UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Commission File Number: 0-25760
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period
ended June 30, 1996.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period
From ______ to _____.
GENERAL ACCEPTANCE CORPORATION
(Exact name of Registrant as specified in its charter)
Indiana 35-1739977
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1025 Acuff Road
Bloomington, Indiana 47404
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (812) 337-6000
Indicate by check mark whether the Registrant (1) has filed all reports
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, no par value, 25,000,000 shares authorized, 6,022,000
shares issued and outstanding as of July 29, 1996.
<PAGE>
FORM 10-Q
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TABLE OF CONTENTS
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Page
----
PART I Financial Information 3
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
7
Revenues 8
Expenses 9
Liquidity and Capital Resources 10
Other Developments 12
PART II. Other Information 13
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
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General Acceptance Corporation
Balance Sheets
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JUNE 30, 1996 DECEMBER 31, 1995
--------------- -------------------
(UNAUDITED) (NOTE 1)
ASSETS
Contracts receivable $ 122,858,533 $ 129,392,670
Allowance and discount available for credit losses (12,949,984) (19,512,815)
--------------- -------------------
Contracts receivable, net 109,908,549 109,879,855
Cash and cash equivalents 356,171 557,206
Repossessions 10,123,305 5,223,623
Purchased and trade automobile inventory 1,026,048 811,820
Property and equipment, net 2,242,765 1,672,475
Other assets 3,148,228 1,674,847
Taxes receivable --- 2,300,475
Deferred tax asset 2,260,000 2,260,000
Total assets $ 129,065,066 $ 124,380,301
=============== ===================
LIABILITIES
Revolving line of credit $ 98,344,736 $ 94,165,243
Accounts payable and accrued expenses 1,392,070 1,605,484
Dealer participation reserves available
for credit losses 1,877,695 1,865,681
Total liabilities 101,614,501 97,636,408
STOCKHOLDERS' EQUITY
Preferred stock; no par value; authorized
shares - 5,000,000; no shares issued or outstanding --- ---
Common stock; no par value;
authorized shares - 25,000,000;
issued and outstanding shares - 6,022,000 in 1996
and 1995 29,792,573 29,792,573
Retained earnings (deficit) (2,342,008) (3,048,680)
--------------- -------------------
Total stockholders' equity 27,450,565 26,743,893
--------------- -------------------
Total liabilities and stockholders' equity $ 129,065,066 $ 124,380,301
=============== ===================
<FN>
See accompanying notes.
</TABLE>
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<CAPTION>
General Acceptance Corporation
Statements of Income
(Unaudited)
THREE MONTH ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
- ----------------------------------- ---------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
--------------------------- ---------- ------------ -----------
Revenues:
Interest and discount $ 6,754,684 $5,685,261 $13,491,693 $ 9,827,856
Ancillary products 796,717 101,159 1,055,392 673,226
Other 376,464 439,921 830,157 738,925
--------------------------- ---------- ------------ -----------
Total revenues 7,927,865 6,226,341 15,377,242 11,240,007
Expenses:
Interest 2,328,262 1,304,028 4,476,692 2,663,206
Salaries and employee benefits 2,018,069 1,087,303 4,300,281 2,001,560
Marketing 336,199 80,348 513,413 191,601
Provision for credit losses 892,631 166,920 2,126,134 564,903
Other 1,547,441 1,404,352 2,783,050 2,158,761
Total expenses 7,122,602 4,042,951 14,199,570 7,580,031
--------------------------- ---------- ------------ -----------
Income before income taxes 805,263 2,183,390 1,177,672 3,659,976
Income taxes (322,036) 516,000 (471,000) 516,000
Net income $ 483,227 $2,699,390 $ 706,672 $ 4,175,976
=========================== ========== ============ ===========
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
--------------------------- ---------- ------------ -----------
Income before income taxes $ 805,263 $2,183,390 $ 1,177,672 $ 3,659,976
Income taxes 322,036 873,356 471,000 1,463,990
Net income $ 483,227 $1,310,034 $ 706,672 $ 2,195,986
========== ============ ===========
Net income per share $ 0.08 $ 0.22 $ 0.12 $ 0.41
========== ============ ===========
Weighted average shares outstanding 6,022,000 5,834,854 6,022,000 5,402,607
=========================== ========== ============ ===========
See accompanying notes.
