-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bcg2ivNGbBG7XD+n/EU/gRbpJ1YwkR6kdoUP6WfQ16+zYg2ttb3r+INSBslGxQFW KIqbb4wfKlmvUKSxmsafmA== 0000912057-96-021117.txt : 19960926 0000912057-96-021117.hdr.sgml : 19960926 ACCESSION NUMBER: 0000912057-96-021117 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960925 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP CENTRAL INDEX KEY: 0000804269 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 752291093 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10667 FILM NUMBER: 96634261 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 817-332-70 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-K405 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1996 [ ] 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 Identification No.) incorporation or organization) 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. [ ] The aggregate market value of 24,452,995 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 18, 1996 was approximately $431,106,302. 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 28,340,491 shares of Common Stock, $.01 par value outstanding as of September 18, 1996. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended June 30, 1996 ("the Annual Report") furnished to the Commission pursuant to Rule 14a-3(b) and the definitive Proxy Statement pertaining to the 1996 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 4 2. Properties 17 3. Legal Proceedings 18 4. Submission of Matters to a Vote of Security Holders 18 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 19 6. Selected Financial Data 19 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 8. Financial Statements and Supplementary Data 19 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 19 PART III 10. Directors and Executive Officers of the Registrant 20 11. Executive Compensation 20 12. Security Ownership of Certain Beneficial Owners and Management 20 13. Certain Relationships and Related Transactions 20 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 21 SIGNATURES 22 3 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 automobile finance business. AFSI began operating in the indirect automobile finance business in September 1992. Through AFSI's branch offices and marketing representatives, the Company serves as a 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. Sales finance contracts originated by 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. These consumer finance loans typically range in amount from $9,000 to $15,000, with repayment terms usually ranging from 42 to 60 months. Funding for the Company's operations is obtained through the use of bank lines of credit and the issuance of automobile receivables-backed securities. The Company services its loan portfolio at facilities located in Fort Worth, Texas and Tempe, Arizona using automated loan servicing and collection systems. From April 1993 through January 1995, the Company, through another subsidiary, financed insurance premiums for consumers purchasing automobile insurance through independent insurance agents. The Company curtailed its activities in this business in order to concentrate its resources on the core indirect automobile finance business. The Company previously operated a chain of "we finance" used car retail lots in Texas, selling used cars and typically financing sales to customers. However, in connection with a restructuring during the year 4 ended June 30, 1993, the Company withdrew from the retail used car sales business effective December 31, 1992. INDIRECT AUTOMOBILE FINANCE OPERATIONS TARGET MARKET. The Company's indirect lending programs are designed to serve consumers who have limited access to traditional automobile 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 an established credit history. Because the Company serves consumers who are unable to meet the credit standards imposed by most traditional automobile financing sources, the Company generally charges interest at rates which are higher than those charged by traditional automobile financing sources. The Company also expects to sustain a higher level of credit losses than that experienced by traditional automobile 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 automobile financing, a dealer typically submits such buyer's application to one or more secondary financing sources, such as the Company, for approval and purchase. Since the Company is an indirect lender, the Company's financing programs are marketed directly to dealers rather than to consumers. 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 automobile dealers located in the markets in which the Company has branch offices or marketing representatives. While the Company occasionally finances purchases of new cars, a large majority 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, 1996, approximately 77% were originated by 5 manufacturer-franchised dealers with used car operations and 23% by independent dealers specializing in used car sales. The Company purchased contracts from 3,262 dealers during the year ended June 30, 1996. No dealer accounted for more than 10% of the total volume of contracts purchased by the Company for the year ended June 30, 1996. Prior to entering into a relationship with a dealer, the Company evaluates the dealer's operating history. The quality of the credit applications submitted by the dealer for review and the 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 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. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon such representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer. BRANCH 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 a branch manager, an assistant manager, and one or more dealer and customer service representatives. Larger branches may also have an additional assistant manager and/or a dealer marketing representative. Branch managers are compensated with base salaries, annual incentives based on overall branch performance and stock option grants. The branch managers report to a regional vice president. 6 The Company's regional vice presidents monitor branch office compliance with the Company's underwriting guidelines. The Company's automated application processing system and loan accounting system provide the regional vice presidents access to credit application information enabling them to consult with the branch managers on day to day credit decisions and review and approve exceptions to the Company's underwriting guidelines. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews. The regional vice presidents report to senior vice presidents who in turn report to the Executive Vice President and Director of Consumer Finance Operations. As of June 30, 1996, the Company operated 51 branch offices in 26 states. The Company has branch offices in the following locations: STATE CITY ----- ---- Arizona Phoenix California San Jose San Francisco Concord Fresno Los Angeles San Diego Stockton Colorado Colorado Springs Denver Florida Tampa Ft. Lauderdale Jacksonville Orlando Georgia Atlanta (2) Illinois Chicago (3) Indiana Indianapolis Kentucky Louisville Maryland Baltimore Massachusetts Boston Michigan Detroit Missouri Kansas City St. Louis Nevada Las Vegas New Jersey Marlton New Mexico Albuquerque North Carolina Charlotte Raleigh-Durham 7 STATE CITY ----- ---- Ohio Columbus Cleveland Cincinnati Akron Oklahoma Oklahoma City Oregon Portland Pennsylvania Pittsburgh South Carolina Greenville Charleston Tennessee Nashville Memphis Texas Dallas-Fort Worth Houston San Antonio Utah Salt Lake City Virginia Vienna Newport News Norfolk Richmond Washington Seattle The Company selects markets for branch office locations based upon the availability of qualified branch managers and evaluation of regulatory, competitive and demographic factors. Branch offices are typically situated in office buildings which are accessible to local automobile dealers. MARKETING REPRESENTATIVES. The Company's marketing representatives are responsible for solicitation and development of dealer relationships in existing branch territories and in markets where the Company does not have a branch presence. Unlike the Company's branch managers, the marketing representatives do not have credit authority. Credit applications solicited by marketing representatives located in teritories where the Company does not have a branch presence are underwritten at a central purchasing office in Dallas-Fort Worth, Texas. FINANCE CONTRACT ACQUISITION. The Company purchases individual finance contracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. The Company's central purchasing office operates in a manner similar to the branch office network. 8 All credit extensions are executed at the branch level. Each branch manager has a specific credit authority based upon their experience and historical loan portfolio results and credit scoring parameters. Extensions of credit outside these limits are reviewed and approved by a regional vice president. Although the credit approval process is decentralized, all credit decisions are guided by the Company's credit scoring strategies and overall credit and underwriting policies and procedures. The Company has implemented a credit scoring system across its branch network to support the branch level credit approval process. The credit scoring system was developed with the assistance of Fair Isaac & Co., Inc. from the Company's loan origination and portfolio databases. Credit scoring is used to prioritize applications for processing and to tailor loan pricing and structure to an empirical assessment of credit risk. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations at the branch level in evaluating finance contracts for purchase could adversely affect the credit quality of the Company's loan portfolio. Loan application packages completed by prospective obligors are received via facsimile at the branch offices from 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 branch manager. In either case, the Company's credit policy requires investigation of all applications prior to loan funding. The branch manager reviews the application package and determines whether to approve the application, approve the application subject to conditions that must be met, or deny the application. The branch manager considers many factors in arriving at a credit decision, including the applicant's credit score, capacity to pay, stability, character and intent to pay, the contract terms, and collateral value. In certain cases, a regional vice president may review and approve the branch manager's credit decision. The Company estimates that approximately 55% 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. Dealers are contacted regarding credit decisions by telefax and/or telephone. Declined and conditioned applicants are also provided with appropriate notification of the decision. 