 14, 2000 By: /s/ Daniel E. Berce
---------------------------------------
(Signature)
Daniel E. Berce
Vice Chairman and
Chief Financial Officer
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