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<CAPTION>
General Acceptance Corporation
Statements of Cash Flows
(Unaudited)
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SIX MONTHS ENDED JUNE 30,
---------------------------
1996 1995
------------- ---------------------------
OPERATING ACTIVITIES
Net income $ 706,672 $ 4,175,976
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property and equipment 308,166 143,338
Amortization of deferred costs and revenues,
net 73,286 (264,610)
Provision for credit losses 2,126,134 564,903
Changes in operating assets and liabilities:
(Increase) decrease in other assets and
taxes receivable 827,094 (797,990)
Increase (decrease) in accounts payable
and accrued expenses (213,414) 3,456,584
Net cash provided by operating activities 3,827,938 7,278,201
INVESTING ACTIVITIES
Cost of acquiring or originating contracts receivable (37,619,652) (47,435,042)
Principal collected on contracts receivable 30,289,642 11,434,664
Purchases of property and equipment (878,456) (617,788)
Net cash used in investing activities (8,208,466) (36,618,166)
FINANCING ACTIVITIES
Borrowings on revolving line of credit 48,213,844 56,161,920
Repayments of revolving line of credit (44,034,351) (43,363,156)
Proceeds from issuance of common stock --- 29,739,573
Repayment of notes payable to related parties --- (2,956,998)
Dividends paid --- (9,459,666)
Net cash provided by financing activities 4,179,493 30,121,673
------------- ---------------------------
Net increase (decrease) in cash and cash equivalents (201,035) 781,708
Cash and cash equivalents at beginning of period 557,206 304,185
Cash and cash equivalents at end of period $ 356,171 $ 1,085,893
============= ===========================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
General Acceptance Corporation
Notes to Financial Statements
(Unaudited)
June 30, 1996
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six
month periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. The
balance sheet as of December 31, 1995 has been derived from the audited
financial statements as of that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
financial statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
Note 2. Pro Forma Financial Data
Prior to the Company's initial public offering in April 1995, it was an S
Corporation and therefore not subject to income taxes. Pro forma data is
therefore presented for 1995 to reflect a provision for income taxes as if the
Company had been subject to income taxes at an assumed combined rate of 40%.
Note 3. Net Income Per Share
The 1996 net income per share amounts are based on the weighted average
number of common shares and dilutive common stock equivalents outstanding
during the periods. The 1995 net income per share amounts are based on the
weighted average common shares outstanding increased by the number of shares
(assumed issued at $17.00 per share) whose proceeds would have been used to
fund distributable S Corporation earnings.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
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Information regarding the components of contracts receivable, net is
presented below.
<S> <C> <C>
JUNE 30, DECEMBER 31,
1996 1995
------------- --------------
Contractually scheduled payments $154,475,277 $ 165,865,851
Add (deduct):
Unearned interest income (32,121,615) (36,920,628)
Accrued interest income 434,659 298,059
Unearned insurance commissions (37,803) (128,718)
Net deferred acquisition costs 108,015 278,106
------------- --------------
Contracts receivable 122,858,533 129,392,670
Allowance and discount available
for credit losses (12,949,984) (19,512,815)
Contracts receivable, net $109,908,549 $ 109,879,855
============= ==============
</TABLE>
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<CAPTION>
Changes in the components of amounts available for credit losses during the three and six
month periods ended June 30, 1996 are presented below.
<S> <C> <C> <C>
ALLOWANCE AND DISCOUNT DEALER PARTICIPATION RESERVES
TOTAL
-------------
Balance December 31, 1995 $ 19,512,815 $ 1,865,681 $ 21,378,496
Additions 5,460,376 2,181,244 7,641,620
Charge-offs, net (12,023,207) (2,169,230) (14,192,437)
Balance June 30, 1996 $ 12,949,984 $ 1,877,695 $ 14,827,679
=============================== =============
Balance March 31, 1996 $ 15,857,856 $ 1,678,786 $ 17,536,642
Additions 2,418,787 1,046,754 3,465,541
Charge-offs, net (5,326,659) (847,845) (6,174,504)
------------------------ ------------------------------- -------------
Balance June 30, 1996 $ 12,949,984 $ 1,877,695 $ 14,827,679
======================== =============================== =============
</TABLE>
<TABLE>
<CAPTION>
Information on the Company's total available for credit losses and
delinquency ratio are presented below.
<S> <C> <C>
JUNE 30, 1996 DECEMBER 31, 1995
-------------- ------------------
Total available for credit losses as a
percentage of contracts receivable (1) 12.07% 16.50%
Delinquency ratio (2) 1.68% 3.60%
<FN>
(1) Total available for credit losses is defined as the sum of allowance
and discount available for credit losses and dealer participation reserves
available for credit losses.
(2) Delinquency ratio is defined as contracts receivable, gross relating to
contracts which were contractually past due 60 days or more, as a percentage of
total contracts receivable, gross as of the end of the period indicated.
</TABLE>
<PAGE>
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996, COMPARED TO THREE AND SIX
MONTH PERIODS ENDED JUNE 30, 1995
Revenues
Interest and discount revenue increased from $5.7 million for the second
quarter of 1995 to $6.8 million for the same period of 1996, or 18.8%, and
from $9.8 million for the first six months of 1995 to $13.5 million for the
same period of 1996, or 37.3%. The increase in both 1996 periods over the
comparable 1995 periods was due to a higher level of contracts receivable
owned by the Company, partially offset in both 1996 periods by a lower average
yield on the contracts. As of June 30, 1996, contracts receivable totaled
$122.9 million as compared to $101.1 million as of June 30, 1995. The number
of active dealers (defined as dealers from whom the Company purchased a
contract that was outstanding as of the end of a period) was 1,074 as of June
30, 1996 as compared to 756 as of June 30, 1995.
The average yield on contracts receivable for the second quarter of 1995
was 24.3% compared to 21.7% for the same period of 1996, and was 24.0% for the
first six months of 1995 compared to 21.4% for the same period of 1996. The
lower yields in both 1996 periods as compared to the same 1995 periods were
due primarily to the Company's decision, effective May 1995, to enter into
agreements with its dealers to apply the difference, if any, between the
contract interest rate and the rate determined by the Company as necessary to
produce a satisfactory return on the contract, to a dealer participation
reserve available for credit losses. The average yield on contracts
receivable is expected to remain in the 21-22% range through the end of 1996.
