-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Wnv3hYDZBwy/SlmYCkrgwL4wb8ZjXJOwTmLpCKmXsF4heYywcDyIuH804heWM2ND m7yl7L/C5lQs6Tex9QIPww== 0000804269-94-000012.txt : 19941017 0000804269-94-000012.hdr.sgml : 19941017 ACCESSION NUMBER: 0000804269-94-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940928 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP CENTRAL INDEX KEY: 0000804269 STANDARD INDUSTRIAL CLASSIFICATION: 6141 IRS NUMBER: 752291093 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10667 FILM NUMBER: 94550745 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 817-332-7000 MAIL ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: URCARCO INC DATE OF NAME CHANGE: 19920703 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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.) 200 Bailey Avenue, Fort Worth, Texas 76107 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 332-7000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of class) 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 . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of 25,095,757 shares of the Registrant's Common Stock held by non-affiliates based upon the closing price of the Registrant's Common Stock on the New York Stock Exchange on September 16, 1994 was approximately $159,985,451. For purposes of this computation, all officers, directors and 5 percent beneficial owners of the Registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the Registrant. There were 28,749,773 shares of Common Stock, $.01 par value outstanding as of September 16, 1994. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended June 30, 1994 ("the Annual Report") furnished to the Commission pursuant to Rule 14a- 3(b) and the definitive Proxy Statement pertaining to the 1994 Annual Meeting of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A are incorporated herein by reference into Parts II and IV, and Part III, respectively. AMERICREDIT CORP. INDEX TO FORM 10-K ITEM PAGE NO. No. PART I 1. Business 3 2. Properties 12 3. Legal Proceedings 12 4. Submission of Matters to a Vote of Security Holders 12 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 13 6. Selected Financial Data 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 8. Financial Statements and Supplementary Data 13 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III 10. Directors and Executive Officers of the Registrant 14 11. Executive Compensation 14 12. Security Ownership of Certain Beneficial Owners and Management 14 13. Certain Relationships and Related Transactions 14 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 SIGNATURES 16 PART I Item 1. Business - - ----------------- General - - ------- AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. The Company's predecessor began the Company's business in March 1987, and the business has been operated continuously since that time. As used herein, the term "Company" refers to the Company, its wholly owned subsidiaries and its predecessor corporation. The Company's principal executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, 76107 and its telephone number is (817) 332-7000. On July 22, 1992, the Company formed a subsidiary, AmeriCredit Financial Services, Inc. ("AFSI"), a Delaware corporation, to engage in the indirect consumer lending business. AFSI began operating in the indirect consumer lending business in September 1992. Through AFSI's branch offices and marketing representatives, the Company serves as a funding source for franchised and independent dealers to finance their customers' purchases of primarily used cars. The Company targets customers who are typically unable to obtain financing from traditional sources. Consumer finance contracts originated by the dealers which conform to the Company's credit policies are purchased by the Company, generally for a non-refundable acquisition fee and without recourse to the dealer. Such consumer finance loans typically range in amount from $6,000 to $12,000, with repayment terms usually ranging from 24 to 60 months. The Company services its consumer loan portfolio at its central facility using automated servicing and collection systems. The Company formed another subsidiary, AmeriCredit Premium Finance, Inc. ("APFI"), a Delaware corporation, on September 15, 1992 to engage in the premium finance business. APFI began operating in the premium finance business in April 1993. APFI finances insurance premiums for consumers purchasing car liability and physical damage insurance through independent insurance agents. Such loans typically range in amount from $300 to $1,200 with repayment terms ranging from four to ten months. The Company previously operated a chain of "we finance" used car retail lots in Texas, selling used cars and typically financing sales to its customers. However, in connection with a restructuring during the year ended June 30, 1993, the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged-off. On April 24, 1991, the Company entered into a management services agreement with Rainwater Management Partners, Ltd., ("RMP"). Pursuant to such agreement, RMP provided certain consulting services related to strategic analysis of the Company's operations and major policy actions and directions. As part of the transaction, the Company issued to RMP a stock option to purchase up to 3.5 million shares of the Company's common stock at an exercise price of $3.218 per share. Ten percent of the option was exercisable at the time of issuance, and the balance became exercisable over an 18-month period. On April 4, 1994, the Company purchased and cancelled this stock option for $1.782 per option share, or $6,237,000. The management services agreement with RMP was also terminated. On October 25, 1990, the Company entered into a joint venture arrangement with certain entities and individuals for the purpose of establishing and operating retail used car sales lots in the state of California. The joint venture en- tity, Pacific Automart Inc., was owned 50% by the Company and 50% by the other investors. On August 3, 1993, the Company sold its entire interest in the joint venture to Pacific Automart Inc. for $11,300,000 in cash. No gain or loss was recognized on the sale. Indirect Consumer Finance Operations - - ------------------------------------ Target Market. The Company's indirect lending programs are designed to serve consumers who have limited access to traditional car financing. The Company's typical borrower may have had previous financial difficulties, but is now attempting to re-establish credit, or may not yet have a sufficient credit history. Because the Company serves consumers who are unable to meet the credit standards imposed by most traditional car financing sources, the Company generally charges interest at rates which are higher than those charged by traditional car financing sources. The Company also expects to sustain a higher level of credit losses than that experienced by traditional car financing sources since the Company provides financing in a relatively high risk market. Dealer Relationships. When buying a car, consumers are customarily directed to a dealer's finance and insurance department to finalize their purchase agreement and review potential financing sources. If the consumer elects to pursue financing at a dealer, an application is taken for submission to the dealer's financing sources. The dealers are generally familiar with the lending policies of their financing sources and develop both traditional and secondary financing sources. In the event that a consumer may not qualify for traditional car financing, a dealer typically submits such buyer's application to one or more secondary financing sources, such as the Company, for review. Since the Company is an indirect lender, the Company's financing programs are marketed directly to the dealers rather than to the consumer. The marketing process involves personal contacts with the owners, general managers and finance managers of the dealers and distribution of the Company's promotional materials. The Company also establishes relationships with dealers through referrals from other participating dealers. The Company has established relationships with a variety of car dealers located in the markets in which the Company has branch offices or marketing representatives. While the Company occasionally finances purchases of new cars, substantially all of the Company's finance receivables are originated in connection with consumers' purchases of used cars. Of the finance contracts purchased by the Company during the year ended June 30, 1994, approximately 76% were originated by manufacturer-franchised dealers with used car operations and 24% by independent dealers specializing in used car sales. The Company pur- chased contracts from 429 dealers during the year ended June 30, 1994. No dealer accounted for more than 10% of the total volume of contracts purchased by the Company for the year ended June 30, 1994. Prior to entering into a relationship with a dealer, the Company evaluates the dealer's operating history. The credit profile and performance of contracts purchased from a dealer are continually monitored to determine the viability of the Company's relationship with the dealer. Dealer relationships are maintained through frequent contacts by the Company's representatives and by providing a high level of service, including prompt and consistent credit application processing, timely contract funding and competitive financing terms and fees. Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the finance contract. To mitigate the Company's risk from potential credit losses, the Company charges the dealers an acquisition fee when purchasing finance contracts. Such acquisition fees are negotiated with dealers on a contract-by-contract basis and are usually non-refundable. Al- though finance contracts are purchased without recourse to the dealer, the deal- er typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Branch Offices. The Company's branch offices are responsible for solicitation and development of dealer relationships and execution of credit decisions. Branch locations are typically staffed by an area general manager and one or more customer service representatives. Larger branches may also have an assistant area manager and/or a dealer marketing representative. Area general managers are compensated with base salaries, annual incentives based on overall branch performance and stock option grants. The area general managers report to a regional manager. The Company's regional managers monitor branch office compliance with the Company's underwriting guidelines and review and approve all transactions that exceed the underwriting guidelines. The Company's automated application processing system and loan accounting system provide the regional managers access to credit application information enabling them to consult with the area general managers on day to day credit decisions. The regional managers also make periodic visits to the branch offices to conduct operating reviews. The regional managers report to the Senior Vice President and Director of Consumer Finance. As of June 30, 1994, the Company operated eighteen indirect consumer finance branch offices in thirteen states. The Company's branch offices are located in Dallas-Fort Worth, Houston, San Antonio, Phoenix, Colorado Springs, Denver, Salt Lake City, Atlanta, Chicago, Kansas City, San Jose, Indianapolis, Detroit, Oklahoma City, Las Vegas, St. Louis, San Diego and Nashville. The Company selects markets for branch office locations based upon the availability of qualified area general managers and evaluation of regulatory, competitive and demographic factors. Branch offices are typically situated in office buildings which are accessible to consumers and local car dealers. Marketing Representatives. The Company initiated a marketing representative program in fiscal 1994 and as of June 30, 1994, the Company had ten marketing representatives. These marketing representatives cover territories in Washington, Oregon, Texas, Oklahoma, Missouri and Maryland. The marketing representatives are responsible for solicitation and development of dealer relationships primarily in markets where the Company does not have a branch presence. Unlike the Company's area general managers, the marketing representatives do not have credit authority. Credit applications solicited by the marketing representatives are underwritten at a central purchasing office. The Company's marketing representatives may be either employees or independent contractors. After a training