9 Once a credit approval has been received from the Company and any other financing 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. Completed loan packages are sent by the dealers to the branch office. Loan terms and insurance coverages are generally 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 scanned to create an electronic copy. Key original documents are stored in a fire-proof vault and the loan packages are further processed in an electronic environment. The loans are reviewed for proper documentation and regulatory compliance and are entered into the Company's loan accounting system. A daily loan report is generated for a final review by consumer finance operations management. Once cleared for funding by consumer finance operations management, the loan services department issues a check to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the automobile that was financed. All of the Company's finance contracts are fully amortizing with substantially equal monthly installments. Consumers receive monthly billing statements from the Company directing them to remit payments to the Company's lockbox bank for deposit into the Company's lockbox account. Payment receipt data is electronically transferred to the Company by its lockbox bank for posting to the loan accounting system. All payment processing and customer account maintenance is performed centrally by the loan services department. COLLECTIONS AND REPOSSESSIONS. Collection activity on finance contracts is performed centrally at the Company's Fort Worth, Texas and Tempe, Arizona collection facilities. The Company believes that centralization of collections activities creates a more efficient process through the use of technology and employment of economies of scale. The Company's collection personnel ("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 within a few days after delinquency occurs. A collector's action is usually 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 call is routed to a collector and the delinquent consumer's account 10 information is displayed on the collector's computer terminal. The collector then attempts to work out the delinquency with the consumer. If a consumer is delinquent in their payment obligations, 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 automobile and generally will take prompt action to do so. Repossessions are handled by independent repossession firms engaged by the Company. Repossessions must be approved by a collection officer. 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 automobile, and return of personal items to the consumer. In some jurisdictions, the Company must provide the consumer with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy, may restrict the Company's ability to dispose of the repossessed vehicle. Upon repossession and after any prescribed waiting period, the repossessed automobile is typically sold at auction. The proceeds from the sale of the automobile at auction and any other recoveries are credited against the balance of the finance contract. Auction proceeds from the sale of repossessed vehicles and other recoveries are usually not sufficient to cover the outstanding balance of the finance contract, and the resulting deficiencies are charged-off against the Company's allowance for losses. The Company may 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 consumer to insure the collateral, continuing efforts are made to persuade the consumer to comply with the insurance requirements of the finance contract. Although it has the right, the Company rarely repossesses a vehicle 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. In the event that the consumer fails to maintain insurance as required by the finance contract, the Company may be adversely affected in its 11 ability to realize auction proceeds from the sale of repossessed vehicles if the vehicle collateralizing the finance contract has been damaged or stolen. Further, uninsured damage or theft of the vehicles serving as collateral under the finance contracts can be expected to result in higher rates of default by consumers. 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 commissions and fees 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 consumer finance operations 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 histories. The risk management department also reviews the performance of the Company's credit scoring system and is involved with third party vendors in the development of new credit scorecards for the Company. 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 underwritten by each branch 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 on a consolidated basis, as well as at the branch, dealer and transaction levels. While the Company's risk management department is designed to minimize the risks inherent in the decentralized credit approval process, the risk of adverse finance contract purchases by the branch network cannot be eliminated. 12 TRADE NAMES The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. COMPETITION The Company encounters strong 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. As an indirect lender, the Company's financing programs are marketed directly to automobile dealers rather than consumers. The Company believes that there are numerous competitors providing, or capable of providing, financing through dealers for purchases of automobiles. Many of these competitors have long standing relationships with dealers. The principal competitive factors affecting a dealer's decision to offer finance contracts for sale to a particular financing source are the level of service including promptness and consistency of credit application processing, the timeliness of contract funding, the competitiveness of financing terms and fees and the financial stability of the funding source. The Company plans to expand its indirect automobile finance business by adding additional branch offices 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 branch 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 dealers or a decrease in contract acquisition volume, which would adversely affect the Company's profitability. Because the Company's target market consists of consumers who generally have limited access to traditional automobile financing sources, the Company usually does not compete directly with banks, savings and loans, credit unions, the manufacturers' captive finance companies and other traditional sources of consumer credit. However, 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. 13 REGULATION The Company's operations are subject to regulation, supervision, and licensing under various federal, state and local statutes, ordinances and regulations. In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company's business. 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 and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring model used by the Company must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires 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 automobile 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 14 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. As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other theories of liability, usury, wrongful repossession, fraud and discriminatory treatment of credit applicants. The Company, as the assignee of finance contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. Management believes that the Company has taken prudent steps to address the litigation risks associated with its business activities. However, there can be no assurance that the Company will be able to successfully defend against all such consumer claims, or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's indirect automobile finance business. EMPLOYEES At June 30, 1996, the Company employed 447 persons. EXECUTIVE OFFICERS The following sets forth certain data concerning the executive officers of the Company, all of whom are elected on an annual basis. Name Age Position ---- --- -------- Clifton H. Morris, Jr. 61 Chairman of the Board, Chief Executive Officer and President 15 Michael R. Barrington 37 Executive Vice President and Chief Operating Officer of the Company; President and Chief Operating Officer of AFSI Daniel E. Berce 42 Executive Vice President, Chief Financial Officer and Treasurer Chris A. Choate 33 Vice President, General Counsel and Secretary Edward H. Esstman 55 Senior Vice President and Chief Credit Officer of the Company; Executive Vice President, Director of Consumer Finance Operations of AFSI Cheryl L. Miller 32 Senior Vice President, Director of Collections and Customer Service of AFSI Michael T. Miller 35 Senior Vice President, Director of Risk Management, Credit Policy and Planning and Chief of Staff of AFSI Preston A. Miller 32 Vice President and Controller 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 which owns and operates funeral homes and related businesses. MICHAEL R. BARRINGTON has been President and Chief Operating Officer of AFSI since AFSI's formation in July 1992. Mr. Barrington has also been Executive Vice President and Chief Operating Officer of the Company since November 1994 and Vice President of the Company from May 1991 until November 1994. 16 DANIEL E. BERCE is a certified public accountant and has been Executive Vice President, Chief Financial Officer and Treasurer of the Company since November 1994 and Vice President, Chief Financial Officer and Treasurer of the Company from May 1991 until November 1994. CHRIS A. CHOATE has been Vice President, General Counsel and Secretary of the Company since November 1994 and General Counsel and Secretary of the Company from January 1993 until November 1994. From July 1991 until January 1993, Mr. Choate was Assistant General Counsel. EDWARD H. ESSTMAN has been Executive Vice President, Director of Consumer Finance Operations of AFSI since November 1994 and Senior Vice President, Director of Consumer Finance of AFSI from AFSI's formation in July 1992 until November 1994. Mr. Esstman has also been Senior Vice President and Chief Credit Officer for the Company since November 1994. From April 1984 until June 1992, Mr. Esstman acted in various management capacities at Mercury Finance Company, most recently as Vice President of Administration. CHERYL L. MILLER has been Senior Vice President, Collections and Customer Service of AFSI since March 1996 and Vice President, Collections and Customer Service of AFSI from October 1994 until March 1996. From May 1994 until October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to that, Ms.Miller was with Ford Motor Credit Company, most recently as customer service supervisor of the Dallas branch. MICHAEL T. MILLER has been Senior Vice President, Risk Management, Credit Policy and Planning and Chief of Staff of AFSI since November 1994 and Vice President, Risk Management, Credit Policy and Planning of AFSI from AFSI's formation in July 1992 until November 1994. From May 1991 until July 1992, Mr. Miller was Manager of Credit Analysis of the Company. PRESTON A. MILLER has been Vice President and Controller of the Company since November 1994 and was Controller of the Company from September 1989 until November 1994. 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. This building is utilized by the Company for loan 17 servicing, branch support and administrative activities. The building has not been pledged as collateral for any outstanding debt. All of the Company's branch office facilities are leased under agreements with original terms of three to five years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 2,000 square feet of space. The Company also leases 25,000 square feet of office space in Tempe, Arizona under a ten year agreement with renewal options that commenced in July 1996. This facility is used for loan servicing activities. ITEM 3. LEGAL PROCEEDINGS In the normal course of its business, the Company is named as defendant in legal proceedings. These cases include claims for alleged truth-in- lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. One proceeding in which the Company is a defendant has been brought as a putative class action and is pending in federal district court in Connecticut. A class has yet to be certified in this case and the Company's motion to dismiss is presently pending. In the opinion of management, resolution of these matters will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. 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, 1996. 18 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, 1996, 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. 