Ancillary products revenue increased from $101,000 for the second quarter
of 1995 to $797,000 for the same period of 1996, or 687.6%, and from $673,000
for the first six months of 1995 to $1.1 million for the same period of 1996,
or 56.8%. The increase in the second quarter of 1996 over the comparable
period of 1995 was due to increased sales of a secured Visa credit card
offered by the Company as co-brander and, to a lesser extent, to an increase
in revenues from a warranty program offered by the Company. The increase in
ancillary products revenue for the first six months of 1996 as compared to the
same period of 1995 was due to an increase in sales of a secured Visa credit
card previously described, partially offset by the Company's decision to
discontinue offering, effective March 22, 1995, a Gap protection product as a
result of regulatory uncertainties surrounding the product.
In the second quarter of 1996, the secured Visa credit card, together
with another product with which it is packaged, generated revenues of
approximately $599,000. These revenues were primarily derived from the sale
of the product package to customers who currently have contracts outstanding
with the Company. While the Company is actively exploring other avenues in
which to market the secured Visa credit card, it is expected that revenues
derived from the sale of this product package to customers who currently have
contracts outstanding with the Company will be less in the third and fourth
quarters than in the second quarter of 1996.
Other revenues decreased from $440,000 for the second quarter of 1995 to
$376,000 for the same period of 1996, or 14.4%, and increased from $739,000
for the first six months of 1995 to $830,000 for the same period of 1996, of
12.3%. The decrease in the second quarter of 1996 from the comparable period
of 1995 was due to lower training fees earned by the Company partially offset
by higher gross profit generated by the sale of purchased and trade inventory
at the GAC sales lots and by a $125,000 reduction in a special reserve for
losses on receivables from a dealer as a result of the reduction of amounts
owed to the Company by that dealer. The increase for the first six months of
1996 from the comparable period of 1995 was due to higher gross profit
generated by the sale of purchased and trade inventory at the GAC sales lots
and to a $250,000 reduction in the special reserve for losses on receivables
from a dealer as a result of the reduction of amounts owed to the Company by
that dealer, partially offset by lower training fees earned by the Company.
Effective January 1, 1996, the training fee was replaced with a $35 per
contract training and processing fee, which is deferred and amortized into
income over the estimated average life of the contracts. The previous
training fee, charged for new dealers in a $2,500 lump sum or $100 per
contract for the first 35 contracts, was recognized as income upon receipt.
Expenses
Interest expense increased from $1.3 million for the second quarter of
1995 to $2.3 million for the same period of 1996, or 78.5%, and from $2.7
million for the first six months of 1995 to $4.5 million for the same period
of 1996, or 68.1%. The increase in both 1996 periods over the comparable 1995
periods was due to the higher average level of borrowings required to fund the
higher level of contracts receivable in 1996 and the increase in the interest
rate charged by the Company's primary lender for borrowings on the line of
credit from LIBOR plus 3.0% to LIBOR plus 4.0% for the period from March 15,
1996 to June 30, 1996, partially offset by a lower interest rate environment
in 1996 as compared to 1995. Average borrowings on the line of credit were
$53.4 million for the second quarter of 1995 compared to $97.9 million for the
same period of 1996, and $54.5 million for the first six months of 1995
compared to $97.1 million for the same period of 1996. As of July 1, 1996,
the interest rate charged by the Company's primary lender reverted to LIBOR
plus 3.0%. See "Liquidity and Capital Resources" for additional information.
Salaries and employee benefits increased from $1.1 million for the second
quarter of 1995 to $2.0 million for the same period of 1996, or 85.6%, and
from $2.0 million for the first six months of 1995 to $4.3 million for the
same period of 1996, or 114.8%. The increases were due to an increase in the
number of full time equivalent employees from 197 as of June 30, 1995 to 327
as of June 30, 1996. The increase in full time equivalent employees was
attributable to the development and staffing of the Company's branch offices
and GAC sales lots and, to a lesser extent, to additional management and
headquarters support personnel required to support anticipated portfolio
growth in the future.
Marketing costs increased from $80,000 for the second quarter of 1995 to
$336,000 for the same period of 1996, or 318.4%, and from $192,000 for the
first six months of 1995 to $513,000 for the same period of 1996, or 168.0%.
The increase in both periods of 1996 over the comparable periods of 1995 was
due to increased advertising for the GAC sales lots and to increased expenses
associated with promoting the Company's secured Visa credit card program.