and development period, the marketing representatives are compensated based primarily upon finance contract originations. The Company's marketing representative program is managed by the Vice President and Director of Sales and Marketing. Finance Contract Acquisition. The Company purchases individual finance con- tracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. The Company's central purchasing office, which underwrites applications solicited by the marketing representa- tives, operates in a manner similar to the branch office network. All credit extensions are executed at the branch level. Each area general manager has a specific credit authority based upon their experience and historical loan portfolio results. Any extension of credit outside these limits is reviewed and approved by a regional manager. Although the credit approval process is decentralized, all credit decisions are guided by the Company's overall credit and underwriting policies and procedures. The Company implemented a credit scoring system across its branch network in late fiscal 1994. The credit scoring system is designed to empirically assess the credit quality of a consumer applicant. While the Company's use of credit scoring is still evolving, the system is intended to supplement the branch level judgmental credit approval process. Loan application packages completed by prospective borrowers are received via facsimile at the branch offices from the dealers. Application data is entered into the Company's automated application processing system. A credit bureau report is automatically generated and a credit score is computed. Depending on the credit quality of the applicant, a customer service representative may then investigate the residence, employment and credit history of the applicant or forward the application package directly to the area general manager. In either case, all applications are investigated prior to loan funding. The area general manager reviews the application package and determines whether the applicant has been approved, approved subject to any conditions that must be met, or denied. In certain cases, a regional manager may review and approve the area general manager's credit decision. The Company estimates that approximately 50% of applicants are denied credit by the Company typically because of their credit histories or because their income levels are not sufficient to support the proposed level of monthly car payments. The dealer is contacted regarding credit decisions by telefax and/or telephone. Declined applicants are also provided with appropriate notification of the decision. Once a credit approval has been received from the Company and any other financ- ing sources to which the application package was submitted, the dealer selects a financing source. The ability of the financing source to provide a rapid credit decision and the amount of the contract fees and customer advance are of primary importance to the dealer in choosing a financing source. The interest rate in the finance contract is generally of secondary importance. Completed loan packages are received from the dealers at the branch office. Loan terms are reverified with the consumer by branch personnel and the loan packages are forwarded to the Company's centralized loan services department where the package is reviewed for proper documentation and regulatory compliance. The loans are entered into the Company's loan accounting system and a daily report of loans is generated. The loan services department issues a funding check to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the car that was financed. All of the Company's finance contracts are fully amortizing with substantially equal monthly installments. Consumers receive monthly statements from the Company and remit payments directly to the Company. Payments are processed centrally by the loan services department. Collections and Repossessions. Collection activity on finance contracts is performed by the Company's collection personnel ("collectors") at the Company's headquarters facility. The collectors follow standardized collection policies and procedures. Collectors monitor the finance receivables portfolio through a computer assisted collection system and typically take action on delinquencies on the fifth day after delinquency occurrence. A collector's action is typically telephone contact with the consumer utilizing the Company's automated predictive dialing system. This system dials multiple telephone numbers simultaneously based upon parameters set by management. When a telephone connection is made, the delinquent consumer's account information is displayed on a collector's computer terminal. The collector then attempts to work out the delinquency with the consumer. If a consumer continues to be delinquent, the Company's policy is to work out suitable payment arrangements with the consumer. However, if the consumer becomes seriously delinquent or deals in bad faith with the Company, the Company may ultimately have to repossess the consumer's car and generally will take prompt action to do so. Repossessions are handled by independent repossession firms engaged by the Company. All repossessions are approved by collection managers. The Company follows prescribed legal procedures for repossessions, which include peaceful repossession, one or more consumer notifications, a prescribed waiting period prior to disposition of the repossessed car, and return of personal items to the consumer. Upon repossession and after any prescribed waiting period, the repossessed car is typically sold at auction. Unearned finance charges and any recoveries are credited against the finance contract, and the remaining balance is charged off against the Company's allowance for losses. The Company will pursue collection of deficiencies when it deems such action to be appropriate. Insurance and Other Products. The Company requires all consumers to obtain or provide evidence that they carry current comprehensive and collision insurance. Through a third party administrator, the Company tracks the insurance status of each finance contract and sends notices to consumers when collateral becomes uninsured. If no action is taken by the borrower to insure the collateral, continuing efforts are made to persuade the consumer to comply with the insur- ance requirements of the finance contract. Although it has the right, the Company rarely repossesses a car due to it being uninsured. The Company also does not typically force place insurance coverage and add the premium to the consumer's obligation, although it has the right to do so under the terms of the finance contracts. The Company will also finance other insurance products including credit life, credit accident and health and extended service contracts at the option of the consumer. The consumer may obtain such products from sources provided by the Company, dealers or from other third parties. The Company may receive compensation related to these products, but the Company does not assume any primary insurance risk. Risk Management. With its decentralized credit approval process, the Company has developed procedures to evaluate and supervise the operations of each branch office. The Company's centralized risk management department is responsible for monitoring the origination process and supporting the supervisory role of branch management. This group tracks key variables via databases that contain loan applicant data, credit bureau and credit score information, loan structures and terms and payment history. The residual value of the collateral underlying the Company's loan portfolio is updated monthly with a loan by loan link to national wholesale auction values. This data is used for evaluating collateral disposition activities as well as for reserve analysis models. The risk management department prepares a periodic credit indicator package reviewing portfolio performance at various levels of detail including total company, branch and dealer. A sample of loans are reviewed periodically to audit compliance with policies and procedures. Various daily reports and analytical data are also generated by the Company's management information systems. This information is used to monitor credit quality as well as to constantly refine the structure and mix of new loan production. Projected portfolio returns are reviewed not only on a consolidated basis, but also at the branch, dealer and transaction levels. Premium Finance Operations - - -------------------------- The Company's premium finance receivables portfolio and related assets represented approximately 5% of the Company's total assets as of June 30, 1994. While the Company has grown the premium finance business through June 30, 1994, the Company has determined that it will reduce its investment in this business in the future in order to concentrate its resources on its core indirect consum- er lending business. The size of the market for indirect consumer lending is substantially greater than the market for premium finance, and the Company believes that the potential returns are more favorable in the indirect consumer lending business as compared to the premium finance business. The Company offers financing primarily to consumers who purchase non-standard car liability and physical damage coverages and who are unable or unwilling to pay the full amount of their insurance premium in advance. Consumers generally look to their agent to locate a financing source for their insurance premiums. While many large insurance agencies operate captive premium finance companies, other agents refer their customers to independent premium finance sources such as the Company. The Company markets its financing program to insurance agents in Texas and Louisiana. The key factors in obtaining business from agents include frequent contacts, quality service, delivering materials and instructions that facilitate the financing transaction, providing a steady source of funding and offering competitive payment terms. Insurance agents participating in the Company's referral program are provided a supply of premium finance contracts and the Company's rate books and are trained to initiate notes on behalf of the Company. The agent assists the customer in completing the premium finance contract by using the Company's rate books, which set forth payment terms and finance charge rates by premium amount. The Company has minimum down payment requirements and generally charges the maximum allow- able interest rate. Under the terms of the finance contract, the customer is required to repay the loan in equal monthly installments over four to ten months depending upon the term of the insurance policy. Customers receive monthly statements and mail payments directly to the Company. The finance contract provides the Company the right to cancel the insurance policy and obtain a refund of the unearned premium directly from the insurance carrier in the event of a payment default. Upon receipt of the unearned premium from the insurance company, the Company deducts the principal balance of the note and applicable late charges and returns the excess, if any, to the customer. While the Company's down payment requirements and monthly payment schedule are designed so that the unearned premium value of the policy generally exceeds the unpaid principal balance of the note, charge- offs may still result from untimely policy cancellations, short rate premium refunds, non-refundable fees, insurance company or agency insolvencies or other factors. Direct Lending Portfolio - - ------------------------ Prior to September 1992, the Company's finance receivables consisted solely of finance contracts originated in connection with the sale of used cars at the Company's former retail locations. These finance receivables are referred to as the direct lending portfolio. Since the Company has exited the retail used car business, the direct lending portfolio is being liquidated over time as the contracts are collected or charged-off. Distressed Receivables Joint Ventures - - ------------------------------------- During fiscal 1994, the Company entered into certain joint venture arrangements with third parties to acquire and collect distressed receivables portfolios. While the Company's capital investment in these joint ventures is not material, the Company has provided office facilities, computer systems and administrative support to the joint ventures. Trade Names - - ----------- The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. Competition - - ----------- Because the Company's target market consists of consumers who