19 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 There is no information requiring disclosure pursuant to Item 404 of Regulation S-K. Accordingly, no information is furnished in response to this Item 13. 20 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, 1996 and 1995. Consolidated Income Statements for the years ended June 30, 1996, 1995 and 1994. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994. Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994. 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 24 through 27. (4) The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 1996. 21 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 23, 1996. 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 23, 1996 - ---------------------------- Chief Executive Officer Clifton H. Morris, Jr. and President /s/ Daniel E. Berce Executive Vice President, September 23, 1996 - ---------------------------- Chief Financial Officer Daniel E. Berce and Treasurer and Director /s/ Michael R. Barrington Executive Vice President, September 23, 1996 - ---------------------------- Chief Operating Officer Michael R. Barrington and Director /s/ Edward H. Esstman Senior Vice President, September 23, 1996 - ---------------------------- Chief Credit Officer and Edward H. Esstman Director /s/ James H. Greer Director September 23, 1996 - ---------------------------- James H. Greer /s/ Gerald W. Haddock Director September 23, 1996 - ---------------------------- Gerald W. Haddock /s/ Douglas K. Higgins Director September 23, 1996 - ---------------------------- Douglas K. Higgins 22 /s/ Kenneth H. Jones, Jr. Director September 23, 1996 - ---------------------------- Kenneth H. Jones, Jr. 23 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 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) *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) 24 ##10.11 -- Executive Employment Agreement, dated May 20, 1993, between the Company and Edward H. Esstman (Exhibit 10.18) ###10.12 -- Indenture, dated December 1, 1994, between AmeriCredit Receivables Finance Corp. and LaSalle National Bank (Exhibit 10.1) ###10.13 -- Sale and Servicing Agreement, dated December 1, 1994, between AmeriCredit Receivables Finance Corp., AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.2) ^10.14 -- Indenture, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A and LaSalle National Bank (Exhibit 10.15) ^10.15 -- Sale and Servicing Agreement, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A, AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.16) ^10.16 -- Restated Revolving Credit Agreement, dated June 2, 1995, between AmeriCredit Corp. and subsidiaries and First Interstate Bank of Texas, N.A., Bank One, Texas, N.A., LaSalle National Bank, The Daiwa Bank, Ltd., Harris Trust and Savings Bank, and Comerica Bank - Texas (Exhibit 10.17) ^^10.17 -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. ^^^10.18 -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1995-B, dated November 20, 1995, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) %10.19 Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-A, dated February 12, 1996, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) %%10.20 Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-B, dated April 30, 1996, among AmeriCredit Financial Services, Inc., AFS Funding Corp. and LaSalle National Bank (Exhibit 4.1) %%%10.21 -- 1996 Limited Stock Option Plan for AmeriCredit Corp. @11.1 -- Statement Re Computation of Per Share Earnings 25 INDEX TO EXHIBITS (Continued) @13.1 -- 1996 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 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 December 31, 1994 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, 1995 filed by the Company with the Securities and Exchange Commission. ^^ Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1995 filed by the Company with the Securities and Exchange Commission. ^^^ Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1995 26 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 March 31, 1996 filed by Company with the Securities and Exchange Commission. %% Incorporated by reference to the exhibit shown in parenthesis included in Form 8-K, dated May 16, 1996, filed by the AmeriCredit Automobile Receivables Trust 1996-B with the Securities and Exchange Commission. %%% Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1996 filed by the Company with the Securities and Exchange Commission. @ Filed herewith. 27 EX-11.1 2 EXHIBIT 11.1 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, 1996 1995 1994 ---------- ---------- ---------- PRIMARY: Average common shares outstanding 28,524,571 28,730,151 29,067,323 Common share equivalents resulting from assumed exercise of stock options and warrants 1,678,727 1,650,598 2,750,760 ---------- ---------- ---------- Average common shares and share equivalents outstanding 30,203,298 30,380,749 31,818,083 ---------- ---------- ---------- ---------- ---------- ---------- FULLY DILUTED: Average common shares outstanding 28,524,571 28,730,151 29,067,323 Common share equivalents resulting from assumed excercise of stock options and warrants 1,881,793 2,405,317 2,750,760 ---------- ---------- ---------- Average common shares and share equivalents outstanding 30,406,364 31,135,468 31,818,083 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME $ 21,591 $ 28,893 $ 5,065 ---------- ---------- ---------- ---------- ---------- ---------- Primary $ .71 $ .95 $ .16 ---------- ---------- ---------- ---------- ---------- ---------- Fully Diluted $ .71 $ .95 $ .16 ---------- ---------- ---------- ---------- ---------- ---------- Primary earnings per share has been computed by dividing net income 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 per share has been computed in the same manner as primary earnings 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-13.1 3 EXHIBIT 13.1 CORPORATE PROFILE AmeriCredit Corp. is a national consumer finance company specializing in purchasing and servicing automobile sales finance contracts. The Company is headquartered in Fort Worth, Texas, and its common shares are traded on the New York Stock Exchange. Through its branch offices and marketing representatives, the Company serves as a 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. Sales finance contracts originated by 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. These consumer finance loans typically range in amounts from $9,000 to $15,000, with repayment terms usually ranging from 42 to 60 months. Funding for the Company's operations is obtained through the use of bank lines of credit and the issuance of automobile receivables- backed securities. The Company services its loan portfolio at facilities, located in Fort Worth, Texas and Tempe, Arizona using automated loan servicing and collection systems. LETTER TO SHAREHOLDERS AmeriCredit Corp.'s strategic investments in quality people, leading edge technology and skilled risk management paid off in the form of strong growth for our fiscal year ended June 30, 1996. With a solid operating foundation in place, AmeriCredit experienced growth of 117% in managed finance receivables for fiscal 1996. Loan originations increased by 88% over last year. Revenue was up 145% and operating income was 242% higher for fiscal 1996 compared to fiscal 1995. The most important product of our investments, however, was that we were able to achieve these growth rates while staying focused on credit quality. Encouraged by this success, we have decided to accelerate our expansion plans for fiscal 1997. At the same time, AmeriCredit remains committed to making the investments necessary to position the company for sustained profitable growth. FISCAL 1996 RESULTS AmeriCredit earned $21.6 million, or $.71 per share for the fiscal year ended June 30, 1996. Pre-tax operating income for fiscal 1996 was a record $34.3 million, a 242% increase compared to pre-tax operating earnings of $10.0 million for fiscal 1995. Net income of $28.9 million, or $.95 per share, for the fiscal year ended June 30, 1995 included a one-time income tax credit of $19.0 million, or $.62 per share, arising from the Company's recognition of the future benefits from using its net operating loss and other tax credit carryforwards. RECEIVABLES GROWTH AmeriCredit attained growth of 117% in managed finance receivables for fiscal 1996, increasing the portfolio to $524.0 million at June 30, 1996 from $240.5 million at June 30, 1995. We purchased $432.4 million of new loans in fiscal 1996, up 88% compared to loan originations of $230.2 million for fiscal 1995. This growth resulted from opening new branch offices in fiscal 1996 and increasing market penetration in existing branch territories. Our ability to deliver fast, consistent service through our automated systems, combined with our strategy of focusing marketing efforts on dealers who have historically provided us higher quality credit applications, contributed to our increased lending volume. We purchased loans from 3,262 dealers in fiscal 1996 2 compared to 1,861 dealers last year. A dealer marketing survey recently conducted by an independent marketing research firm showed that dealers have a positive image of AmeriCredit and their awareness of AmeriCredit continues to grow. BRANCH EXPANSION AmeriCredit opened 20 branches in fiscal 1996, and at June 30, 1996 had a total of 51 lending offices located throughout the country. We were doing business in 39 states at fiscal year end. We have decided to accelerate our expansion rate going forward, with plans now to open 30 offices in fiscal 1997. Several factors convinced us to step up our expansion. First, we have been able to attract, develop and retain quality personnel. Approximately 40% of our branches are now managed by individuals trained and promoted from within AmeriCredit. Turnover at key positions in AmeriCredit has been minimal. In addition, our infrastructure has continually been strengthened to accommodate growth. Representative of our forward looking investments is the opening in August 1996 of our second servicing facility in Tempe, Arizona. This location will house 200 employees at its capacity, significantly expanding our servicing capabilities. Finally, our risk management strategies have performed favorably providing us confidence in our ability to increase loan production without sacrificing our commitment to credit quality. RISK MANAGEMENT STRATEGIES The cornerstone of our risk management strategies has been the use of new account credit scoring to assess credit quality at origination. Our initial scorecard was installed in the summer of 1994, and in late fiscal 1996, we completed the development of a new custom scorecard with the assistance of Fair Isaac & Co., Inc. We expect the new scorecard to be more predictive, which should help us to maintain volume objectives while enhancing our ability to evaluate credit quality. After two years of scorecard experience, it is clear that credit scoring works in the sub-prime auto finance niche. Our historical static pool portfolio performance, segregated by credit score interval, indicates that credit scoring 3 effectively differentiates credit risk across a broad spectrum of the sub-prime market. Based on the evaluation of risk through credit scoring, we are able to price each finance contract purchase according to risk. Our goal is to balance risk with our targeted returns. We believe that our risk management strategies have set AmeriCredit apart and allowed us this past year to avoid the deteriorating credit experience recently reported by some consumer credit lenders. TECHNOLOGY AND EFFICIENCY The deployment of leading edge technology combined with economies of scale realized from our centralized branch support and loan servicing operations has enabled AmeriCredit to be a low cost provider in our business. AmeriCredit's ratio of operating expenses to average net managed finance receivables outstanding decreased to 7.2% for fiscal 1996 from 10.0% for fiscal 1995. This ratio should improve further as we benefit from continued portfolio growth and information systems developments. During fiscal 1996, we continued to make investments in our operating platform. Among other enhancements, we upgraded the predictive dialing and automated collection systems used in our loan servicing centers. Voice response technology was installed to more efficiently and effectively manage customer service. A new version of our automated application processing system was implemented in the branch offices. We have also further developed our behavioral scoring models which are used to focus our collection efforts and contain loan servicing costs. AmeriCredit is committed to remaining at the forefront of technology in the sub-prime auto finance sector. FINANCE ACTIVITY AmeriCredit's asset securitization program has evolved to become the primary source of funding for our growth. We completed three automobile receivables- backed securities transactions in fiscal 1996, raising a total of $270.3 million. Our fourth quarter securitization was a public issuance which reduced our overall funding cost and attracted a more diversified investor base. We plan to access the automobile receivables-backed securities market each calendar quarter going forward. Our $150 million bank line of credit, which we use to warehouse finance receivables between securitization transactions, will also be expanded in fiscal 1997. 