The provision for credit losses increased from $167,000 for the second
quarter of 1995 to $893,000 for the same period of 1996, or $726,000, and from
$565,000 for the first six months of 1995 to $2.1 million for the same period
of 1996, or $1.6 million. In the second quarter and first six months of 1995,
the provision for credit losses consisted entirely of amounts provided for
contracts originated at the GAC sales lots. As there is no discount
associated with these contracts, in order to develop an allowance for future
losses, a charge directly to earnings was required. In the second quarter and
first six months of 1996, however, an additional provision was required to
restore the allowance and discount available for credit losses on contracts
acquired from dealers to a level deemed acceptable by the Company. The
increase in the provision for credit losses in the second quarter of 1996 and
the first six months of 1996 relates primarily to additional provisions deemed
necessary related to contracts purchased from dealers to restore the allowance
and discount for credit losses to an acceptable level, and to a lesser extent,
to an increased volume of contracts originated by the GAC sales lots, as
compared to the same periods of 1995. The total available for credit losses
as a percent of contracts receivable was 12.07% as of June 30, 1996, compared
to 14.72% as of June 30, 1995, and 16.5% as of December 31, 1995. The lower
allowance as a percentage of contracts receivable as of June 30, 1996 is
attributable to an improvement in the credit quality of the Company's
portfolio of contracts receivable as evidenced by lower delinquency ratios and
by lower net charge-offs during each month during the second quarter of 1996.
This improvement in credit quality was in part achieved by the tightening of
underwriting standards effective January 1, 1996. The Company's delinquency
ratio declined from 3.60% as of December 31, 1995 to 1.68% as of June 30,
1996.
Other expenses increased from $1.4 million for the second quarter of 1995
to $1.5 million for the same period of 1996, or 10.2%, and from $2.2 million
for the first six months of 1995 to $2.8 million for the same period of 1996,
or 28.9%. The increase in both 1996 periods over the comparable 1995 periods
was attributable to higher costs associated with a larger network of branch
offices and GAC sales lots, including higher rent and depreciation expense.
As a result of the foregoing factors, pre-tax net income decreased from
$2.2 million for the second quarter of 1995 to $805,000 for the same period
of 1996, or 63.1%, and from $3.7 million for the first six months of 1995 to
$1.2 million for the same period of 1996, or 67.8%.
Income tax expense amounted to a credit of $516,000 for the second
quarter of 1995 compared to an expense of $322,000 for the same period of
1996, and was a credit of $516,000 for the first six months of 1995 compared
to an expense of $471,000 for the same period of 1996. In conjunction with
the initial public offering of its shares, the Company terminated its S
Corporation status, and as a result, became subject to federal and state
corporate income taxation from April 10, 1995 forward. For both 1996 periods,
income tax expense was recorded at a combined federal and state income tax
rate of 40%. The income tax credit recorded in both 1995 periods is the
result of a $1.1 million tax credit related to cumulative temporary
differences as of April 10, 1995, partially offset by a $784,000 expense
representing income taxes at a combined federal and state income tax rate of
40% for the period from April 10, 1995 through June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for cash is to fund advances made to dealers
in connection with the acquisition of contracts. Cash used for this purpose
was $47.4 million for the first six months of 1995 compared to $37.6 million
for the same period of 1996. During 1996, the Company funded its contract
purchases with borrowings on its $100.0 million revolving line of credit with
GE Capital (the "Line"). The Line provides for interest at the one-month
LIBOR rate plus 3.0% (4.0% for the period from March 15, 1996 to June 30,
1996). As of June 30, 1996, borrowings on the Line were $98.3 million.
During the fourth quarter of 1995, the Company experienced sharply
increased loan losses and delinquency rates, which exceeded certain loan
covenant requirements. Accordingly, on January 17, 1996, GE Capital notified
the Company of an event of default under its loan and security agreement
("Agreement"). GE Capital continued to fund the Company under the Line while
the Company and GE Capital negotiated a mutually acceptable plan of action.
On March 20, 1996, GE Capital and the Company signed a letter agreement (the
"Forbearance Agreement") under which, assuming no further events of default,
GE Capital agreed to forbear from exercising its rights under the Agreement
through December 31, 1996, subject to the Company meeting certain terms and
conditions. Since signing of the Forbearance Agreement, the Company has
complied with all its terms and conditions, except that during the first
quarter of 1996, net charge-offs exceeded maximum permitted levels under the
Forbearance Agreement. The higher than permitted net charge-offs were due to
the Company's aggressive collection efforts during the first quarter of 1996
which were successful in producing substantial declines in delinquency rates,
but resulted also in higher than anticipated net charge-offs. GE Capital has
provided the Company with a letter which amends the maximum charge-off levels
in the Forbearance Agreement, and with which the Company is in full
compliance.
The Company is currently in negotiations with GE Capital to increase the
current $100.0 million Line and to cure the existing default under the Line.
While no assurances can be given, the Company believes these negotiations will
proceed such that additional funding will be available prior to the end of the
third quarter of 1996. The Forbearance Agreement will remain in effect until
the earlier of the successful conclusion of the negotiations or December 31,
1996. The Company continues to explore alternatives to increase and diversify
its funding sources but believes it may have difficulty in securing
alternative funding sources while it remains in default under the Line.
Based on the aforementioned funding limitations, the Company expects that
its contracts receivable will remain near current levels during the third
quarter of 1996. If the Company and GE Capital do not agree on a mutually
acceptable loan agreement to supersede the Agreement and the Forbearance
Agreement, there is no assurance that the Company will be successful in
locating additional financing. If additional financing is not obtained from
GE Capital or other sources, the Company's growth will be curtailed.