generally have limited access to traditional financing sources, the Company usually does not compete directly with banks, savings and loans, credit unions, the manufactur- ers' captive finance companies and other traditional sources of consumer credit. However, the Company encounters intense competition in its segment of the market from other local, regional and national consumer finance companies, some of which have access to greater financial resources than the Company. In addition, there can be no assurance that traditional financial institutions will not, in the future, become more active in providing financing to the Company's targeted customer base. The Company plans to expand its indirect consumer finance business by adding additional branch offices and marketing representatives and expanding loan production capacity at existing branches. The success of this strategy is dependent upon the Company's ability to hire and retain qualified area general managers and other personnel and develop relationships with more dealers. The Company confronts intense competition in attracting key personnel and establishing relationships with dealers. Dealers often already have favorable secondary financing sources, which may restrict the Company's ability to develop dealer relationships and delay the Company's growth. In addition, the competitive conditions in the Company's markets may result in a reduction in the contract fees that the Company charges the dealers or a decrease in contract acquisition volume, which would adversely affect the Company's profitability. Regulation - - ---------- The Company's operations are subject to regulation, supervision, and licensing under various federal, state and local statutes, ordinances and regulations. The consumer credit authority in each state in which the Company operates has primary responsibility for regulation and enforcement of laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of lenders, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers, prohibit misleading advertising and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. The dealers who originate car loans purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with such statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company. Management believes that it maintains all licenses and permits required for its current operations and is in substantial compliance with all applicable local, state, and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits and the failure to satisfy those and other regulatory requirements could have a material adverse effect on the operations of the Company. Further, the adoption of additional, or the revision of existing rules and regulations could have a material adverse effect on the Company's business. Employees - - --------- At June 30, 1994, the Company employed 183 persons. Executive Officers - - ------------------ The following sets forth certain data concerning the executive officers of the Company and AFSI, all of whom are elected on an annual basis. Name Age Position Clifton H. Morris, Jr. 59 Chairman of the Board, Chief Executive Officer and President Dennis R. Adams 39 Senior Vice President, Director of Collections of AFSI Michael R. Barrington 35 Vice President and President and Chief Operating Officer of AFSI Daniel E. Berce 40 Vice President, Chief Financial Officer and Treasurer Chris A. Choate 31 General Counsel and Secretary Edward H. Esstman 53 Senior Vice President, Director of Consumer Finance of AFSI CLIFTON H. MORRIS, JR. has been Chairman of the Board and Chief Executive Officer of the Company since May 1988, and was also President of the Company from such date until April 1991 and from April 1992 to the present. Mr. Morris is also a director of Service Corporation International, a publicly held company that owns and operates funeral homes and related businesses, and Cash America International, Inc., a publicly held pawn brokerage company. DENNIS R. ADAMS has been Senior Vice President, Director of Collections of AFSI since AFSI's formation in July 1992. Mr. Adams was also Vice President, Director of Collections and Customer Service of the Company from July 1991 until July 1992. From September 1985 until July 1991, Mr. Adams acted in various management capacities at Citicorp National Services, most recently as Collection Center Manager for Citicorp's National P&L Recovery Center in Dallas, Texas. MICHAEL R. BARRINGTON has been President and Chief Operating Officer of AFSI since AFSI's formation in July 1992. Mr. Barrington has also been Vice President of the Company since May 1991. Mr. Barrington was Assistant to the Chairman of the Company from July 1989 until May 1991 and Vice President, Credit and Finance Operations from July 1990 until May 1991. From December 1984 until July 1989, Mr. Barrington was employed at Bank One, Texas, N.A. (previously MBank Fort Worth, N.A.) in various capacities, most recently as Senior Vice President and Manager of Commercial Lending. DANIEL E. BERCE is a certified public accountant and has been Vice President, Chief Financial Officer and Treasurer for the Company since May 1991. Mr. Berce was Vice President, Chief Financial Officer from May 1990 until May 1991. Prior to that, he was a partner of Coopers & Lybrand, certified public accountants, for four years and with such firm for fifteen years. CHRIS A. CHOATE has been General Counsel and Secretary of the Company since January 1993. From July 1991 until January 1993, Mr. Choate was Assistant General Counsel. Prior to that, he was an associate with the law firm of Jones, Day, Reaves & Pogue in Dallas, Texas from January 1990 until July 1991 and an associate with the law firm of Jenkens & Gilchrist in Dallas, Texas from September 1988 until January 1990. EDWARD H. ESSTMAN has been Senior Vice President, Director of Consumer Finance of AFSI since AFSI's formation in July 1992. From April 1984 until June 1992, Mr. Esstman acted in various management capacities at Mercury Finance Company, most recently as Vice President of Administration. Item 2. Properties - - ------------------- The Company's executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, in a 43,000 square foot building purchased by the Company in February 1994. All of the Company's branch office facilities are leased under lease agreements with original terms of two to four years. Item 3. Legal Proceedings - - -------------------------- Four lawsuits were filed against the Company, several of its current and former officers and directors, and certain other defendants, alleging violations of federal securities and other laws. The suits were originally filed in July 1990, and in October 1991, the four lawsuits were consolidated into one action. In May 1993, the U.S. District Court for the Northern District of Texas, Dallas Division, dismissed with prejudice all claims alleging violations of federal securities laws. The plaintiffs' state claims were dismissed for want of jurisdiction. The plaintiffs appealed the dismissal to the Court of Appeals for the Fifth Circuit. On August 8, 1994, the Court of Appeals for the Fifth Circuit affirmed the U.S. District Court's dismissal of the lawsuit. The Company is involved in other lawsuits in the normal course of business. In the opinion of management, resolution of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. Item 4. Submission of Matters to a Vote of Security Holders - - ------------------------------------------------------------ There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended June 30, 1994. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - - ------------------------------------------------------------------------------ The Company has never paid cash dividends on its common stock. The Company's bank line of credit contains certain restrictions on the payment of dividends. While the Company has an accumulated deficit at June 30, 1994, the Company presently intends to retain future earnings, if any, for purposes of funding operations. Information contained under the caption "Common Stock Data" in the Annual Report is incorporated herein by reference in further response to this Item 5. Item 6. Selected Financial Data - - -------------------------------- Information contained under the caption "Summary Financial and Operating Information" in the Annual Report is incorporated herein by reference in response to this Item 6. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - - ------------------------------------------------------------------------ Information contained under the caption "Financial Review" in the Annual Report is incorporated herein by reference in response to this Item 7. Item 8. Financial Statements and Supplementary Data - - ---------------------------------------------------- The Consolidated Financial Statements of the Company included in the Annual Report and information contained under the caption "Quarterly Data" in the Annual Report are incorporated herein by reference in response to this Item 8. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - - ------------------------------------------------------------------------- The Company had no disagreements on accounting or financial disclosure matters with its independent accountants to report under this Item 9. PART III Item 10. Directors and Executive Officers of the Registrant - - ------------------------------------------------------------ Information contained under the caption "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 10. See Item 1. "Business - Executive Officers" for information concerning executive officers. Item 11. Executive Compensation - - -------------------------------- Information contained under the captions "Executive Compensation" and "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 11. Item 12. Security Ownership of Certain Beneficial Owners and Management - - ------------------------------------------------------------------------ Information contained under the caption "Principal Shareholders and Stock Ownership of Management" in the Proxy Statement is incorporated herein by reference in response to this Item 12. Item 13. Certain Relationships and Related Transactions - - -------------------------------------------------------- Information contained under the caption "Certain Transactions" in the Proxy Statement is incorporated herein by reference in response to this Item 13. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - - -------------------------------------------------------------------------- (1) The following Consolidated Financial Statements of the Company and Report of Independent Accountants are contained in the Annual Report and are incorporated herein by reference. Consolidated Financial Statements: Consolidated Balance Sheets as of June 30, 1994 and 1993. Consolidated Statements of Operations for the years ended June 30, 1994, 1993 and 1992. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1994, 1993 and 1992. Consolidated Statements of Cash Flows for the years ended June 30, 1994, 1993 and 1992. Notes to Consolidated Financial Statements Report of Independent Accountants (2) All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference. (3) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Index to Exhibits on pages 17 and 18. (4) The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 1994. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on September 27, 1994. AmeriCredit Corp. BY: /s/ Clifton H. Morris, Jr. Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Clifton H. Morris, Jr. Chairman of the Board, September 27, 1994 Clifton H. Morris, Jr. Chief Executive Officer and President /s/ Daniel E. Berce Vice President, Chief September 27, 1994 Daniel E. Berce Financial Officer and Treasurer and Director /s/ Michael R. Barrington Vice President and September 27, 1994 Michael R. Barrington Director /s/ James H. Greer Director September 27, 1994 James H. Greer /s/ Gerald W. Haddock Director September 27, 1994 Gerald W. Haddock /s/ Kenneth H. Jones, Jr. Director September 27, 1994 Kenneth H. Jones, Jr. INDEX TO EXHIBITS The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this report have been omitted. Exhibit Number Description *3.1 -- Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of Incorporation, filed August 24, 1988 (Exhibit 3.1) *3.2 -- Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2) ###3.3 -- Articles of Amendment to the Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3) *3.4 -- Bylaws of the Company (Exhibit 3.4) #4.1 -- Specimen stock certificate evidencing the Common Stock (Exhibit 4.1) *4.2 -- Amended Warrant Agreement, dated September 6, 1989, between the Company and Alex Brown & Sons Incorporated and Amendment to Warrant Agreement, dated October 24, 1989 (Exhibit 4.3) *4.3 -- Amended Warrant Agreement, dated September 6, 1989, between the Company and Cazenove Inc. and Amendment to Warrant Agreement, dated October 24, 1989 (Exhibit 4.3) *10.1 -- 1989 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.4) *10.2 -- 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5) **10.3 -- Amendment No. 1 to the 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 4.6) *10.4 -- 1987 Incentive Stock Option Plan for the Company (Exhibit 10.6) ***10.5 -- 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14) #10.6 -- 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10) #10.7 -- 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11) #10.8 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit 10.18) #10.9 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit 10.19) #10.10 -- Executive Employment Agreement, dated January 30, 1991, between the Company and Daniel E. Berce (Exhibit 10.20) ###10.11 -- Executive Employment Agreement, dated May 20, 1993, between the Company and Edward H. Esstman ###10.12 -- Executive Employment Agreement, dated August 18, 1993, between the Company and Dennis R. Adams ##10.13 -- Stock Purchase Agreement By and Between AmeriCredit Corp., as Seller, and Pacific Automart Inc., as Buyer, dated April 30, 1993 (Exhibit 10.1) ##10.14 -- Stock Purchase, Release and Confidentiality Agreement By and Between AmeriCredit Corp. and Pacific Automart Inc., dated August 3, 1993 (Exhibit 10.2) INDEX TO EXHIBITS (Continued) ^10.15 -- Revolving Credit Agreement, dated October 18, 1993, between AmeriCredit Corp. and subsidiaries and First Interstate Bank of Texas, N.A. (Exhibit 10.1) @10.16 -- Stock Option Purchase Agreement, dated April 4, 1994, between AmeriCredit Corp. and Rainwater Management Partners, Ltd. @11.1 -- Schedule Re Computation of Per Share Earnings @13.1 -- 1994 Annual Report to Shareholders of the Company @21.1 -- Subsidiaries of the Company @23.1 -- Consent of Coopers & Lybrand @27.1 -- Financial Data Schedule _____________________________________________________________________ * Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-31220 on Form S-1 filed by the Company with the Securities and Exchange Commission. ** Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-41203 on Form S-8 filed by the Company with the Securities and Exchange Commission. *** Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1990 filed by the Company with the Securities and Exchange Commission. # Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1991 filed by the Company with the Securities and Exchange Commission. ## Incorporated by reference to the exhibit shown in parenthesis included in the Company's Current Report on Form 8-K dated August 3, 1993 filed by the Company with the Securities and Exchange Commission. ### Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1993 filed by the Company with the Securities and Exchange Commission. ^ Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1993 filed by the Company with the Securities and Exchange Commission. @ Filed herewith. EX-10 2 STOCK OPTION PURCH AGRMT EXHIBIT 10.16 STOCK OPTION PURCHASE AGREEMENT THIS STOCK OPTION PURCHASE AGREEMENT (the "Agreement"), dated as of April 4, 1994, is between AMERICREDIT CORP., a Texas corporation formerly named URCARCO, Inc., ("AmeriCredit"), and RAINWATER MANAGEMENT PARTNERS, LTD., a Texas limited partnership "RMP"). RECITALS WHEREAS, AmeriCredit has issued to RMP an option "Option") to purchase 3.5 million shares of its Common Stock, par value $.01 per share, pursuant to a Stock Option Agreement, dated as of April 24, 1991, between AmeriCredit and RMP (the "Stock Option Agreement"), and AmeriCredit desires to purchase the Option from RMP and cancel the Stock Option Agreement and the related Registration Rights Agreement and the Management Services Agreement, each entered into as of April 24, 1991, between AmeriCredit and RMP (herein referred to as the Registration Rights Agreement and the Management Services Agreement), and RMP desires to sell the Option to AmeriCredit and to cancel each of such agreements. AGREEMENT NOW, THEREFORE, for an in consideration of the mutual agreements herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Section 1. Sale of Option. RMP hereby sells, assigns, transfers, conveys, sets over and delivers to AmeriCredit the Option and all rights, title, interest and claims possessed by RMP under the Option and the Stock Option Agreement, together with all other right, title and interest and claim in and to the Common Stock of AmeriCredit issuable thereunder and all rights, title and interest and claims accrued and/or accruing under the Registration Rights Agreement and the Management Services Agreement, in consideration for $6,237,000 in hand paid in good funds on this date (the "Sale"). The payment made by AmeriCredit hereunder is in full and final settlement and satisfaction of all obligations of whatsoever nature now or hereafter due by AmeriCredit to RMP, its partners, legal representatives, successors and assigns under the Option, the Stock Option Agreement, the Registration Rights Agreement and the Management Services Agreement (other than indemnifications obligations, if any, relating to this transaction or facts or circumstances occurring prior to this transaction). RMP hereby surrenders unto AmeriCredit the Stock Option Agreement for cancellation in accordance with the terms hereof, and AmeriCredit hereby acknowledges receipt of the original Stock Option Agreement, and hereby agrees to promptly mark it "cancelled". RMP hereby acknowledges receipt of $6,237,000 in good funds from AmeriCredit, and RMP, on its own behalf and on behalf of its partners, legal representatives and its successors and assigns, hereby unconditionally and forever waives, relinquishes and releases all right, title, interest and claim accrued or accruing to the benefit of RMP under the Option and the Stock Option Agreement and under the Management Services Agreement and the Registration Rights Agreement. Section 2. Representations of AmeriCredit. AmeriCredit represents that it has full power and authority to execute, deliver and perform this Agreement; this Agreement has been duly authorized by all requisite corporate action on the part of AmeriCredit and has been duly executed and delivered by AmeriCredit; AmeriCredit has obtained all consents and approvals requisite to the transactions contemplated hereby; and this Agreement constitutes a legal, valid and binding obligation of AmeriCredit, enforceable against AmeriCredit, its legal representatives, successors and assigns, in accordance with its terms. Section 3. Representations of RMP. RMP represents that: (a) Any and all rights RMP, its partners and its and their legal representatives, successors and assigns, possess in and to the Option and in and to shares of Common Stock issuable upon exercise of the Option or in and to any other rights accrued or accruing under the Option, the Stock Option Agreement, the Registration Rights Agreement and/or the Management Services Agreement, are hereby and shall hereafter be null and void and are of no further force or effect. (b) RMP has full power and authority to execute, deliver and perform this Agreement; this Agreement has been duly authorized by all requisite partnership action on the part of RMP; RMP has obtained all consents and approvals requisite to the transactions contemplated hereby; and this Agreement has been duly executed and delivered by RMP, and constitutes a legal, valid and binding obligation of RMP, enforceable against RMP, its partners and its and their legal representatives, successors and assigns, in accordance with its terms. (c) RMP is the true and lawful owner of the Option and no part of the Option is in any respect encumbered or committed to be encumbered, and there are no other persons or entities claiming an interest therein, and RMP has not assigned to any person or entity any interest or rights under the Stock Option Agreement, the Registration Rights Agreement and the Management Services Agreement, and no other persons or entities have a claim or any interest or rights thereunder. Section 4. Miscellaneous. (a) Binding Effect. This Agreement may not be assigned by either party hereto. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors or permitted assigns. (b) Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provision hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (c) Entire Agreement; Modifications. This instrument contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby. Neither this Agreement nor any provisions hereof may be waived, modified, amended, discharged or terminated except by an instrument in writing signed by the party to be charged, and then only to the extent set forth in such instrument. (d) Headings. Descriptive headings contained herein are for convenience of reference only and shall not affect the meaning or interpretation hereof. (e) Counterparts. This Agreement may be executed simultaneously or in two or more counterparts, each of which together shall constitute one and the same instrument. (f) Applicable Law. The rights and obligations of the parties to this Agreement shall be governed by the laws of the State of Texas applicable to contracts made or to be performed entirely within such state. (g) Further Assurances. Each party hereto agrees to execute any and all documents, and to perform such other acts, whether before or after the date hereof, that may be reasonably necessary or expedient to further the purposes of this Agreement or to further assure the benefits intended to be conferred hereby. (h) Survival. All representations, warranties, obligations and under- takings of the parties set forth herein shall survive the execution and delivery of this Agreement and Sale and other transactions contemplated hereby. The parties execute this Agreement as of the date first above written. AMERICREDIT CORP. By: /s/ Clifton H. Morris, Jr. Clifton H. Morris, Jr., Chairman of the Board of Directors, President and Chief Executive Officer RAINWATER MANAGEMENT PARTNERS, LTD. By: Rainwater, Inc., its sole general partner By: /s/ John C. Goff John C. Goff, Vice President EX-11 3 EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts)
Years Ended June 30, June 30, June 30, 1994 1993 1992 PRIMARY: Average common shares outstanding . . . . . . . 29,067,323 29,267,419 31,482,225 Common share equivalents resulting from assumed exercise of stock options and warrants. . . . . . . 2,750,760 ---------- ---------- ---------- Average common shares and share equivalents outstanding . . . . . . . 31,818,083 29,267,419 31,482,225 ========== ========== ========== FULLY DILUTED: Average common shares outstanding . . . . . . . 29,067,323 29,267,419 31,482,225 Common share equivalents resulting from assumed exercise of stock options and warrants. . . . . . . 2,750,760 ---------- ---------- ---------- Average common shares and share equiv- alents outstanding. . . . 31,818,083 29,267,419 31,482,225 ========== ========== ========== NET INCOME (LOSS). . . . .$ 5,065 ($ 19,366)($ 24,201) ========== ========== ========== EARNINGS (LOSS) PER SHARE: Primary . . . . . . . . .$ .16 ($ .66)($ .77) ========== ========== ========== Fully diluted . . . . . .$ .16 ($ .66)($ .77) ========== =========== ==========
Primary earnings (loss) per share has been computed by dividing net income (loss) by the average common shares and share equivalents outstanding. Common share equivalents were computed using the treasury stock method. The average common stock market price for the period was used to determine the number of common share equivalents. Fully diluted earnings (loss) per share has been computed in the same manner as primary earnings (loss) per share except that the higher of the average or end of period common stock market price was used to determine the number of common share equivalents. EX-21 4 EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE COMPANY State of Subsidiary Ownership % Incorporation URCARCO Operating Co., Inc. 100% Delaware Crestpointe General Agency, Inc. 100% Texas AmeriCredit Financial Services, Inc. 100% Delaware ACF Investment Corp. 100% Delaware AmeriCredit Premium Finance, Inc. 100% Delaware URCARCO Enterprises, Inc. 100% Texas EX-23 5 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of AmeriCredit Corp. on Form S-8 (File Nos. 33-41203 and 33-48162) of our report dated August 9, 1994, on our audits of the consolidated financial statements as of June 30, 1994 and 1993, and for the years ended June 30, 1994, 1993 and 1992, which report is incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Fort Worth, Texas September 27, 1994 EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCORPORATED BY REFERENCE INTO THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1994 JUL-01-1993 JUN-30-1994 15,756 26,506 81,480 (9,330) 0 0 9,153 (3,808) 122,215 0 388 318 0 0 119,183 122,215 0 15,882 0 9,400 0 1,249 168 5,065 0 0 0 0 0 5,065 .16 .16