4 The Company repurchased 829,000 shares of our stock in fiscal 1996 at an aggregate price of $10.7 million or $12.92 per share. An additional 315,000 shares were repurchased in July and August of 1996. AmeriCredit's stock buyback program, authorized by the Board of Directors, allows the repurchase of another 1.4 million shares. OUTLOOK We are pleased that during the past year the financial community has taken note of AmeriCredit's unique risk management approach, operating efficiencies and growth prospects. The Company attracted broader shareholder interest and analyst coverage in fiscal 1996. Our hometown newspaper, The Fort Worth Star Telegram, recognized us as the top performing public company of 1995 in the Fort Worth area. AmeriCredit set out over four years ago to be a dominant player in sub-prime auto finance - building market share on a solid foundation of quality people and superior risk management - and to be a low cost provider aided by leading edge technology. We remain absolutely committed to these strategies and the creation of shareholder value. We appreciate the continued interest, support and loyalty of all of our employees, customers and shareholders. Sincerely, Clifton H. Morris, Jr. Chairman of the Board, Chief Executive Officer and President September 13, 1996 5 AMERICREDIT CORP. SUMMARY FINANCIAL AND OPERATING INFORMATION (dollars in thousands, except per share data) Year Ended ------------------------------------------------------------- June 30, June 30, June 30, June 30, June 30, 1996 1995 (a) 1994 1993 (b) 1992 --------- -------- -------- -------- ------- OPERATING DATA: Finance charge income $ 51,706 $ 30,249 $ 12,788 $ 13,904 $ 23,989 Gain on sale of receivables 22,873 Sales 8,271 48,454 Income (loss) before income taxes 34,256 10,018 5,065 (19,366) (23,257) Net income (loss) 21,591 28,893 5,065 (19,366) (24,201) Earnings (loss) per share .71 .95 .16 (.66) (.77) Weighted average shares and share equivalents 30,203,298 30,380,749 31,818,083 29,267,419 31,482,225
June 30, June 30, June 30, June 30, June 30, 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- BALANCE SHEET DATA: Cash and cash equivalents and investment securities $ 24,007 $ 33,586 $ 42,262 $ 68,425 $ 39,303 Finance receivables, net 250,484 221,888 72,150 43,889 69,527 Excess servicing receivable 33,093 Total assets 330,159 285,725 122,215 131,127 153,564 Total liabilities 166,934 138,499 2,714 8,343 6,224 Shareholders' equity 163,225 147,226 119,501 122,784 147,340
(a) As further described in the Financial Review, the Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. (b) The Company withdrew from the retail used car sales business effective December 31, 1992. 6 FINANCIAL REVIEW GENERAL Since September 1992, the Company has been in the business of purchasing and servicing automobile sales finance contracts originated by franchised and independent dealers. Finance receivables originated in this business are referred to as indirect receivables. Finance receivables originated in businesses previously operated by the Company are referred to as other receivables. Indirect-owned finance receivables represent finance contracts held in the Company's loan portfolio. The Company earns finance charge income on these finance receivables. When indirect finance receivables are sold to special purpose financing trusts (the "Trusts") in automobile receivables-backed securities transactions, the Company recognizes a gain on sale of receivables and continues to service such finance receivables. Indirect-serviced finance receivables represent finance contracts sold with servicing retained by the Company. The Company earns servicing fee income for acting as servicer of these finance receivables. RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 1996 AS COMPARED TO YEAR ENDED JUNE 30, 1995 REVENUE: The Company's average net owned and serviced finance receivables outstanding consisted of the following (in thousands): Years Ended June 30, ---------------------------- 1996 1995 ---- ---- Indirect-owned $261,776 $141,526 Indirect-serviced 96,190 -------- -------- 357,966 141,526 Other 443 6,918 -------- -------- $358,409 $148,444 -------- -------- -------- -------- 7 The Company's finance charge income consisted of the following (in thousands): Years Ended June 30, ---------------------------------- 1996 1995 ---- ---- Indirect $51,679 100% $ 29,039 96% Other 27 0% 1,210 4% ------- ---- -------- ---- $51,706 100% $ 30,249 100% ------- ---- -------- ---- ------- ---- -------- ---- The increase in indirect finance charge income is due to growth of 85% in average net indirect-owned finance receivables outstanding. The Company purchased $432.4 million of indirect loans during fiscal 1996, compared to $230.2 million during fiscal 1995. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 51 branch offices as of June 30, 1996, compared to 31 as of June 30, 1995. The decrease in other finance charge income is due to the ongoing liquidation of the related receivables portfolios. The Company's effective yield on its finance receivables decreased to 19.7% from 20.4%. Gain on sale of receivables of $22.9 million in fiscal 1996 resulted from the sale of finance receivables to the Trusts and the issuance to investors of $270.3 million of automobile receivables-backed securities by the Trusts. The gain represents the difference between the sales proceeds, net of transaction costs, and the Company's net carrying value of the receivables sold, plus excess servicing spread. Excess servicing spread is the present value of estimated future collections and recoveries on the finance receivables sold to the Trusts, less the present value of required principal and interest payments to the investors, base servicing fees payable to the Company and certain other fees. The gain on sale of receivables amounted to 8.5% of the sales proceeds for fiscal 1996. The Company's issuances of automobile receivables-backed securities in fiscal 1995 were structured as debt issuances by subsidiaries of the Company and thus were accounted for as borrowings on the Company's consolidated balance sheets, rather than as sales of receivables. Since the Company intends to structure future issuances of automobile receivables-backed securities in a manner which will result in the recognition of a gain on sale of receivables, the amount and 8 timing of such future transactions will significantly impact the Company's earnings from period to period. Servicing fee income of $3.7 million in fiscal 1996 represents the Company's base servicing fees and other fees earned for acting as servicer of the finance receivables sold to the Trusts and net excess servicing fees. COSTS AND EXPENSES: Operating expenses as a percentage of average net owned and serviced finance receivables outstanding decreased to 7.2% for fiscal 1996 as compared to 10.0% for fiscal 1995. The ratio improved as a result of economies of scale realized from a growing finance receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $10.9 million, or 74%, primarily due to the addition of branch offices and branch management and loan processing and servicing staff. The provision for losses increased to $7.9 million as compared to $4.3 million. Further discussion concerning the provision for losses is included under the caption, "Finance Receivables". Interest expense increased to $13.1 million for fiscal 1996 as compared to $4.0 million for fiscal 1995 due to the higher debt levels necessary to fund the Company's increased loan origination volume. Average debt outstanding was $163.8 million and $44.3 million for the years ended June 30, 1996 and 1995, respectively. The Company's effective rate of interest paid on its debt decreased to 8.0% from 9.1%. The provision for income taxes for fiscal 1996 resulted primarily from amortization of the Company's deferred tax asset at the federal statutory income tax rate. In the fourth quarter of fiscal 1995, the Company recognized an income tax benefit and a corresponding deferred tax asset equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. The deferred tax asset is being amortized through a non-cash income tax provision against the Company's earnings as the net operating loss carryforward and other future tax benefits are utilized. The Company will not pay regular federal income taxes until the net operating loss carryforward and other future tax benefits have been fully recovered. Prior to the fourth quarter of fiscal 1995, the Company had offset the deferred tax 9 asset with a valuation allowance. Accordingly, there was no provision for federal income taxes in fiscal 1995. YEAR ENDED JUNE 30, 1995 AS COMPARED TO YEAR ENDED JUNE 30, 1994 REVENUE: The Company's average net finance receivables outstanding consisted of the following (in thousands): Years Ended ---------------------------- June 30, June 30, 1995 1994 ---- ---- Indirect $141,526 $37,507 Other 6,918 25,260 -------- ------- $148,444 $62,767 -------- ------- -------- ------- The Company's finance charge income consisted of the following (in thousands): Years Ended ---------------------------- June 30, June 30, 1995 1994 ---- ---- Indirect $29,039 96% $ 7,820 61% Other 1,210 4% 4,968 39% ------- ---- ------- ---- $30,249 100% $12,788 100% ------- ---- ------- ---- ------- ---- ------- ---- The increase in indirect finance charge income is due to growth of 277% in average net indirect finance receivables outstanding. The Company purchased $230.2 million of indirect loans during fiscal 1995, compared to $65.9 million during fiscal 1994. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 31 branch offices as of June 30, 1995, compared to 18 as of June 30, 1994. The decrease in other finance charge income is due to the ongoing liquidation of the related receivables portfolios. The Company's overall effective yield on its finance receivables was 20.4% for both fiscal years. 