In April, 1996, the Company completed its move to new headquarters
offices. During the first six months of 1996, the Company spent $878,000 in
capital expenditures, primarily for furniture and computer and telephone
equipment. No further capital expenditures are expected to be required as a
result of the relocation.
As a result of the Company's continuing collection efforts during the first
six months of 1996, repossession inventory grew from $5.2 million as of
December 31, 1995 to $10.1 million as of June 30, 1996, an increase of $4.9
million. Repossession inventory is expected to decline during the remainder
of 1996 as a result of lower repossession activity and an acceleration in the
Company's retail sales efforts. The company has received a commitment letter
for $4.5 million from a bank for a revolving line of credit secured by
repossession inventory and purchased and trade automobile inventory. Funding
under this line of credit is contingent upon several factors, including
negotiation of a satisfactory intercreditor agreement between the bank and GE
Capital. While no assurances can be given, the Company believes that funding
will be available under this line prior to the end of the third quarter of
1996.
<PAGE>
OTHER DEVELOPMENTS
The Company is in the process of forming a wholly-owned subsidiary,
General Acceptance Corporation Reinsurance, Ltd., to reinsure 100% of the risk
associated with credit life and disability policies produced by the Company.
The primary insurer and administrator of the Company's reinsurance arrangement
will be a third-party insurance company. The Company is taking this action to
capitalize on the excellent claims history the Company's third-party former
primary insurer has experienced on credit life and disability insurance
produced by the Company. The formation of this company is not expected to
have any significant impact on profitability during the next 24 months.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any litigation that is expected to have a
material adverse effect on the Company. The Company regularly initiates legal
proceedings as a plaintiff in connection with its routine collection
activities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
June 30, 1996.
<PAGE>
SIGNATURES
<TABLE>
<CAPTION>
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.
<S> <C> <C>
GENERAL ACCEPTANCE CORPORATION
Date July 31, 1996 /s/ Russell E. Algood
------------- ------------------------------
Russell. E. Algood
President and
Chief Operating Officer
Date July 31, 1996 /s/ Martin C. Bozarth
------------- ------------------------------
Martin C. Bozarth
Chief Financial Officer
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
PAGE NUMBER IN SEQUENTIAL NUMBERING SYSTEM
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -------------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of
General Acceptance Corporation (incorporated by reference to
Exhibit 3.1 in the Company's Form S-1 Registration Statement,
File No. 33-89520)
3.2 Bylaws of General Acceptance Corporation (incorporated by
reference to Exhibit 3.2 in the Company's Form S-1
Registration Statement, File No. 33-89520)
4.1 See exhibits 3.1 and 3.2
4.2 Specimen Stock Certificate for Common Stock (incorporated by
reference to Exhibit 4.2 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.1 Loan and Security Agreement, dated May 1, 1992, between
General Electric Capital and GAC Credit Corporation
(incorporated by reference to Exhibit 10.1 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.2 Amendment No. 1 to Loan and Security Agreement, dated May 25,
1993 between General Electric Capital Corporation and General
Acceptance Corporation (incorporated by reference to Exhibit
10.2 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.3 Amendment No. 2 to Loan and Security Agreement, dated July 12,
1993 between General Electric Capital Corporation and General
Acceptance Corporation (incorporated by reference to Exhibit
10.3 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.4 Amendment No. 3 to Loan and Security Agreement, dated October
4, 1993 between General Electric Capital Corporation and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.4 in the Company's Form S-1 Registration
Statement, File No. 33-89520)
10.5 Amendment No. 4 to Loan and Security Agreement, dated
December 20, 1993 between General Electric Capital
Corporation and General Acceptance Corporation (incorporated
by reference to Exhibit 10.5 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.6 Amendment No. 5 to Loan and Security Agreement, dated May 2,
1994 between General Electric Capital Corporation and General
Acceptance Corporation (incorporated by reference to Exhibit
10.6 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.7 Amendment No. 6 to Loan and Security Agreement, dated May 12,
1994 between General Electric Capital Corporation and General
Acceptance Corporation (incorporated by reference to Exhibit
10.7 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.8 Letter Agreement, dated August 18, 1994, between General
Electric Capital Corporation and General Acceptance
Corporation (incorporated by reference to Exhibit 10.8
in the Company's Form S-1 Registration Statement, File No.