EX-99 7 [TEXT] Letter to Shareholders We are pleased to report that AmeriCredit Corp. posted a profit in our first full year in the indirect automobile lending business. The Company earned $5.1 million or $0.16 per share for the year ended June 30, 1994, compared to a loss of $19.4 million or $0.66 per share for the year ended June 30, 1993. The prior year's results included charges of $20.4 million related to a restructuring of the Company. We have now reported six consecutive profitable quarters since the restructuring. These positive financial results reflect the performance of our core indirect lending business. The financial measures of our growth in indirect lending are evident. We originated $65.9 million of loans during fiscal 1994, increasing the size of our indirect lending portfolio by 325% to $67.6 million at June 30, 1994 from $16.0 million at the beginning of the year. Finance charge income from indirect lending was $7.8 million for the year ended June 30, 1994, compared to $1.1 million for the previous year. Other steps we are taking to build the indirect lending business are just as important to our long-term success. We are creating a solid foundation of people and systems to support our future growth plans. We opened 13 branch offices in fiscal 1994 bringing our branch network to 18 offices in 13 states as of June 30, 1994. In addition to attracting experienced branch managers for each of these new locations, we also added four seasoned regional managers to supervise our expanding branch operations. In the latter part of the fiscal year, we hired ten marketing representatives who are responsible for marketing our lending programs to auto dealerships primarily located outside our existing branch territories. Unlike our branch managers, the marketing representatives do not have credit authority. A central purchasing office has been set up at our headquarters facility in Fort Worth to underwrite finance contracts generated by these marketing representatives. We believe that this initiative creates excellent growth opportunities for us in new markets and may enable us to expedite our national presence. We have made further investments in technology in an effort to increase our operating efficiency and strengthen controls. We recently installed an automated application processing system in the branch network. This system streamlines the credit application process, while allowing management to have central access to all applications. In addition, a credit scoring system has been developed which is designed to empirically assess the credit quality of our applicant base. Credit scoring should enhance the credit skills of our branch managers and could allow us, over time, to participate in a wider spectrum of the market. We believe that our credit scoring technology is unique among secondary finance lenders. Consistent with our emphasis on the risk management aspects of our business, we have continued to upgrade our analytical systems and skills. While there is no way to eliminate the risks inherent in our business, it is critical that secondary finance lenders, such as AmeriCredit, develop the tools to assess risk and potential returns. We are monitoring key variables of the loan origination process and portfolio performance. We also review cash-on-cash returns not only on a consolidated basis, but also at the branch, dealer and transaction levels. Our objective is to attain a proper balance of credit risk and projected returns. The companies with the best risk management capabilities should ultimately have the greatest long-term success in our business. With a sound infrastructure in place, we believe that AmeriCredit is poised to pursue a greater share of our large, highly fragmented industry. Although competition is intense, we believe that our technological investments and personnel expertise provide us a competitive advantage. We plan to open one branch per month, add additional marketing representatives and expand loan production capacity at existing branch offices in fiscal 1995. The Company's current financial position is strong with over $42 million in cash, cash equivalents and investment securities and virtually no debt as of June 30, 1994. Our growth plans for fiscal 1995 will, however, require us to obtain additional external capital. We are pursuing an expansion of our bank line of credit, which is currently $20 million, and a securitization of a portion of our finance receivables portfolio. We will keep you informed of our progress in this area. AmeriCredit has generated new shareholder interest and analyst coverage in recent months. These shareholders and analysts have helped us communicate our strategies and goals. We appreciate their support. The past year was an important rebuilding period for AmeriCredit. We thank all of our employees, dealer customers and consumer customers for the excellent relationships we have developed. Management is committed, with the help of these relationships, to creating significant long-term shareholder value. Sincerely, Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President September 16, 1994 Corporate Profile AmeriCredit Corp. is a consumer finance company specializing primarily in financing automobile sales contracts. The Company is headquartered in Fort Worth, Texas. As of September 15, 1994, the Company operated 20 consumer lending branch offices located in 15 states and had ten marketing representatives soliciting contracts underwritten at its central purchasing office. Through its branch offices and marketing representatives, the Company serves as a funding source for franchised and independent dealers to finance their customers' purchases of primarily used automobiles. The Company targets consumers who are typically unable to obtain financing from traditional sources. Consumer finance contracts originated by the dealers which conform to the Company's credit policies are purchased by the Company, generally for a non-refundable acquisition fee and without recourse to the dealer. Such consumer finance loans typically range in amount from $6,000 to $12,000, with repayment terms usually ranging from 24 to 60 months. The Company services its consumer loan portfolio at its central facility using automated loan servicing and collection systems. AMERICREDIT CORP. SUMMARY FINANCIAL AND OPERATING INFORMATION (dollars in thousands, except per share data)
Years Ended June 30, June 30, June 30, June 30, June 30, 1994 1993(a) 1992 1991 1990 Operating Data: Finance charge income $ 12,788 $ 13,904 $ 23,989 $ 30,737 $ 12,452 Sales 8,271 48,454 155,924 150,417 Net income (loss) 5,065 ( 19,366)( 24,201)( 36,188) 15,802 Earnings (loss) per share .16 ( .66)( .77)( 1.15) .68 Weighted average shares and share equivalents 31,818,083 29,267,419 31,482,225 31,388,686 23,303,989 June 30, June 30, June 30, June 30, June 30, 1994 1993 1992 1991 1990 Balance Sheet Data: Cash and cash equivalents and investment securities $ 42,262 $ 68,425 $ 39,303 $ 14,255 $ 71,894 Finance receivables, net 72,150 43,889 69,527 115,399 112,109 Total assets 122,215 131,127 153,564 181,388 223,371 Total liabilities 2,714 8,343 6,224 9,486 15,282 Shareholders' equity 119,501 122,784 147,340 171,902 208,089
(a) As further described in the Financial Review, the Company withdrew from the retail used car sales business effective December 31, 1992. FINANCIAL REVIEW GENERAL Since September 1992, the Company has been in the business of purchasing finance contracts originated by franchised and independent car dealers, generally referred to as indirect consumer lending. Beginning April 1993, the Company has also financed insurance premiums for consumers purchasing car insurance through independent insurance agents. The Company previously engaged in the retail used car sales and finance business. However, in connection with a restructuring during the year ended June 30, 1993, the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged off. RESULTS OF OPERATIONS - - ----------------------- Year Ended June 30, 1994 as compared to Year Ended June 30, 1993 - - ------------------------------------------------------------------- Revenue: The Company's overall finance charge income consisted of the following (in thousands):
Years Ended June 30, June 30, 1994 1993 Indirect consumer lending $ 7,820 61% $ 1,125 8% Direct lending 3,711 29 12,718 92 Premium finance 1,257 10 61 ------ --- ------ --- $12,788 100% $13,904 100% ====== === ====== ===
The increase in finance charge income for the indirect consumer lending business is a result of growth in average net finance receivables outstanding. The Company purchased $65.9 million of indirect loans during fiscal 1994 increasing the size of its indirect consumer lending portfolio to $67.6 million at June 30, 1994 from $16.0 million at June 30, 1993. This growth resulted from loan production at branches open at the beginning of the fiscal year as well as expansion of the Company's loan production capacity. The Company opened thirteen branch offices in fiscal 1994 compared to five new locations opened during fiscal 1993. Ten marketing representatives were also added in fiscal 1994. The decrease in direct lending finance charge income is due to liquidation of the direct lending portfolio. The Company's overall effective yield on its finance receivables increased to 20.4% from 18.5% primarily as a result of higher finance charge rates realized in the Company's indirect consumer lending business. The effective yield on indirect consumer lending receivables was 20.8% for the year ended June 30, 1994, while the effective yield on direct lending receivables was 17.6% for the same period. Investment income increased as a result of higher average cash and cash equivalents and investment securities balances in fiscal 1994. The Company's yield on its cash and cash equivalents and investment securities was 3.8% for the year ended June 30, 1994 as compared to 3.6% for the year ended June 30, 1993. Other income for the year ended June 30, 1994 included $105,000 related to the Company's participation in certain joint ventures which acquire and collect distressed receivables portfolios. These joint ventures were formed during fiscal 1994. As described under the caption "General" above, the Company exited the retail used car sales business effective December 31, 1992, and thus did not have sales in fiscal 1994. The Company's share of operating results of its former affiliate, Pacific Automart Inc., resulted in income of $392,000 for the year ended June 30, 1993. The Company sold its entire interest in Pacific Automart Inc. for $11,300,000 in cash on August 3, 1993. No gain or loss was recognized on the sale. Costs and Expenses: Operating expenses as a percentage of average net finance receivables outstanding decreased to 15.0% for the year ended June 30, 1994 as compared to 18.2% for the year ended June 30, 1993. The ratio improved as a result of the Company's ability to leverage its fixed overhead costs by growing its finance receivables portfolio. The dollar amount of operating expenses decreased by 31%, or $4.3 million, to $9.4 million from $13.7 million. The overall operating expense reduction was a result of the Company's exit from the retail used car sales business. The provision for losses decreased to $1.2 million as compared to $8.0 million. Further discussion concerning the provision for losses is included in the paragraph below and under the caption, "Finance Receivables". The restructuring charges of $15.4 million in the year ended June 30, 1993 related to the Company's exit from the retail used car sales business. These restructuring charges included an accrual of future retail lease and other facility costs, a write-down of used car inventories, a write-down of property and equipment and other assets and an accrual of other costs necessary to complete the liquidation of the retail sales operations. In addition, the Company recorded a provision for losses of $5.0 million in connection with the restructuring in light of the impact that closure of the Company's retail sales