10 COSTS AND EXPENSES: Operating expenses as a percentage of average net finance receivables outstanding decreased to 10.0% for fiscal 1995 as compared to 15.0% for fiscal 1994. The ratio improved as a result of economies of scale realized from a growing finance receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $5.4 million, or 57%, primarily due to the addition of branch offices and branch management and loan processing and servicing staff. The provision for losses increased to $4.3 million as compared to $1.2 million. Further discussion concerning the provision for losses is included under the caption, "Finance Receivables". Interest expense of $4.0 million for fiscal 1995 resulted from borrowings on the Company's bank line of credit and the issuance of $51 million and $99.2 million of automobile receivables-backed notes in December 1994 and June 1995, respectively. The Company did not have any bank borrowings during fiscal 1994. The income tax benefit in fiscal 1995 resulted from the Company's recognition of a deferred tax asset equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. Based on the Company's trend of positive operating results since entering the indirect automobile finance business in September 1992 and future expectations, the Company determined in the fourth quarter of fiscal 1995 that it is more likely than not that its net operating loss carryforward and other future tax benefits will be fully utilized prior to expiration of the carryforward periods. Prior to the fourth quarter of fiscal 1995, the Company had offset the deferred tax asset with a valuation allowance. Accordingly, there was no provision for federal income taxes in fiscal 1995 and 1994. FINANCE RECEIVABLES The Company provides financing in relatively high-risk markets, and therefore, charge-offs are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheets as a reserve against estimated future losses in the indirect-owned finance receivables portfolio. The Company typically purchases individual finance contracts with a non-refundable acquisition fee on a non- recourse basis. Such acquisition fees are also recorded in the consolidated balance sheets as an allowance for losses. The calculation of excess servicing 11 receivable includes an allowance for estimated future losses over the remaining term of the finance receivables sold to the Trusts and serviced by the Company. 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 75.9% and 77.7% of the Company's total assets at June 30, 1996 and 1995, respectively. The following table presents certain data related to the finance receivables portfolio (dollars in thousands): June 30, 1996 ------------------------------------- Indirect Indirect Total Owned Serviced Portfolio ------------------------------------- Gross finance receivables $315,552 $314,796 $630,348 Unearned finance charges and fees (51,466) (54,901) (106,367) --------- --------- --------- Finance receivables 264,086 $259,895 $523,981 --------- --------- --------- --------- Allowance for losses (13,602) $ 25,616 (1) $ 39,218 --------- --------- --------- --------- --------- --------- Finance receivables, net $250,484 --------- --------- Number of outstanding contracts 30,366 29,547 --------- -------- --------- -------- Average amount of outstanding contract (principal amount) $ 8,697 $ 8,796 (in dollars) --------- -------- --------- -------- Allowance for losses as a percentage of finance receivables 5.2% 9.9% 7.5% --------- --------- --------- --------- --------- --------- (1) The allowance for losses related to indirect-serviced finance receivables is netted against excess servicing receivable in the Company's consolidated balance sheets. 12 June 30, 1995 ------------------------------------- Indirect Total Owned Other Portfolio ------------------------------------- Gross finance receivables $287,360 $ 1,373 $288,733 Unearned finance charges and fees (46,869) (25) (46,894) --------- --------- --------- Finance receivables 240,491 1,348 241,839 Allowance for losses (19,376) (575) (19,951) --------- --------- --------- Finance receivables, net $221,115 $ 773 $221,888 --------- --------- --------- --------- --------- --------- Number of outstanding contracts 30,941 --------- --------- Average amount of outstanding contract (principal amount) (in dollars) $ 7,773 --------- --------- Allowance for losses as a percentage of finance receivables 8.1% --------- --------- The following is a summary of net indirect owned and serviced finance receivables which are more than 60 days delinquent (dollars in thousands): June 30, --------------- 1996 1995 ---- ---- Delinquent contracts $16,207 $ 4,907 Delinquent contracts as a percentage of total net indirect owned and serviced finance receivables outstanding 3.1% 2.0% 13 The following table presents charge-off data with respect to the Company's net indirect owned and serviced finance receivables portfolio (dollars in thousands): Years Ended June 30, ---------------------------- 1996 1995 1994 ---- ---- ---- Net charge-offs: Indirect-owned $18,322 $6,409 $1,432 Indirect-serviced 1,652 ------- ------ ------ $19,974 $6,409 $1,432 ------- ------ ------ ------- ------ ------ Net charge-offs as a percentage of average net indirect owned and serviced finance receivables outstanding 5.6% 4.5% 3.8% ------- ------ ------ ------- ------ ------ The Company recorded periodic provisions for losses as charges to operations of $7,912,000, $4,156,000 and $1,062,000 related to its indirect owned finance receivables portfolio for the years ended June 30, 1996, 1995 and 1994, respectively. (Provisions for losses of $122,000 and $187,000 for the years ended June 30, 1995 and 1994, respectively, were recorded with respect to other finance receivables). The increased loss provisions are a result of higher average net indirect-owned finance receivables outstanding. The Company began its indirect automobile finance business in September 1992 and has grown its total net owned and serviced finance receivables portfolio to $524.0 million as of June 30, 1996. The Company expects that its delinquency and charge-offs will increase over time as the portfolio matures and its finance receivables growth rate moderates. 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. 14 LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands): Years Ended June 30, ------------------------------- 1996 1995 1994 ---- ---- ---- Operating activities $34,897 $ 14,637 $ 3,900 Investing activities (63,116) (144,512) (12,174) Financing activities 12,050 132,433 (9,238) --------- ---------- --------- Net increase (decrease) in cash and cash equivalents $(16,169) $ 2,558 (17,512) --------- ---------- --------- --------- ---------- --------- In addition to the net change in cash and cash equivalents shown above, the Company also had net decreases in investment securities of $3.7 million, $16.2 million and $8.7 million for the years ended June 30, 1996, 1995 and 1994, respectively. Such amounts are included as investing activities in the above table. The Company's primary sources of cash have been collections and recoveries on its finance receivables portfolio, borrowings under its bank line of credit and the issuance of automobile receivables-backed securities. The Company has a line of credit with a group of banks under which it may borrow up to $150 million, subject to a defined borrowing base. The Company utilizes the line of credit to fund its daily lending activities and operations. A total of $86.0 million was outstanding under the line of credit as of June 30, 1996. During fiscal 1996 and 1995, the Company completed five automobile receivables- backed securities transactions. The proceeds from the transactions were used in each case to repay a portion of the borrowings then outstanding under the Company's bank line of credit. A summary of these transactions is as follows: 15 Amount Investor Accounting Issuer Name Date (in Millions) Rate Treatment - ----------- ---- ----------- ------ --------- AmeriCredit Receivables Finance Corp. 1994-A Dec. 1994 $ 51.0 8.19% Borrowing AmeriCredit Receivables Finance Corp. 1995-A Jun. 1995 99.2 6.55% Borrowing AmeriCredit Automobile Receivables Trust 1995-B Dec. 1995 65.0 6.10% Sale of Receivables AmeriCredit Automobile Receivables Trust 1996-A Mar. 1996 89.4 5.70% Sale of Receivables AmeriCredit Automobile Receivables Trust 1996-B May 1996 115.9 6.50% Sale of Receivables
The securities listed above were rated "Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard and Poor's Ratings Services. Financial Security Assurance, Inc. issued financial guaranty insurance policies for the benefit of the investors in each series. The Company's primary use of cash has been purchases and originations of finance receivables. The Company purchased $432.4 million of finance contracts during fiscal 1996 requiring cash of $417.2 million, net of acquisition fees and other factors. The Company operated 51 branch offices and had a number of marketing representatives as of June 30, 1996. The Company plans to open thirty additional branches in fiscal 1997. The Company may also expand loan production capacity at existing offices where appropriate. While the Company has been able to establish and grow its indirect automobile finance 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 4,279,500 shares at an aggregate purchase price of $22.9 million had been purchased pursuant to this program through June 30, 1996. As of June 30, 1996, the Company had $8.7 million in cash and cash equivalents and investment securities. The Company also had available borrowing capacity of $64.0 million under its bank line of credit. The Company estimates that it will require additional external capital for fiscal 1997 in addition to these existing capital resources and collections and recoveries on its finance receivables portfolio in order to fund expansion of its indirect automobile finance business, capital expenditures, additional common stock repurchases and other costs and expenses. 16 The Company anticipates that such funding will be in the form of additional automobile receivables-backed securities transactions, expansion of its bank line of credit and the implementation of other warehouse financing facilities. There can be no assurance that funding will be available to the Company through these sources, or if available, that it will be on terms acceptable to the Company. Since the Company's funding strategy is dependent upon the issuance of interest-bearing securities and the incurrence of other debt, fluctuations in interest rates impact the Company's profitability. The Company uses several strategies to minimize the risk of interest rate fluctuations including the use of hedging instruments and the regular sale of finance receivables to the Trusts. There can be no assurance that these strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on the Company's profitability. 