33-89520)
10.9 Letter Agreement, dated September 15, 1994, between General
Electric Capital Corporation and General Acceptance
Corporation (incorporated by reference to Exhibit 10.9 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.10 Assignment Agreement, dated as of November 18, 1994, between
Kidder, Peabody Global Capital Corporation, Credit Lyonnais
New York Branch and General Acceptance Corporation,
assigning interest rate cap annexed thereto (incorporated by
reference to Exhibit 10.10 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.11 Confirmation of Assignment of interest rate cap from Kidder,
Peabody Global Capital Corporation to Chemical Bank,
assigning interest rate cap annexed thereto (incorporated by
reference to Exhibit 10.11 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.12 Confirmation of Assignment of interest rate cap from Kidder,
Peabody Global Capital Corporation to Chemical Bank,
assigning interest rate cap annexed thereto (incorporated by
reference to Exhibit 10.12 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.13 Guaranteed Auto Protection Program Administrative Services
Agreement between Western Diversified Services, Inc. and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.13 in the Company's Form S-1 Registration
Statement, File No. 33-89520)
10.14 Credit Insurance Agency Agreement, dated August 1, 1988,
between Concord National Life Insurance Company and GAC
Credit Corporation (now General Acceptance Corporation)
(incorporated by reference to Exhibit 10.14 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.15 Credit Insurance Agreement, dated November 29, 1994 between
Union Fidelity Life Insurance Company and General
Acceptance Corporation (incorporated by reference to Exhibit
10.15 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.16 Promissory Note, dated November 18, 1993, in the original
principal amount of $399,000 payable to General Acceptance
Corporation by All-Good Cars Incorporated (incorporated by
reference to Exhibit 10.16 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.17 Form of Promissory Note payable by General Acceptance
Corporation to existing shareholders, officers and related parties
of General Acceptance Corporation as set forth on the schedule
to this Exhibit (incorporated by reference to Exhibit 10.17 in
the Company's Form S-1 Registration Statement, File No. 33-
89520)
10.18 Commercial Lease Agreement, dated December 10, 1993, between
Edwards Properties and General Acceptance Corporation, and
extension dated January 20, 1995 (incorporated by reference to
Exhibit 10.18 in the Company's Form S-1 Registration
Statement, File No. 33-89520)
10.19 Lease Agreement, dated December 13, 1994, between Pat
D'Andrea d/b/a Plaza 43 and General Acceptance Corporation
(incorporated by reference to Exhibit 10.19 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.20 Business Lease, dated December 9, 1993, between Crusader
Buildings, Cindy Jarvis and General Acceptance Corporation
(incorporated by reference to Exhibit 10.20 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.21 Lease, dated May 16, 1994, between M. L. Algood, Janet B.
Algood and Russell E. Algood and General Acceptance
Corporation (incorporated by reference to Exhibit 10.21 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.22 Store Lease, dated March 28, 1994, between General Acceptance
Corporation and Schrank & Associates as agent for G&B
Investors and Rider with respect thereto, dated March 28,
1994 (incorporated by reference to Exhibit 10.22 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.23 Lease, dated October 31, 1994, between M. L. Algood, Janet B.
Algood and General Acceptance Corporation (incorporated by
reference to Exhibit 10.23 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.24 Commercial Lease, dated January 1, 1995, between Kenneth Bader
and General Acceptance Corporation (incorporated by
reference to Exhibit 10.24 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.25 Lease Agreement, dated January 21, 1995, between Enrovi
Associates and General Acceptance Corporation (incorporated
by reference to Exhibit 10.25 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.26 Real Estate Lease, dated January 31, 1995, between James R.
Sandefur and Bobbie Sandefur and General Acceptance
Corporation (incorporated by reference to Exhibit 10.26 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.27 Forms of Dealer Retail Agreement and Amendment to Dealer
Retail Agreement (incorporated by reference to Exhibit 10.27 in
the Company's Form S-1 Registration Statement, File No. 33-
89520)
10.28 Dealer Retail Agreement, dated January 2, 1994, between Bedford
Chrysler Plymouth Dodge, Inc. and General Acceptance
Corporation (incorporated by reference to Exhibit 10.28 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.29 Dealer Retail Agreement, dated January 4, 1994, between
Ellettsville Truck & Car, Inc. and General Acceptance
Corporation (incorporated by reference to Exhibit 10.29 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.30 Dealer Retail Agreement, dated January 17, 1994, between All-
Good Cars, Inc. and General Acceptance Corporation
(incorporated by reference to Exhibit 10.30 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.31 Dealer Agreement, dated January 2, 1994, between Algood
Chevrolet, Oldsmobile, Pontiac, Inc. and General Acceptance
Corporation (incorporated by reference to Exhibit 10.31 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.32 Dealer Agreement, dated July 11, 1988, between Algood Motor
Company, Inc. and General Acceptance Corporation
(incorporated by reference to Exhibit 10.32 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.33 General Acceptance Corporation Compensation Plan
(incorporated by reference to Exhibit 10.33 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.34 General Acceptance Corporation Employee Stock Option Plan
(incorporated by reference to Exhibit 10.34 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
<PAGE>
10.35 General Acceptance Corporation Outside Director Stock Option
Plan (incorporated by reference to Exhibit 10.35 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.36 Form of Tax Indemnification Agreement, dated as of ____, 1995,
by among General Acceptance Corporation and Malvin L.
Algood, Russell E. Algood, Shirley A. Cook and John G.
Algood (incorporated by reference to Exhibit 10.36 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.37 System Purchase Agreement, Software License Agreement, each
dated September 7, 1993, between Advanced Lease Systems,
Inc. and General Acceptance Corporation (incorporated by
reference to Exhibit 10.37 in the Company's Form S-1
Registration Statement, File No. 33-89520)
10.38 Agreement, dated September 6, 1994, between Norwest Financial
Information Services Group, Inc. and General Acceptance
Corporation (incorporated by reference to Exhibit 10.38 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.39 Form of Term Loan Agreement between NBD Bank, N. A. and
General Acceptance Corporation, with respect to S Corporation
Distributions (incorporated by reference to Exhibit 10.39 in the
Company's Form S-1 Registration Statement, File No. 33-
89520)
10.40 Letter confirmation of warranty program between Wynn's and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.40 in the Company's Form S-1 Registration
Statement, File No. 33-89520)
10.41 First Amendment to Credit Insurance Agreement, dated March 8,
1995, between Union Fidelity Insurance Company and General
Acceptance Corporation (incorporated by reference to Exhibit
10.41 in the Company's Form S-1 Registration Statement, File
No. 33-89520)
10.42 Installment Business Loan Note, dated February 13, 1995, payable
by General Acceptance Corporation to NBD Bank, N. A.