locations could have on the Company's direct finance customer base. Year Ended June 30, 1993 as compared to Year Ended June 30, 1992 - - ------------------------------------------------------------------- Revenue: The Company's overall finance charge income decreased to $13.9 million as compared to $24.0 million because of a decrease in average net finance receivables outstanding. The overall finance receivables portfolio decreased to $56.5 million at June 30, 1993 from $107.0 million at June 30, 1992. This decline in portfolio size during fiscal 1993 was due to the Company's phase down and subsequent exit from the retail used car sales business, which was the Company's sole source for finance contracts prior to its entry into indirect consumer lending and premium finance. The Company's indirect consumer lending and premium finance businesses, which were formed in fiscal 1993, contributed $1,125,000 and $61,000, respectively, of finance charge income for the year ended June 30, 1993. The Company's overall effective yield on its finance receivables increased to 18.5% from 16.9%. Investment income increased as a result of higher average cash and cash equivalents and investment securities balances in fiscal 1993. The Company's yield on its cash and cash equivalents and investment securities was 3.6% for both the years ended June 30, 1993 and 1992. Other income for the year ended June 30, 1992 consisted primarily of commissions earned by the Company's wholly-owned subsidiary, Crestpointe General Agency, Inc., based upon the claims loss experience from certain collateral insurance policies financed by the Company through April 1991. Since these policies had only a one-year term, the amount of commissions earned during the year ended June 30, 1993 decreased compared to the year ended June 30, 1992. Sales decreased due to the Company's phase down and exit from the retail used car sales business effective December 31, 1992. The Company's share of operating results of its former affiliate, Pacific Automart Inc., resulted in income of $392,000 for the year ended June 30, 1993 compared to a loss of $777,000 for the year ended June 30, 1992. Costs and Expenses: Operating expenses as a percentage of average net finance receivables outstanding remained constant at 18.2% for both fiscal years. The dollar amount of operating expenses decreased by 47%, or $12.1 million, to $13.7 million from $25.8 million. These expenses decreased due to the Company's phase down and exit from the retail used car sales business. The provision for losses decreased to $8.0 million as compared to $39.4 million. Further discussion concerning the provision for losses is included under the caption, "Finance Receivables". FINANCE RECEIVABLES The Company provides financing in relatively high-risk markets, and therefore, charge-offs and related losses are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheet as a reserve against estimated future losses in the finance receivables portfolio. In the indirect consumer lending business, the Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are recorded in the consolidated balance sheet as an allowance for losses. The Company reviews historical origination and charge- off relationships, charge-off experience factors, collections information, 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 periodic provision for losses and the allowance for losses. Although the Company uses many resources to assess the adequacy of the allowance for losses, there is no precise method for accurately estimating the ultimate losses in the finance receivables portfolio. Net finance receivables represented 59.0% of the Company's total assets at June 30, 1994. The following table presents certain data related to the finance receivables portfolio (dollars in thousands):
June 30, 1994 Indirect Direct Premium Total Gross finance receivables $80,507 $ 8,467 $ 6,631 $95,605 Unearned finance charges and fees ( 12,871) ( 770) ( 484) ( 14,125) ------ ------ ------ ------ Finance receivables (principal amount) 67,636 7,697 6,147 81,480 Allowance for losses ( 7,721) ( 1,173) ( 436) ( 9,330) ------ ------ ------ ------ Finance receivables, net $59,915 $ 6,524 $ 5,711 $72,150 ====== ====== ====== ====== Number of outstanding contracts 9,375 4,232 11,867 25,474 ====== ====== ====== ====== Allowance for losses as a percentage of finance receivables (principal amount) 11.4% 15.2% 7.1% 11.5% ====== ====== ====== ====== Average amount of outstanding contract (principal amount) (in dollars) $ 7,215 $ 1,819 $ 518 $ 3,199 ====== ====== ====== ======
Indirect Finance Receivables: The following is a summary of indirect consumer lending contracts which are more than 60 days delinquent (dollars in thousands):
June 30, June 30, 1994 1993 Principal amount of delinquent contracts $1,269 $ 137 Principal amount of delinquent contracts as a percentage of total net indirect finance receivables outstanding 1.9% .9%
The following table presents charge-off data with respect to the Company's indirect finance receivables portfolio (dollars in thousands):
Years Ended June 30, June 30, 1994 1993 Net charge-offs $1,432 $ 49 Net charge-offs as a percentage of average net indirect finance receivables outstanding 3.8% .7%
The Company recorded periodic provisions for losses of $1,062,000 and $435,000 related to its indirect finance receivables portfolio for the years ended June 30, 1994 and 1993, respectively. The Company also accounts for acquisition fees on indirect consumer lending contracts as additional allowances for losses. The Company began its indirect consumer lending business in September 1992. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a more seasoned portfolio. Direct Finance Receivables: The following is a summary of direct lending contracts which are more than three payments delinquent if payment terms are weekly, bi-weekly or semi- monthly, and 60 days delinquent if payment terms are monthly (dollars in thousands):
June 30, June 30, 1994 1993 Number of delinquent contracts 319 811 Number of delinquent contracts as a percentage of the total number of contracts outstanding 7.5% 6.9% Amount of delinquent contracts * $ 897 $4,104 Amount of delinquent contracts as a percentage of total gross direct finance receivables outstanding * 10.6% 9.1%
* Includes unearned finance charges The following table presents repossession and charge-off data with respect to the Company's direct finance receivables portfolio:
Years Ended June 30, June 30, June 30, 1994 1993 1992 Repossessions and other charge-offs 2,613 7,780 8,617 Repossessions and other charge-offs as a percentage of the average number of contracts outstanding 32.9% 49.4% 37.7% Net charge-offs (in thousands) $ 7,626 $34,191 $48,578 Average net charge-off $ 2,918 $ 4,395 $ 5,637 Net charge-offs as a percentage of average direct finance receivables outstanding, less unearned finance charges 36.2% 49.0% 34.2%
Net charge-offs as a percentage of average direct finance receivables outstanding has decreased as the portfolio has become more seasoned and average outstanding contract balances have decreased. The Company recorded provisions for losses of $7,522,000 and $39,350,000 related to its direct lending portfolio for the years ended June 30, 1993 and 1992, respectively. No provision for losses was recorded for the year ended June 30, 1994. As of June 30, 1994, the Company reassigned $2,000,000 of allowances for losses from the direct lending portfolio to the indirect consumer lending and premium finance portfolios based upon an evaluation of the level of reserves necessary for the remaining liquidation of the direct lending finance receivables. Premium Finance Receivables: Premium finance loans made by the Company are collateralized by the unearned premium value of the car insurance policies financed. If the consumer defaults on the payment terms of the loan, the Company has the right to cancel the insurance policy and obtain a refund of unearned premiums from the insurance carrier. While the Company generally requires a sufficient down payment and limits the terms of loans so that the unearned premium value typically exceeds the outstanding principal balance of the loan, charge-offs may still result from untimely policy cancellations, short rate insurance premium refunds, non-refundable policy fees, insurance company or agency insolvencies or other factors. The Company recorded periodic provisions for losses of $187,000 and $7,000 related to its premium finance receivables portfolio for the years ended June 30, 1994 and 1993, respectively. The following table presents charge-off data with respect to the Company's premium finance receivables portfolio (dollars in thousands):
Years Ended June 30, June 30, 1994 1993 Net charge-offs $158 - Net charge-offs as a percentage of average net premium finance receivables outstanding 3.7% -
LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands):
Years Ended June 30, June 30, June 30, 1994 1993 1992 Operating activities $ 3,900 $17,332 $21,434 Investing activities ( 12,174) ( 8,121) ( 3,889) Financing activities ( 9,238) ( 5,705) ( 2,038) ------ ------ ------ Net increase (decrease) in cash and cash equivalents ($17,512) $ 3,506 $15,507 ====== ====== ======
In addition to the net change in cash and cash equivalents shown above, the Company also had a net decrease in investment securities of $8,651,000 for the year ended June 30, 1994 and net increases in investment securities of $25,616,000 and $9,541,000 for the years ended June 30, 1993 and 1992, respectively. Such amounts are included as investing activities in the above table. The Company's primary source of cash has been collections and recoveries on its finance receivables portfolio. The Company also received an income tax refund of $10.5 million in October 1992 and proceeds from the sale of its interest in Pacific Automart Inc. of $11.3 million in August 1993. The Company's primary use of cash has been purchases and originations of finance receivables. The Company entered the indirect consumer lending business in September 1992 and has grown the indirect finance receivables portfolio to $67.6 million as of June 30, 1994. The Company operated eighteen indirect consumer lending branches in thirteen states and had ten marketing representatives as of June 30, 1994. The Company plans to open twelve additional consumer lending branches, add additional marketing representatives, and expand loan production capacity at existing branch offices in fiscal 1995. While the Company has been able to establish and grow this business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. The Company's Board of Directors has authorized the repurchase of up to 6,000,000 shares of the Company's common stock. A total of 3,017,300 shares of common stock at an aggregate purchase price of $8,743,000 had been purchased pursuant to this program through June 30, 1994. On April 4, 1994, the Company purchased and cancelled the stock option to purchase up to 3,500,000 shares of its common stock held by Rainwater Management Partners, Ltd. for $1.782 per option share or $6,237,000. The stock option had an exercise price of $3.218 per share and was exercisable through April 24, 1994. As of June 30, 1994, the Company had $42.3 million in cash and cash equivalents and investment securities. The Company also has a revolving credit agreement with a bank under which the Company may borrow up to $20 million. The Company estimates that it will require additional external capital in fiscal 1995 in addition to these existing capital resources and collections and recoveries on its finance receivables portfolio in order to fund expansion of its indirect consumer lending business, capital expenditures, any additional common stock repurchases and other costs and expenses. The Company anticipates that such funding will be in the form of an expanded bank line of credit and securitization of a portion of its finance receivables portfolio. There can be no assurance that external funding will be available, or if available, that it will be on terms acceptable to the Company. AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands)