17 AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS June 30, June 30, 1996 1995 ---- ---- Cash and cash equivalents $ 2,145 $ 18,314 Investment securities 6,558 10,265 Finance receivables, net 250,484 221,888 Excess servicing receivable 33,093 Restricted cash 15,304 5,007 Property and equipment, net 7,670 6,036 Deferred income taxes 9,995 19,788 Other assets 4,910 4,427 -------- --------- Total assets $330,159 $ 285,725 -------- --------- -------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $ 86,000 $ Automobile receivables-backed notes 67,847 134,520 Notes payable 418 716 Accrued taxes and expenses 12,669 3,263 -------- --------- Total liabilities 166,934 138,499 -------- --------- 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 share, 120,000,000 shares authorized; 32,640,963 and 32,117,201 shares issued 326 321 Additional paid-in capital 190,005 185,573 Accumulated deficit (5,233) (26,824) -------- --------- 185,098 159,070 Treasury stock, at cost (4,120,483 and 3,400,039 shares) (21,873) (11,844) -------- --------- Total shareholders' equity 163,225 147,226 -------- --------- Total liabilities and shareholders' equity $330,159 $285,725 -------- --------- -------- --------- The accompanying notes are an integral part of these consolidated financial statement 18 AMERICREDIT CORP. CONSOLIDATED INCOME STATEMENTS (dollars in thousands, except per share data) Years Ended ---------------------------------------- June 30, June 30, June 30, 1996 1995 1994 -------- -------- -------- Revenue: Finance charge income $ 51,706 $ 30,249 $ 12,788 Gain on sale of receivables 22,873 Servicing fee income 3,712 Investment income 1,075 1,284 2,550 Other income 1,612 1,551 544 --------- --------- --------- 80,978 33,084 15,882 --------- --------- --------- Costs and expenses: Operating expenses 25,681 14,773 9,400 Provision for losses 7,912 4,278 1,249 Interest expense 13,129 4,015 168 --------- --------- --------- 46,722 23,066 10,817 --------- --------- --------- Income before income taxes 34,256 10,018 5,065 Income tax provision (benefit) 12,665 (18,875) --------- --------- --------- Net income $ 21,591 $ 28,893 $ 5,065 --------- --------- --------- --------- --------- --------- Earnings per share $ .71 $ .95 $ .16 --------- --------- --------- --------- --------- --------- Weighted average shares and share equivalents 30,203,298 30,380,749 31,818,083 ---------- ---------- ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements 19 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands) Common Stock Additional Treasury Stock ----------------- Paid-in Accumulated -------------- Shares Amount Capital Deficit Shares Amount ------ ------ ------- --------- ------ ------ Balance at July 1, 1993 31,723,733 $ 317 $189,695 $(60,782) 2,614,200 $ (6,446) 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) Common stock issued for employee benefit plan (8,940) 55 Net income 5,065 ---------- ---- -------- -------- --------- --------- Balance at June 30, 1994 31,757,333 318 183,588 (55,717) 3,008,360 (8,688) Common stock issued on exercise of options 359,868 3 1,302 Income tax benefit from exercise of options 683 Purchase of treasury stock 433,200 (3,412) Common stock issued for employee benefit plans (41,521) 256 Net income 28,893 ---------- ---- -------- -------- --------- --------- Balance at June 30, 1995 32,117,201 321 185,573 (26,824) 3,400,039 (11,844) Common stock issued on exercise of options 523,762 5 3,045 Income tax benefit from exercise of options 1,387 Purchase of treasury stock 829,000 (10,710) Common stock issued for employee benefit plans (108,556) 681 Net income 21,591 ---------- ---- -------- -------- --------- --------- Balance at June 30, 1996 32,640,963 $326 $190,005 $(5,233) 4,120,483 $(21,873) ---------- ---- -------- -------- --------- --------- ---------- ---- -------- -------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements 20 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Years Ended --------------------------------------- June 30, June 30, June 30, 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Net income $ 21,591 $ 28,893 $ 5,065 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,528 1,317 1,274 Provision for losses 7,912 4,278 1,249 Deferred income taxes 11,681 (18,954) Gain on sale of receivables (22,873) Amortization of excess servicing receivable 6,636 Changes in assets and liabilities: Other assets (984) (1,834) 1,051 Accrued taxes and expenses 9,406 937 (4,739) -------- -------- -------- Net cash provided by operating activities 34,897 14,637 3,900 -------- -------- -------- Cash flows from investing activities: Purchases and originations of finance receivables (417,235) (225,350) (76,208) Principal collections and recoveries on finance receivables 94,948 71,334 46,698 Net proceeds from sale of receivables 268,923 Purchases of property and equipment (3,166) (1,791) (3,255) Proceeds from disposition of property and equipment 4 61 640 Purchases of investment securities (19,183) Proceeds from sales and maturities of investment securities 3,707 16,241 27,834 Increase in restricted cash (10,297) (5,007) Proceeds from sale of investment in affiliate 11,300 -------- -------- -------- Net cash used by investing activities (63,116) (144,512) (12,174) -------- -------- -------- Cash flows from financing activities: Borrowings on bank line of credit 342,600 83,900 Payments on bank line of credit (256,600) (83,900) Proceeds from issuance of automobile receivables-backed notes 150,170 Payments on automobile receivables- backed notes (66,673) (15,650) Payments on notes payable (298) (236) (890) Proceeds from issuance of common stock 3,731 1,561 186 Purchase of treasury stock (10,710) (3,412) (2,297) Purchase and cancellation of stock option (6,237) -------- -------- -------- Net cash provided (used) by financing activities 12,050 132,433 (9,238) -------- -------- -------- Net increase (decrease) in cash and cash equivalents (16,169) 2,558 (17,512) Cash and cash equivalents at beginning of year 18,314 15,756 33,268 -------- -------- -------- Cash and cash equivalents at end of year $ 2,145 $ 18,314 $ 15,756 -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated financial statements 21 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 automobile sales finance contracts originated by franchised and independent dealers, generally referred to as indirect lending. The Company operated 51 indirect lending branch offices in 26 states as of June 30, 1996 and also had a group of marketing representatives doing business in both branch territories and other areas. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates. These estimates include, among other things, anticipated prepayments and credit losses on finance receivables sold in automobile receivables-backed securities transactions and the determination of the allowance for losses on finance receivables. 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. 22 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 more than 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related 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 losses in the finance receivables portfolio. Automobile finance sales contracts are typically purchased by the Company for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews historical origination and charge-off relationships, charge-off experience factors, 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. Finance contracts are charged-off to the allowance for losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectible. EXCESS SERVICING RECEIVABLE The Company periodically sells finance receivables to certain special purpose financing trusts (the "Trusts"), and the Trusts issue automobile receivables- backed securities to investors in order to provide the sales proceeds. A gain on sale of receivables is recognized by the Company on the settlement date of such transactions. The gain on sale of receivables represents the difference between the sales proceeds, net of transaction costs, and the Company's net carrying value of the finance receivables sold, plus excess servicing spread. Excess servicing spread is the present value of estimated future collections and recoveries on the finance receivables sold to the Trusts, less the present value of required principal and interest payments to the investors, base servicing fees payable to the Company and certain other fees. 23 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EXCESS SERVICING RECEIVABLE (CONT.) Concurrently with recognizing such gain on sale of receivables, the Company records a corresponding asset, excess servicing receivable, equal to the excess servicing spread described above plus any subordinated interests in the Trusts retained by the Company. Excess servicing receivable is amortized, as a charge to servicing fee income, over the estimated term of the finance receivables sold. Collections of excess servicing receivable are recognized as servicing fee income when received. The calculation of excess servicing receivable includes estimates of future credit losses and prepayment rates for the remaining term of the finance receivables sold since these factors impact the amount and timing of future collections and recoveries on the finance receivables. The carrying value of excess servicing receivable is reviewed quarterly by the Company on a disaggregated basis by Trust. If future credit losses and prepayment rates exceed the Company's original estimates, excess servicing receivable will be adjusted through a charge to servicing fee income. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional servicing fee income. RESTRICTED CASH A financial guaranty insurance company (the "Insurer") has provided a financial guaranty insurance policy for the benefit of the investors in each series of automobile receivables-backed securities issued by the Trusts or special purpose financing subsidiaries of the Company. In connection with the issuance of the policies, the Company was required to establish a separate cash account with a trustee for the benefit of the Insurer for each series of securities and related finance receivables pool. Monthly collections and recoveries from each pool of finance receivables in excess of required principal and interest payments on the securities and servicing and other fees are added to the restricted cash accounts until the balance reaches a specified percentage of the pool of finance receivables, and thereafter are distributed to the Company. In the event that monthly collections and recoveries from any pool of finance receivables are insufficient to make required principal and interest payments to the investors and pay servicing and other fees, any shortfall would be drawn from the restricted cash accounts. 24 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RESTRICTED CASH (CONT.) Certain agreements with the Insurer provide that if delinquency, default and net loss ratios in the pools of finance receivables supporting the automobile receivables-backed securities exceed certain amounts, the specified levels of the restricted cash accounts would be increased and, in certain cases, the Company would be removed as servicer of the finance receivables. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. OFF BALANCE SHEET FINANCIAL INSTRUMENTS The Company periodically enters into hedging transactions to manage the gross interest rate spread on its automobile receivables-backed securities transactions. The Company's hedging strategies include the use of Forward U.S. Treasury Rate Lock Agreements. The face amount and terms of these agreements generally correspond to the principal amount and average maturities of the finance receivables to be sold to the Trusts and the related securities to be issued by the Trusts. Gains or losses on these agreements are deferred and recognized as a component of the gain on sale of receivables at the time that finance receivables are sold to the Trusts. 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. 