(incorporated by reference to Exhibit 10.42 in the Company's
Form S-1 Registration Statement, File No. 33-89520)
10.43 Sublease, dated April 27, 1995, between Hunt, Inc., James J.
Castoro, Winifred Castoro and General Acceptance
Corporation (incorporated by reference to Exhibit 10.43 in the
Company's Form 10-K for the year ended December 31, 1995)
10.44 Lease, dated May 24, 1995, between The Koger Partnership, Ltd.
and General Acceptance Corporation (incorporated by reference
to Exhibit 10.44 in the Company's Form 10-K for the year
ended December 31, 1995)
10.45 Office Lease, dated June 6, 1995, between Kenneth Bader and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.45 in the Company's Form 10-K for the year ended
December 31, 1995)
<PAGE>
10.46 Letter Agreement, dated July 18, 1995, between General Electric
Capital Corporation and General Acceptance Corporation
(incorporated by reference to Exhibit 10.46 in the Company's
Form 10-K for the year ended December 31, 1995)
10.47 Office Lease, dated August 7, 1995, between 2930 LLC and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.47 in the Company's Form 10-K for the year ended
December 31, 1995)
10.48 Store Lease, dated August 7, 1995, between Julius Teitle, Michael
Teitle and General Acceptance Corporation (incorporated by
reference to Exhibit 10.48 in the Company's Form 10-K for the
year ended December 31, 1995)
10.49 Lease, dated August 9, 1995, between Russell E. Algood and
General Acceptance Corporation(incorporated by reference to
Exhibit 10.49 in the Company's Form 10-K for the year ended
December 31, 1995)
10.50 Marketing Agreement, dated September 12, 1995, between Key
Federal Savings Bank and General Acceptance Corporation
(incorporated by reference to Exhibit 10.50 in the Company's
Form 10-K for the year ended December 31, 1995)
10.51 Commercial Lease, dated September 25, 1995, between Edwards
Properties and General Acceptance Corporation (incorporated
by reference to Exhibit 10.51 in the Company's Form 10-K for
the year ended December 31, 1995)
10.52 Office Lease, dated October 2, 1995, between C. R. Kreis, Virginia
Kreis and General Acceptance Corporation (incorporated by
reference to Exhibit 10.52 in the Company's Form 10-K for the
year ended December 31, 1995)
10.53 Commercial and Industrial Lease Agreement, dated October 30,
1995, between The Ruby C. Kenworthy Trust and General
Acceptance Corporation (incorporated by reference to Exhibit
10.53 in the Company's Form 10-K for the year ended
December 31, 1995)
10.54 Collateral Physical Damage Insurance Policy, dated November 1,
1995, between Ohio Indemnity Company and General
Acceptance Corporation (incorporated by reference to Exhibit
10.54 in the Company's Form 10-K for the year ended
December 31, 1995)
10.55 Commercial Lease, dated November 16, 1995, between Michael
Lee and General Acceptance Corporation (incorporated by
reference to Exhibit 10.55 in the Company's Form 10-K for the
year ended December 31, 1995)
10.56 Addendum to Lease Agreement, dated January 12, 1996, between
Enrovi Associates and General Acceptance Corporation
(incorporated by reference to Exhibit 10.56 in the Company's
Form 10-K for the year ended December 31, 1995)
10.57 Lease, dated January 12, 1996, between The Ohio State Highway
Patrol Retirement System and General Acceptance Corporation
(incorporated by reference to Exhibit 10.57 in the Company's
Form 10-K for the year ended December 31, 1995)
10.58 Letter, dated January 17, 1996, from General Electric Capital
Corporation to General Acceptance Corporation (incorporated
by reference to Exhibit 10.58 in the Company's Form 10-K for
the year ended December 31, 1995)
10.59 Lease Agreement, dated January 31, 1996, between Terry Johnson,
Jean Johnson and General Acceptance Corporation
(incorporated by reference to Exhibit 10.59 in the Company's
Form 10-K for the year ended December 31, 1995)