June 30, June 30, 1994 1993 ASSETS Cash and cash equivalents $ 15,756 $ 33,268 Investment securities 26,506 35,157 Finance receivables, net 72,150 43,889 Property and equipment, net 5,345 5,582 Other assets 2,458 1,931 Investment in affiliate 11,300 ------- ------- Total assets $122,215 $131,127 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 388 $ 1,278 Accounts payable 281 204 Accrued taxes and expenses 2,045 6,861 ------- ------- Total liabilities 2,714 8,343 ------- ------- Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued Common stock, $.01 par value per per share, 120,000,000 shares authorized; 31,757,333 and 31,723,733 shares issued 318 317 Additional paid-in capital 183,588 189,695 Accumulated deficit ( 55,717) ( 60,782) ------- ------- 128,189 129,230 Treasury stock, at cost (3,008,360 and 2,614,200 shares) ( 8,688) ( 6,446) ------- ------- Total shareholders' equity 119,501 122,784 ------- ------- Total liabilities and shareholders' equity $122,215 $131,127 ======= =======
The accompanying notes are an integral part of these consolidated financial statements AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data)
Years Ended June 30, June 30, June 30, 1994 1993 1992 Revenue: Finance charge income $ 12,788 $ 13,904 $ 23,989 Investment income 2,550 2,052 857 Other income 544 262 1,694 Sales 8,271 48,454 Equity in income (loss) of affiliate 392 ( 777) ---------- ---------- ---------- 15,882 24,881 74,217 ---------- ---------- ---------- Costs and expenses: Operating expenses 9,400 13,672 25,816 Provision for losses 1,249 7,964 39,350 Interest expense 168 221 322 Cost of sales 6,986 31,986 Restructuring charges 15,404 ---------- ---------- ---------- 10,817 44,247 97,474 ---------- ---------- ---------- Income (loss) before income taxes 5,065 ( 19,366)( 23,257) Provision for income taxes ( 944) ---------- ---------- ---------- Net income (loss) $ 5,065 ($ 19,366)($ 24,201) ========== ========== ========== Earnings (loss) per share $ .16 ($ .66)($ .77) ========== ========== ========== Weighted average shares and share equivalents 31,818,083 29,267,419 31,482,225 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands)
Additional Common Stock Treasury Stock Paid-in Accumulated hares Amount Shares Amount Capital Deficit Balance at July 1, 1991 31,388,901 $314 $188,803 ($17,215) Common stock issued on exercise of option 112,665 1 232 Purchase of treasury stock 220,500 ($ 594) Net loss ( 24,201) ---------- --- --------- ----- ------- ------ Balance at June 30, 1992 31,501,566 315 220,500 ( 594) 189,035 ( 41,416) Common stock issued on exercise of options 222,167 2 660 Purchase of treasury stock 2,393,700 ( 5,852) Net loss ( 19,366) ---------- --- --------- ----- ------- ------ Balance at June 30, 1993 31,723,733 317 2,614,200 ( 6,446) 189,695 ( 60,782) Common stock issued on exercise of options 33,600 1 130 Purchase of treasury stock 403,100 ( 2,297) Purchase and cancellation of stock option ( 6,237) Contribution of common stock to employee benefit plan ( 8,940) 55 Net income 5,065 ---------- --- --------- ----- ------- ------ Balance at June 30, 1994 31,757,333 $318 3,008,360 ($8,688) $183,588 ($55,717) ========== === ========= ===== ======= ======
The accompanying notes are an integral part of these consolidated financial statements AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended June 30, June 30, June 30, 1994 1993 1992 Cash flows from operating activities: Net income (loss) $ 5,065 ($19,366) ($24,201) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,274 1,862 2,067 Provision for losses 1,249 7,964 39,350 Equity in (income) loss of affiliate ( 392) 777 Deferred income taxes 12,082 Restructuring charges 2,401 Changes in assets and liabilities: Decrease in other assets 1,051 11,683 906 Decrease (increase) in income tax refunds receivable 10,546 ( 7,359) Increase (decrease) in accounts payable and accrued taxes and expenses ( 4,739) 2,634 ( 2,188) ------ ------ ------ Net cash provided by operating activities 3,900 17,332 21,434 ------ ------ ------ Cash flows from investing activities: Purchases and originations of finance receivables ( 76,208) ( 24,716) ( 45,893) Principal collections and recoveries on finance receivables 46,698 42,390 52,415 Purchases of property and equipment ( 3,255) ( 544) ( 1,187) Proceeds from disposition of property and equipment 640 365 317 Purchases of investment securities ( 19,183) ( 31,692) ( 10,543) Proceeds from sales and maturities of investment securities 27,834 6,076 1,002 Proceeds from sale of investment in affiliate 11,300 ------ ------ ------ Net cash used by investing activities ( 12,174) ( 8,121) ( 3,889) ------ ------ ------ Cash flows from financing activities: Payments on notes payable ( 890) ( 515) ( 1,677) Proceeds from issuance of common stock 186 662 233 Purchase of treasury stock ( 2,297) ( 5,852) ( 594) Purchase and cancellation of stock option ( 6,237) ------ ------ ------ Net cash used by financing activities ( 9,238) ( 5,705) ( 2,038) ------ ------ ------ Net increase (decrease) in cash and cash equivalents ( 17,512) 3,506 15,507 Cash and cash equivalents at beginning of year 33,268 29,762 14,255 ------ ------ ------ Cash and cash equivalents at end of year $15,756 $33,268 $29,762 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies History and Operations AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and began operations in March 1987. Since September 1992, the Company has been in the business of purchasing finance contracts originated by franchised and independent car dealers, generally referred to as indirect consumer lending. The Company operated 18 indirect consumer lending branch offices in thirteen states and had ten marketing representatives as of June 30, 1994. Beginning April 1993, the Company has also financed insurance premiums for consumers purchasing car insurance through independent insurance agents. The Company previously engaged in the retail used car sales and finance business. However, in connection with a restructuring during the year ended June 30, 1993 (see Note 10), the Company withdrew from the retail used car sales business effective December 31, 1992. The finance receivables originated in this previous business are referred to as the direct lending portfolio and are being liquidated over time as the contracts are collected or charged-off. Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Cash Equivalents Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. Investment Securities Investment securities are considered held-to-maturity and are carried at amortized cost. Finance Receivables Finance charge income related to finance receivables is recognized using the interest method. Accrual of finance charge income is suspended on finance contracts which are the lesser of three payments or 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related finance contracts also using the interest method. Provisions for losses are charged to operations in amounts sufficient to maintain the allowance for losses at a level considered adequate to cover estimated future losses in the existing finance receivables portfolio. In the indirect lending business, the Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews charge-off experience, 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 periodic provision for losses and the allowance for losses. Finance contracts are charged-off to the allowance for losses when the Company repossesses the collateral or the account is otherwise deemed uncollectible. Property and Equipment Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. Income Taxes Deferred income taxes are provided, when appropriate, in accordance with the asset and liability method of accounting for income taxes as prescribed by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", to recognize the tax effects of temporary differences between financial statement and income tax accounting. Earnings (Loss) Per Share Earnings (loss) per share is based upon the weighted average number of shares outstanding during each year, adjusted for any dilutive effect of warrants and options using the treasury stock method. 2. Investment Securities The amortized cost and estimated market value of investment securities as of June 30, 1994, by issuer type, are as follows (in thousands):
Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government obligations $ 5,600 $ $347 $ 5,253 State and local government obligations 550 550 Corporate debt securities 10,152 30 10,122 Mortgage-backed securities 10,204 3 188 10,019 ------ -- --- ------ $26,506 $ 3 $565 $25,944 ====== == === ======
The amortized cost and estimated market value of investment securities as of June 30, 1993, by issuer type, are as follows (in thousands):
Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government obligations $ 5,602 $ 2 $ $ 5,604 State of Utah government obligations 4,674 32 4,706 Other state and local government obligations 2,550 12 2,562 Corporate debt securities 4,303 32 4,335 Mortgage and other asset-backed securities 18,028 214 32 18,210 ------ --- --- ------ $35,157 $292 $ 32 $35,417 ====== === === ======
The amortized cost and estimated market value of investment securities as of June 30, 1994, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized Market Cost Value Due in one year or less $10,302 $10,294 Due after one year through five years 6,000 5,631 ------ ------ 16,302 15,925 Mortgage-backed securities 10,204 10,019 ------ ------ $26,506 $25,944 ====== ======
Proceeds from the sale of investment securities during the years ended June 30, 1994, 1993 and 1992 were $1,857,275, $942,000 and $1,002,000, respectively. No material gain or loss was realized on those sales. 3. Finance Receivables Finance receivables consist of the following (in thousands):
June 30, June 30, 1994 1993 Indirect consumer lending: Precomputed interest $55,617 $17,892 Simple interest 24,890 2,180 ------ ------ 80,507 20,072 Direct lending 8,467 45,071 Premium finance 6,631 1,700 ------ ------ Total finance receivables 95,605 66,843 Less unearned finance charges and fees ( 14,125) ( 10,373) ------ ------ Principal amount of finance receivables 81,480 56,470 Less allowance for losses ( 9,330) ( 12,581) ------ ------ Finance receivables, net $72,150 $43,889 ====== ======
The Company's finance contracts typically provide for finance charges on either a precomputed or simple interest basis. Precomputed interest finance receivables include principal and unearned finance charges. Simple interest finance receivables include principal only. All direct lending and premium finance contracts are precomputed interest finance receivables. Direct and indirect consumer lending finance contracts are collateralized by car titles and the Company has the right to repossess the car in the event that the consumer defaults on the payment terms of the contract. A significant portion of such finance receivables are with consumers located in the state of Texas. The accrual of finance charge income has been suspended on $2,244,000 and $3,589,000 of delinquent finance contracts as of June 30, 1994 and 1993, respectively. Contractual maturities of finance receivables for years ending June 30 are as follows (in thousands): 1995 $34,828 1996 22,682 1997 15,455 1998 6,121 1999 2,394 ------ $81,480 ======
The Company's experience has been that a portion of the scheduled payments will be received prior to contractual maturity dates. A summary of the allowance for losses is as follows (in thousands):
Years Ended June 30, June 30, June 30, 1994 1993 1992 Balance at beginning of year $12,581 $37,468 $46,696 Provision for losses 1,249 7,964 39,350 Acquisition fees on indirect consumer lending contracts 4,716 1,389 Net charge-offs ( 9,216) ( 34,240) ( 48,578) ------ ------ ------ Balance at end of year $ 9,330 $12,581 $37,468 ====== ====== ======
4. Property and Equipment Property and equipment consists of the following (in thousands):
June 30, June 30, 1994 1993 Land $ 700 $ 1,246 Buildings and improvements 2,279 1,175 Leasehold improvements 453 Equipment 5,307 7,073 Furniture and fixtures 867 1,021 ----- ------ 9,153 10,968 Less accumulated depreciation and amortization ( 3,808) ( 5,386) ----- ------ $5,345 $ 5,582 ===== ======
Included in property and equipment is certain leased equipment with a cost of $780,000 and $2,234,000, and accumulated amortization of $417,000 and $1,429,000 as of June 30, 1994 and 1993, respectively. 5. Investment in Affiliate The Company had a joint venture arrangement with certain entities and individuals for the purpose of establishing and operating retail used car sales lots in the state of California. The joint venture entity, Pacific Automart Inc., was owned 50% by the Company and 50% by the other investors. On August 3, 1993, the Company sold its entire interest in the joint venture to Pacific Automart Inc. for $11,300,000 in cash. No gain or loss was recognized on the sale. The joint venture investment was being accounted for using the equity method, whereby the Company recorded its 50% share of earnings or losses of the joint venture in its consolidated financial statements. 6. Notes Payable Notes payable consist of the following (in thousands):