25 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EARNINGS PER SHARE Earnings 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 fair value of investment securities as of June 30, 1996, by issuer type, are as follows (in thousands): Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- U.S. Government obligations $ 5,000 $ $ 304 $4,696 Mortgage-backed securities 1,558 1,558 ------- ------- ------- ------ $ 6,558 $ $ 304 $6,254 ------- ------- ------- ------ ------- ------- ------- ------ The amortized cost and estimated fair value of investment securities as of June 30, 1995, by issuer type, are as follows (in thousands): Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- U.S. Government obligations $ 5,000 $ $ 220 $4,780 Corporate debt securities 1,000 1,000 Mortgage-backed securities 4,265 4 122 4,147 ------- ------- ------- ------ $10,265 $ 4 $ 342 $9,927 ------- ------- ------- ------ ------- ------- ------- ------ The amortized cost and estimated fair value of investment securities as of June 30, 1996, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have 26 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. INVESTMENT SECURITIES (cont.) the right to call or prepay obligations with or without call or prepayment penalties. Estimated Amortized Fair Cost Value --------- --------- Due after one year through two years $5,000 $4,696 Mortgage-backed securities 1,558 1,558 ------ ------ $6,558 $6,254 ------ ------ ------ ------ Proceeds from the sale of investment securities during the year ended June 30, 1994 were $1,857,000. No material gain or loss was realized on the sale. 3. FINANCE RECEIVABLES Finance receivables consist of the following (in thousands): June 30, June 30, 1996 1995 -------- -------- Gross finance receivables: Indirect $315,552 $287,360 Other 1,373 -------- -------- 315,552 288,733 Less unearned finance charges and fees (51,466) (46,894) -------- -------- Principal amount of finance receivables 264,086 241,839 Less allowance for losses (13,602) (19,951) -------- -------- Finance receivables, net $250,484 $221,888 -------- -------- -------- -------- Indirect automobile sales finance contracts are collateralized by vehicle titles and the Company has the right to repossess the vehicle in the event that the consumer defaults on the payment terms of the contract. 27 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. FINANCE RECEIVABLES (cont.) The accrual of finance charge income has been suspended on $17,339,000 and $7,863,000 of delinquent finance contracts as of June 30, 1996 and 1995, respectively. Contractual maturities of finance receivables for years ending June 30 are as follows (in thousands): 1997 $ 73,477 1998 65,656 1999 58,687 2000 43,272 2001 22,994 -------- $264,086 -------- -------- 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, 1996 1995 1994 --------- ---------- ---------- Balance at beginning of year $19,951 $ 9,330 $12,581 Provision for losses 7,912 4,278 1,249 Acquisition fees 18,097 13,908 4,716 Allowance related to receivables sold (13,461) Net charge-offs-indirect (18,322) (6,409) (1,432) Net charge-offs-other (575) (1,156) (7,784) ------- ------- ------- Balance at end of year $13,602 $19,951 $ 9,330 ------- ------- ------- ------- ------- ------- 28 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. EXCESS SERVICING RECEIVABLE As of June 30, 1996, the Company was servicing $259,895,000 of automobile sales finance contracts which have been sold to the Trusts. Excess servicing receivable consists of the following (in thousands): June 30, 1996 -------- Estimated future net cash flows before allowance for credit losses $ 63,457 Allowance for credit losses (25,616) -------- Estimated future net cash flows 37,841 Unamortized discount at 12% (4,748) -------- $ 33,093 -------- -------- A summary of excess servicing receivable is as follows (in thousands): Year Ended June 30, ---------- 1996 ---- Balance at beginning of period $ 0 Additions related to receivables sold 39,729 Amortization (6,636) ------- Balance at end of period $33,093 ------- ------- 29 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): June 30, June 30, 1996 1995 -------- -------- Land $ 600 $ 600 Buildings and improvements 1,973 1,903 Equipment 6,994 6,230 Furniture and fixtures 828 1,003 ------- ------- 10,395 9,736 Less accumulated depreciation and amortization (2,725) (3,700) ------- ------- $7,670 $6,036 ------- ------- ------- ------- 6. DEBT The Company has a revolving credit agreement with a group of banks under which the Company may borrow up to $150 million, subject to a defined borrowing base. Aggregate borrowings of $86,000,000 were outstanding as of June 30, 1996. Borrowings under the credit agreement are collateralized by certain indirect finance receivables and bear interest, based upon the Company's option, at either the prime rate (8.25% as of June 30, 1996) or various market London Interbank Offered Rates plus 1.65%. 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 in October 1996, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the incurrence of additional debt, capital expenditures, cash dividends and repurchase of common stock. 30 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. DEBT (cont.) Automobile receivables-backed notes consist of the following (in thousands): June 30, June 30, 1996 1995 ---- ---- Series 1994-A notes, interest at 8.19%, collateralized by certain finance receivables in the principal amount of $13,995, final maturity in December 1999 $13,671 $ 35,350 Series 1995-A notes, interest at 6.55%, collateralized by certain finance receivables in the principal amount of $55,688, final maturity in September 2000 54,176 99,170 ------- -------- $67,847 $134,520 ------- -------- ------- -------- The Series 1994-A notes were issued in December 1994 and initially aggregated $51,000,000. The Series 1995-A notes were issued in June 1995 and initially aggregated $99,170,000. Each series of notes was issued by a wholly-owned special purpose financing subsidiary of the Company which holds the related finance receivables. Principal and interest on the notes are payable monthly from collections and recoveries on the specific pools of finance receivables which are collateral for the notes. Maturities of the automobile receivables-backed notes, based on the contractual maturities of the underlying finance receivables, for years ending June 30 are as follows (in thousands): 1997 $30,434 1998 22,066 1999 12,065 2000 3,282 ------- $67,847 ------- ------- The Company's experience has been that a portion of the scheduled payments on the underlying finance receivables will be received prior to the contractual 31 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. DEBT (cont.) maturity dates. Accordingly, scheduled payments shown above for the automobile receivables-backed notes would also be paid prior to the dates indicated. 7. COMMITMENTS AND CONTINGENCIES Branch lending offices are generally leased for terms of up to five years with certain rights to extend for additional periods. The Company also leases office space for its Tempe, Arizona loan servicing facility under a 10 year lease with renewal options. Lease expense was $875,000, $422,000 and $419,000 for the years ended June 30, 1996, 1995 and 1994, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 1997 $1,197 1998 990 1999 720 2000 480 2001 386 Thereafter 1,331 ------ $5,104 ------ ------ As of June 30, 1996, the Company had entered into a Forward U.S. Treasury Rate Lock Agreement to sell $100 million of U.S. Treasury Notes for settlement on August 30, 1996. The gain or loss on this hedging position will be recognized as a component of the gain on sale of receivables in the Company's first automobile receivables-backed securities transaction subsequent to June 30, 1996. The Company services automobile sales finance contracts for its own account and for the Trusts. These finance contracts are with consumers residing throughout the United States, with borrowers located in Texas accounting for 18% and 24% of the total serviced portfolio as of June 30, 1996 and 1995, respectively. No other state accounted for more than 10% of the total serviced portfolio. In the normal course of its business, the Company is named as defendant in legal proceedings. These cases include claims for alleged truth-in-lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes 32 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. COMMITMENTS AND CONTINGENCIES (cont.) requests for compensatory, statutory and punitive damages. One proceeding in which the Company is a defendant has been brought as a putative class action and is pending in federal district court in Connecticut. A class has yet to be certified in this case and the Company's motion to dismiss is presently pending. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position results of operations or liquidity of the Company. 8. STOCK OPTIONS The Company has certain stock option plans for key employees, marketing representatives and non-employee directors. The employee and marketing representative plans generally provide for options to be granted, become exercisable, and terminate upon terms established by a committee of the Board of Directors. The 1995 Omnibus Stock and Incentive Plan also provides for the issuance of other stock-based awards to key employees. Except for the 1989 Stock Option Plan for Non-Employee Directors which has been terminated as to future grants, the terms under which non-employee director options are to be granted, become exercisable and terminate are established by the plans. The Company also has a stock option plan for automobile dealers that become part of the Company's dealership network and refer business to the Company. Dealer options are granted based upon the volume of finance contracts purchased by the Company from such dealer and terminate three years from the date of grant. 33 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. STOCK OPTIONS (cont.) A summary of stock option activity under these plans is as follows: Options Outstanding Options ------------------------------ Available Shares Price Per Share ----------- --------- --------------- Balance at July 1, 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 Granted (1,346,490) 1,346,490 5.50 - 14.50 Canceled 162,100 (162,100) 3.00 - 14.50 Exercised (359,868) 2.80 - 8.13 Adoption of plans 4,000,000 ----------- --------- --------------- Balance at June 30, 1995 (3,247,084 shares exercisable) 4,365,267 4,584,433 2.50 - 14.50 Granted (1,801,723) 1,801,723 11.00 - 16.00 Canceled 44,500 (44,500) 4.00 - 11.00 Exercised (523,762) 2.80 - 12.88 Adoption of plan 850,000 ----------- --------- ---------------- Balance at June 30, 1996 (4,070,245 shares exercisable) 3,458,044 5,817,894 $2.50 - $16.00 ----------- --------- --------------- ----------- --------- --------------- 9. EMPLOYEE BENEFIT PLANS The Company has a defined contribution retirement plan covering substantially all employees. The Company's contributions to the plan, which were made in Company common stock, were $133,000, $99,000 and $55,000 for the years ended June 30, 1996, 1995 and 1994, respectively. The Company also has an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the fair market value at specified dates. A total of 500,000 shares have been reserved for issuance under the plan. Shares 34 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. EMPLOYEE BENEFIT PLANS (cont.) purchased under the plan were 97,117 and 31,361 for the years ended June 30, 1996 and 1995, respectively. 