10.60 Real Estate Lease, dated March 1, 1996, between James R.
Sandefur, Bobbie Sandefur and General Acceptance
Corporation (incorporated by reference to Exhibit 10.60 in the
Company's Form 10-K for the year ended December 31, 1995)
10.61 Letter Agreement, dated March 20, 1996, between General Electric
Capital Corporation and General Acceptance Corporation
(incorporated by reference to Exhibit 10.61 in the Company's
Form 10-K for the year ended December 31, 1995)
10.62 First Sublease Extension Agreement, dated April 12, 1996,
between James J. Castoro, Winifred Castoro, Hunt, Inc. and
General Acceptance Corporation (incorporated by reference to
Exhibit 10.62 in the Company's Form 10-Q for the quarter
ended March 31, 1996)
10.63 Office Lease Agreement, dated April 19, 1996, between Cole
Taylor Bank, Trust No. 4399 and General Acceptance
Corporation (incorporated by reference to Exhibit 10.63 in the
Company's Form 10-Q for the quarter ended March 31, 1996)
10.64 Letter Agreement, dated May 10, 1996, between General Electric
Capital Corporation and General Acceptance Corporation
(incorporated by reference to Exhibit 10.64 in the Company's
Form 10-Q for the quarter ended March 31, 1996)
10.65 Letter Agreement, dated July 12, 1996, between General Capital
Corporation and General Acceptance Corporation
11.1 Statement Re: Computation of Per Share Earnings
27.0 Financial Data Schedule
</TABLE>
Exhibit 10.65
July 12, 1996
VIA FACSIMILE AND FEDERAL EXPRESS
Malvin Algood, Chief Executive Officer
General Acceptance Corporation
5015 West State Road 46, Suite N
Bloomington, Indiana 47404
Re: Loan and Security Agreement with General Electric Capital
Corporation
Dear Al:
Reference is made to that certain Loan and Security Agreement dated as of
May 1, 1992, as amended, between Borrower and Lender (the "Loan Agreement")
and to the Forbearance Agreement executed by the parties in the form of a
letter dated March 20, 1996 (the "Forbearance"), as amended, (together, the
"Agreement"). All terms used in this letter without definition shall have the
meaning given to such terms in the Agreement.
Pursuant to prior conversations, Lender agrees to amend the Forbearance
as follows:
Exhibit E (Delinquency and Losses) of the Forbearance is hereby deleted
in its entirety and a new Exhibit E (attached hereto) substituted therefore.
All other terms and conditions of the Agreement shall remain in full
force and effect.
Very truly yours,
General Electric Capital Corporation
By: /s/ J. Bolger
Its: Authorized Representative
ACKNOWLEDGED AND AGREED:
General Acceptance Corporation
By: /s/ M. L. Algood
Its: Chairman and Chief Executive Officer
<PAGE>
Exhibit E
Delinquency and Losses
Borrower's Rolling Average Delinquency as defined in subsection (G) of
Section 14.2 of the Agreement, shall not exceed seven percent (7%) in the
measurement period beginning July 1, 1996 through December 31, 1996. Until
the first six calendar months have elapsed, the Rolling Average Delinquency
shall be computed for the actual number of calendar months which have expired.
Borrower's Rolling Average Charge-Off, as defined in subsection (H) of
Section 14.2 of the Agreement, shall not exceed one and one quarter percent
(1.25%) in the measurement period beginning on July 1, 1996 through December
31, 1996. Until the first six calendar months have elapsed, the Rolling
Average Charge-Off shall be computed for the actual number of calendar months
which have expired.
Exhibit 11.1
<TABLE>
<CAPTION>
GENERAL ACCEPTANCE CORPORATION
Statement Re: Computation of Per Share Earnings
Exhibit 11.1
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
- --------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995
------------- ------------ ------------- ------------
(HISTORICAL) (PRO FORMA) (HISTORICAL) (PRO FORMA)
Primary:
Weighted average shares outstanding 6,022,000 5,741,945 6,022,000 5,130,676
Net effect of dilutive stock options - based on the
treasury stock method using the average
market price --- 42,803 --- 21,402
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price --- 50,106 --- 250,529
Total weighted average shares 6,022,000 5,834,854 6,022,000 5,402,607
Net income $ 483,227 $ 1,310,034 $ 706,672 $ 2,195,986
Per share amount $ 0.08 $ 0.22 $ 0.12 $ 0.41
============= ============ ============= ============
Fully diluted:
Weighted average shares outstanding 6,022,000 5,741,945 6,022,000 5,130,676
Net effect of dilutive stock options - based on the
treasury stock method using the period-end
market price, if greater than average market
price --- 47,489 --- 23,744
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price --- 50,106 --- 250,529
------------- ------------ ------------- ------------
Total weighted average shares outstanding 6,022,000 5,839,540 6,022,000 5,404,949
Net income $ 483,227 $ 1,310,034 $ 706,672 $ 2,195,986
Per share amount $ 0.08 $ 0.22 $ 0.12 $ 0.41
============= ============ ============= ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the company's
unaudited financial statements as of and for the three months ended
June 30, 1996, and is qualified in its entirity by reference to such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 356171
<SECURITIES> 0
<RECEIVABLES> 122858533
<ALLOWANCES> 12949984
<INVENTORY> 11149353
<CURRENT-ASSETS> 0
<PP&E> 2242765
<DEPRECIATION> 0
<TOTAL-ASSETS> 129065066
<CURRENT-LIABILITIES> 0
<BONDS> 98344736
0
0
<COMMON> 29792573
<OTHER-SE> (2342008)
<TOTAL-LIABILITY-AND-EQUITY> 129065066
<SALES> 0
<TOTAL-REVENUES> 7927865
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3901709
<LOSS-PROVISION> 892631
<INTEREST-EXPENSE> 2328262
<INCOME-PRETAX> 805263
<INCOME-TAX> 322036
<INCOME-CONTINUING> 483227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 483227
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