June 30, June 30, 1994 1993 Obligations under capital leases, interest at varying rates, due in monthly installments including interest through November 1996, collateralized by certain equipment $385 $ 792 Mortgage notes payable, interest at 10%, due in monthly install- ments including interest through March 1995, collateralized by certain land 3 486 --- ----- $388 $1,278 === =====
Maturities of notes payable for years ending June 30 are as follows (in thousands): 1995 $165 1996 163 1997 60 --- $388 ===
The Company has a revolving credit agreement with a bank under which the Company may borrow up to $20,000,000, subject to a defined borrowing base. No borrowings were outstanding as of June 30, 1994. Borrowings under the credit agreement will be collateralized by the indirect consumer lending finance receivables portfolio and will bear interest at the bank's prime rate (7.25% at June 30, 1994) plus 1/2%. The Company is also required to pay an annual commitment fee equal to 3/8% of the unused portion of the credit agreement. The credit agreement, which expires on October 18, 1994, contains various restrictive covenants requiring certain minimum financial ratios and placing certain limitations on the incurrence of additional debt and capital expenditures. 7. Accrued Taxes and Expenses Accrued taxes and expenses consist of the following (in thousands):
June 30, June 30, 1994 1993 Accrued facility closing costs $ 153 $4,499 Accrued sales and use taxes 244 794 Accrued legal costs 718 794 Accrued payroll 517 148 Other 413 626 ----- ----- $2,045 $6,861 ===== =====
8. Commitments and Contingencies Indirect consumer lending branch offices are generally leased for terms of up to three years with certain rights to extend for additional periods. Lease expense, including amounts related to the retail sales locations prior to the Company's exit from the retail used car sales business, was $419,000, $1,259,000 and $2,034,000 for the years ended June 30, 1994, 1993 and 1992, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 1995 $297 1996 253 1997 169 1998 32 1999 21 --- $772 ===
Four lawsuits were filed against the Company, several of its current and former officers and directors, and certain other defendants, alleging violations of federal securities and other laws. The suits were originally filed in July 1990, and in October 1991, the four lawsuits were consolidated into one action. In May 1993, the U.S. District Court for the Northern District of Texas, Dallas Division, dismissed with prejudice all claims alleging violations of federal securities laws. The plaintiffs' state law claims were dismissed for want of jurisdiction. The plaintiffs appealed the dismissal to the Court of Appeals for the Fifth Circuit. On August 8, 1994, the Court of Appeals for the Fifth Circuit affirmed the U.S. District Court's dismissal of the lawsuit. The Company is involved in other lawsuits arising in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. 9. Stock Options and Warrants The Company has certain stock option plans for key employees. The plans generally provide for options to be granted, become exercisable, and terminate upon terms established by a committee of the Board of Directors. The Company also has certain stock option plans for non-employee directors. Except for the 1989 Stock Option Plan for Non-Employee Directors which has been terminated as to future grants, the terms under which options are to be granted, become exercisable and terminate are established by the plans. A summary of stock option activity under these plans is as follows:
Options Options Outstanding Available Shares Price Per Share Balance at July 1, 1991 (495,965 shares exercisable) 2,268,669 3,770,131 $1.50 - 14.50 Granted (1,315,000) 1,315,000 2.50 - 4.00 Canceled 1,480,668 (1,496,668) 1.50 - 11.75 Exercised ( 112,665) 1.50 - 3.00 --------- --------- ------------ Balance at June 30, 1992 (634,133 shares exercisable) 2,434,337 3,475,798 1.80 - 14.50 Granted ( 545,000) 545,000 3.00 - 4.26 Canceled 396,300 ( 741,100) 2.88 - 4.38 Exercised ( 222,167) 1.80 - 4.63 --------- --------- ------------ Balance at June 30, 1993 (1,893,400 shares exercisable) 2,285,637 3,057,531 2.50 - 14.50 Granted ( 814,880) 814,880 5.63 - 7.50 Canceled 78,900 ( 78,900) 2.88 - 14.50 Exercised ( 33,600) 2.50 - 5.75 --------- --------- ------------ Balance at June 30, 1994 (2,259,465 shares exercisable) 1,549,657 3,759,911 $2.50 - 14.50 ========= ========= ============
On April 24, 1991, the Company entered into a management services agreement with Rainwater Management Partners, Ltd. ("RMP"). Pursuant to such agreement, RMP provided certain consulting services related to strategic analysis of the Company's operations and major policy actions and directions. As part of the transaction, the Company issued to RMP a stock option to purchase up to 3,500,000 shares of its common stock at an exercise price of $3.218 per share. Ten percent of the option was exercisable at the time of issuance, and the balance of the option became exercisable over an 18-month period. On April 4, 1994, the Company purchased and canceled this stock option for $1.782 per option share or $6,237,000. The management services agreement with RMP was also terminated. In connection with a private stock offering in November 1989, the placement agents received warrants to purchase 244,185 shares of the Company's common stock at an exercise price of $7.33 per share. These warrants expire in September 1994. 10. Restructuring Charges Restructuring charges consist of the following for the year ended June 30, 1993 (in thousands): Facility closing costs $ 4,892 Write-down of inventories 4,123 Write-down of retail car sales assets 2,401 Severance pay and other retail car sales phase out costs 1,813 Other 2,175 ------ $15,404 ======
11. Income Taxes The provision for income taxes consists of the following for the year ended June 30, 1992(in thousands): Current $11,138 Deferred ( 12,082) ------ ($ 944) ======
The Company's effective income tax rate on income (loss) before income taxes differs from the U.S. statutory tax rate as follows:
Years Ended June 30, June 30, June 30, 1994 1993 1992 U.S. statutory tax rate 34% (34%) (34%) Utilization of net operating loss carryforwards (34 ) Losses providing no income tax benefit 34 34 Alternative minimum tax and other 4 -- -- -- 0% 0% 4% == == ==
The deferred income tax provision consists of the following (in thousands):
Years Ended June 30, June 30, June 30, 1994 1993 1992 Provision for losses ($2,285) ($7,592) ($ 3,751) Losses with no deferred income tax effect 4,168 6,097 ( 8,192) Other ( 186) 6 ( 139) Restructuring charges ( 1,697) 1,489 ----- ----- ------ $ 0 $ 0 ($12,082) ===== ===== ======
The deferred tax asset consists of the following (in thousands):
June 30, June 30, 1994 1993 Income tax net operating loss carryforwards $17,715 $16,323 Allowance for losses 1,078 3,805 Other, net 1,254 2,258 ------ ------ 20,047 22,386 Valuation allowance ( 20,047) ( 22,386) ------ ------ $ 0 $ 0 ====== ======
As of June 30, 1994, the Company has net operating loss carryforwards of $52,000,000 for income tax reporting purposes which expire between 2007 and 2009 and an alternative minimum tax carryforward of $900,000 with no expiration date. 12. Supplemental Information Cash payments (receipts) for interest costs and income taxes consist of the following (in thousands):
Years Ended June 30, June 30, June 30, 1994 1993 1992 Interest costs (none capitalized) $ 168 $ 221 $ 322 Income taxes ( 10,546) ( 3,779)
During the year ended June 30, 1994, the Company sold certain property and equipment for cash and a note receivable of $740,000. During the year ended June 30, 1992, a capital lease obligation of $603,000 was incurred when the Company entered into a lease for equipment. Effective July 1, 1993, the Company established a defined contribution retirement plan covering substantially all employees. The Company's contribution to the plan, which was made in Company common stock, was $55,000 for the year ended June 30, 1994. The Company incurred advertising costs of $465,000 and $1,880,000 during the years ended June 30, 1993 and 1992, respectively. REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders AmeriCredit Corp. We have audited the accompanying consolidated balance sheets of AmeriCredit Corp. as of June 30, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmeriCredit Corp. as of June 30, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 9, 1994 AMERICREDIT CORP. Common Stock Data The Company's common stock trades on the New York Stock Exchange under the symbol ACF. There were 28,748,973 shares of common stock outstanding as of June 30, 1994. The following table sets forth the range of the high, low and closing sale prices for the Company's common stock as reported on the Composite Tape of New York Stock Exchange Listed Issues.
High Low Close Fiscal year ended June 30, 1994: First Quarter $ 6.50 $ 5.00 $ 5.88 Second Quarter 8.00 5.75 7.75 Third Quarter 8.13 5.38 6.50 Fourth Quarter 6.50 5.13 5.88 Fiscal year ended June 30, 1993: High Low Close First Quarter $ 3.75 $ 2.13 $ 3.50 Second Quarter 4.13 2.88 4.00 Third Quarter 4.50 3.38 3.63 Fourth Quarter 5.38 3.25 5.13
As of June 30, 1994, there were approximately 626 shareholders of record of the Company's common stock. AMERICREDIT CORP. Quarterly Data (Unaudited) (dollars in thousands, except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal year ended June 30, 1994: Finance charge income $ 2,896 $ 3,006 $ 3,099 $ 3,787 Provision for losses 288 264 336 361 Net income 1,135 1,334 1,210 1,386 Earnings per share .04 .04 .04 .05 Weighted average shares and share equivalents 31,842,088 32,614,405 32,487,816 30,345,589 First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal year ended June 30, 1993: Finance charge income $ 4,263 $ 3,638 $ 3,123 $ 2,880 Sales (a) 5,468 2,803 Provision for losses 1,680 6,045 78 161 Restructuring charges 15,404 Net income (loss) ( 191) ( 21,260) 1,169 916 Earnings (loss) per share ( .01) ( .73) .04 .03 Weighted average shares and share equivalents 30,093,629 28,936,768 30,148,691 30,709,141
(a) The Company withdrew from the retail used car sales business effective December 31, 1992. SHAREHOLDER INFORMATION Corporate Headquarters: 200 Bailey Avenue Fort Worth, Texas 76107 (817) 332-7000 Investor Relations Information: For financial/investment data and general information about AmeriCredit Corp., write the Investor Relations Department at the above address, or telephone (817) 882-7009. Shareholder Services: For shareholder account information and other shareholder services, write the Corporate Secretary at the above address, or telephone (817) 882-7009. Annual Meeting: The Annual Meeting of the Company will be held on November 9, 1994 at 10:00 a.m. in the Trinity Room on the 12th floor of the Fort Worth Club, 306 West 7th Street, Fort Worth, Texas. All shareholders are cordially invited to attend. Transfer Agent and Registrar: Society National Bank c/o Society Shareholder Services, Inc. 1201 Elm Street, #5050 Dallas, Texas 75270-2014 Direct Dial (214) 871-8844 Toll Free (800) 527-7844 Independent Accountants: Coopers & Lybrand L.L.P. 301 Commerce Street, Suite 1900 Fort Worth, Texas 76102-4119 Form 10-K: Shareholders may obtain without charge a copy of the company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, by writing to the Investor Relations Department at the Corporate Headquarters address. Directors Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President AmeriCredit Corp. Michael R. Barrington Vice President AmeriCredit Corp. President and Chief Operating Officer AmeriCredit Financial Services, Inc. Daniel E. Berce Vice President, Chief Financial Officer and Treasurer AmeriCredit Corp. James H. Greer President Shelton W. Greer Co., Inc. Gerald W. Haddock President and Chief Operating Officer Crescent Real Estate Equities Limited, L.P. Kenneth H. Jones, Jr. Attorney Decker, Jones, McMackin, McClane, Hall & Bates, P.C. EXECUTIVE OFFICERS AmeriCredit Corp.: Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President Michael R. Barrington Vice President Daniel E. Berce Vice President, Chief Financial Officer and Treasurer Chris A. Choate General Counsel and Secretary AmeriCredit Financial Services, Inc.: Michael R. Barrington President and Chief Operating Officer Dennis R. Adams Senior Vice President and Director of Collections Edward H. Esstman Senior Vice President and Director of Consumer Finance -----END PRIVACY-ENHANCED MESSAGE-----