10. INCOME TAXES The income tax provision (benefit) consists of the following (in thousands): Year Ended June 30, ---------------- 1996 1995 ---- ---- Current $ 984 $ 79 Deferred 11,681 (18,954) ------- -------- $12,665 ($18,875) ------- -------- ------- -------- The Company's effective income tax rate on income before income taxes differs from the U.S. statutory tax rate as follows: Years Ended ----------------------------------- June 30, June 30, June 30, 1996 1995 1994 ---- ---- ---- U.S. statutory tax rate 35% 35% 35% Change in valuation allowance (226) (35) Other 2 3 ---- ---- ---- 37% (188%) 0% ---- ---- ---- ---- ---- ---- The deferred income tax provision (benefit) consists of the following (in thousands): Years Ended ----------------------------------- June 30, June 30, June 30, 1996 1995 1994 ---- ---- ---- Change in valuation allowance $ (320) ($22,615) $(1,606) Net operating loss carryforward 8,387 2,266 (2,447) Allowance for losses 1,556 32 2,278 Other 2,058 1,363 1,775 ------- -------- ------- $11,681 ($18,954) $ 0 ------- -------- ------- ------- -------- ------- 35 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES (cont.) The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands): June 30, June 30, 1996 1995 ---- ---- Deferred tax assets: Net operating loss carryforward $ 8,969 $17,356 Allowance for losses 1,151 Alternative minimum tax credits 1,548 1,047 Other 590 554 Valuation allowance (320) ------- ------- 11,107 19,788 ------- ------- Deferred tax liabilities: Allowance for losses 405 Other 707 ------- ------- 1,112 ------- ------- Net deferred tax asset $ 9,995 $19,788 ------- ------- ------- ------- The Company reduced the valuation allowance on the deferred tax asset in the fourth quarter of the year ended June 30, 1995 after re-evaluating the realizability of the deferred tax asset. Based on the Company's trend of positive operating results since entering the indirect automobile finance business in September 1992 and future expectations, the Company determined that it is more likely than not that its net operating loss carryforward and other future tax benefits will be fully utilized prior to expiration of the carryforward periods. As of June 30, 1996, the Company has a net operating loss carryforward of approximately $19,500,000 million for income tax reporting purposes which expires between 2007 and 2009 and an alternative minimum tax carryforward of $1,500,000 million with no expiration date. 36 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. SUPPLEMENTAL INFORMATION Cash payments for interest costs and income taxes consist of the following (in thousands): Years Ended ------------------------------- June 30, June 30, June 30, 1996 1995 1994 -------- --------- ---------- Interest costs (none capitalized) $12,179 $ 5,167 $ 168 Income taxes 1,447 151 During the year ended June 30, 1995, the Company sold certain property for cash and a note receivable of $184,000. During the year ended June 30, 1995, a capital lease obligation of $564,000 was incurred when the Company entered into a lease for equipment. During the year ended June 30, 1994, the Company sold certain property and equipment for cash and a note receivable of $740,000. 12. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair value information about financial instruments, whether or not recognized in the Company's consolidated balance sheets. Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts which ultimately may be realized or paid at settlement or maturity of the financial instruments. SFAS 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. 37 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont.) Estimated fair values, carrying values and various methods and assumptions used in valuing the Company's financial instruments as of June 30, 1996 are set forth below (in thousands): Carrying Estimated Value Fair Value -------- ---------- Financial assets: Cash and cash equivalents and restricted cash (a) $ 17,449 $ 17,449 Investment securities (b) 6,558 6,254 Finance receivables (c) 250,484 283,760 Excess servicing receivable (d) 33,093 35,009 Financial liabilities: Bank line of credit (e) 86,000 86,000 Automobile receivables- backed notes (f) 67,847 68,055 Unrecognized financial instruments: Forward U.S. Treasury Note sale (g) 0 (700) (a) The carrying value of cash and cash equivalents and restricted cash is considered to be a reasonable estimate of fair value. (b) The fair value of investment securities is estimated based on market prices for similar securities. (c) Since the Company periodically sells its finance receivables, fair value is estimated by discounting future net cash flows expected to be realized from the finance receivables using interest rate, prepayment and credit loss assumptions similar to the Company's historical experience. (d) The fair value of excess servicing receivable is estimated by discounting the associated future net cash flows using discount rate, prepayment and credit loss assumptions similar to the Company's historical experience. 38 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont.) (e) The bank line of credit has a variable rate of interest and a maturity of less than one year. Therefore, carrying value is considered to be a reasonable estimate of fair value. (f) The fair value of automobile receivables-backed notes is estimated based on rates currently available for debt with similar terms and remaining maturities. (g) The fair value of the forward U.S. Treasury Note sale is estimated based upon market prices for similar financial instruments. 13. RECENT ACCOUNTING DEVELOPMENTS In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and reporting standards for stock-based compensation plans such as stock purchase plans and stock options. The new standard allows companies either to continue to account for stock based employee compensation plans under existing accounting standards or adopt a fair value-based method of accounting for stock-based awards as compensation expense over the service period, which is usually the vesting period. SFAS 123 requires that if a company continues to account for stock options under existing accounting standards, pro forma net income and earnings per share information must be provided as if the new fair value approach had been adopted. Stock based awards to third parties must be accounted for on a fair value basis. The Company intends to continue to account for stock-based employee compensation under existing accounting standards and will be required to provide the pro forma disclosures described above effective in its consolidated financial statements for the year ended June 30, 1997. Stock option awards under the Company's dealer stock option plan issued after December 15, 1995 have been accounted for on a fair value basis. In June 1996, the FASB issued Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 establishes accounting and reporting standards for transfers of financial assets effective for 39 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. RECENT ACCOUNTING DEVELOPMENTS (cont.) transactions occuring after December 31, 1996. While the new standard will apply to the Company's periodic automobile receivables-backed securities transactions, the Company does not believe that adoption of SFAS 125 will have a material effect on the Company's consolidated financial position or results of operations. 40 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, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1996. 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, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 7, 1996 41 AMERICREDIT CORP. COMMON STOCK DATA The Company's common stock trades on the New York Stock Exchange under the symbol ACF. There were 28,520,480 shares of common stock outstanding as of June 30, 1996. 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. Fiscal year ended June 30, 1995: High Low Close ---- --- ----- First Quarter $ 6.75 $ 5.25 $ 6.75 Second Quarter 7.25 5.50 6.00 Third Quarter 8.25 5.25 8.13 Fourth Quarter 11.13 8.13 11.13 Fiscal year ended June 30, 1996: High Low Close ---- --- ----- First Quarter $15.00 $ 9.63 $14.88 Second Quarter 16.25 10.75 13.63 Third Quarter 14.25 10.38 13.88 Fourth Quarter 16.50 13.25 15.63 As of June 30, 1996, there were 403 shareholders of record of the Company's common stock. 42 AMERICREDIT CORP. QUARTERLY DATA (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Fiscal year ended First Second Third Fourth June 30, 1996: Quarter Quarter Quarter Quarter - --------------- ------- ------- ------- ------- Finance charge income $ 13,377 $ 13,852 $ 12,650 $ 11,827 Gain on sale of receivables 5,621 7,725 9,527 Income before income taxes 3,938 8,830 10,119 11,369 Net income 2,520 5,586 6,312 7,173 Earnings per share .08 .18 .21 .24 Weighted average shares share equivalents 31,223,551 31,120,461 30,082,193 30,273,327 Fiscal year ended First Second Third Fourth June 30, 1995: Quarter Quarter Quarter Quarter - --------------- ------- ------- ------- ------- Finance charge income $ 4,826 $ 6,312 $ 8,237 $ 10,874 Income before income taxes 1,837 2,135 2,650 3,396 Net income 1,801 2,092 2,650 22,350 Earnings per share .06 .07 .09 .73 Weighted average shares share equivalents 30,122,210 30,191,179 30,259,850 30,809,604
43 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 13, 1996 at 10:00 a.m. at the Fort Worth Club, Trinity Room, 700 Taylor Street, Fort Worth, Texas. All shareholders are cordially invited to attend. TRANSFER AGENT AND REGISTRAR: ChaseMellon Shareholder Services Stock Transfer Department 85 Challenger Rd., Overpeck Centre Ridgefield Park, NJ 07660 Direct Dial (800) 635-9270 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. 44 DIRECTORS Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT AmeriCredit Corp. Michael R. Barrington EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER AmeriCredit Corp. Daniel E. Berce EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER AmeriCredit Corp. James H. Greer CHAIRMAN OF THE BOARD Shelton W. Greer Co., Inc. Gerald W. Haddock PRESIDENT AND CHIEF OPERATING OFFICER Crescent Real Estate Equities Limited, L.P. Kenneth H. Jones, Jr. VICE CHAIRMAN KBK Capital Corporation Edward H. Esstman SENIOR VICE PRESIDENT AND CHIEF CREDIT OFFICER AmeriCredit Corp. Douglas K. Higgins OWNER Higgins & Associates 45 OFFICERS AMERICREDIT CORP.: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT Michael R. Barrington EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER Daniel E. Berce EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER Chris A. Choate VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL Edward H. Esstman SENIOR VICE PRESIDENT AND CHIEF CREDIT OFFICER AMERICREDIT FINANCIAL SERVICES, INC.: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Michael R. Barrington PRESIDENT AND CHIEF OPERATING OFFICER Daniel E. Berce EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER Edward H. Esstman EXECUTIVE VICE PRESIDENT, DIRECTOR OF CONSUMER FINANCE OPERATIONS Christopher M. Barry SENIOR VICE PRESIDENT, BRANCH OPERATIONS 46 Randy K. Benefield SENIOR VICE PRESIDENT, DIRECTOR OF MANAGEMENT INFORMATION SERVICES Malia C. Bingham SENIOR VICE PRESIDENT, BRANCH OPERATIONS Chris A. Choate SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL Patricia A. Jones SENIOR VICE PRESIDENT, DIRECTOR OF HUMAN RESOURCES Cheryl L. Miller SENIOR VICE PRESIDENT, DIRECTOR OF COLLECTIONS AND CUSTOMER SERVICE Michael T. Miller SENIOR VICE PRESIDENT, DIRECTOR OF RISK MANAGEMENT, CREDIT POLICY AND PLANNING AND CHIEF OF STAFF Preston A. Miller SENIOR VICE PRESIDENT AND CONTROLLER Cinde Perales SENIOR VICE PRESIDENT, DIRECTOR OF LOAN SERVICES Nils L. Wirstrom SENIOR VICE PRESIDENT, BRANCH OPERATIONS 47 EX-21.1 4 EXHIBIT 21.1 EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE COMPANY State of Subsidiary Ownership % Incorporation - ---------- ----------- ------------- AmeriCredit Operating Co., Inc. 100% Delaware AmeriCredit Financial Services, Inc. 100% Delaware ACF Investment Corp. 100% Delaware AmeriCredit Premium Finance, Inc. 100% Delaware AFS Funding Corp. 100% Nevada AmeriCredit Receivables Finance Corp. 100% Delaware AmeriCredit Receivables Finance Corp. 1995-A 100% Delaware EX-23.1 5 EXHIBIT 23.1 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, 33-48162, 33-56501 and 33-01111)and Form S-3 (File Nos. 33-52679 and 33-57517) of our report dated August 7, 1996, on our audits of the consolidated financial statements as of June 30, 1996 and 1995, and for the years ended June 30, 1996, 1995 and 1994, which report is incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND, L.L.P. Fort Worth, Texas September 23, 1996 EX-27.1 6 FDS EXHIBIT 27.1
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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1996 JUL-01-1995 JUN-30-1996 17,449 6,558 264,086 (13,602) 0 0 10,395 (2,725) 330,159 0 154,265 0 0 326 162,899 330,159 0 80,978 0 25,681 0 7,912 13,129 34,256 12,665 0 0 0 0 21,591 .71 .71
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