-----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, T0ZUI3xrUHz5knMZLSJX5a+Cmx6lQWBsCudcBkYnFlBHQw+PBf4FvVJOULbuQrHq IzjiruvPg2b8wPP3APhVgQ== 0000930661-99-000284.txt : 19990217 0000930661-99-000284.hdr.sgml : 19990217 ACCESSION NUMBER: 0000930661-99-000284 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19990216 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/A SEC ACT: SEC FILE NUMBER: 001-10667 FILM NUMBER: 99543270 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173327000 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/A 1 FORM 10-K405/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ________________________ Commission file number 1-10667 -------------------------------------------------------- AmeriCredit Corp. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Texas 75-2291093 - ------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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: 9 1/4 % Senior Notes due 2004/Guarantee of 9 1/4% Senior Notes due 2004 ------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____. ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of 49,174,966 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 11, 1998 was approximately $577,805,851. For purposes of this computation, all executive 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 executive officers, directors and beneficial owners are, in fact, affiliates of the Registrant. There were 62,196,640 shares of Common Stock, $.01 par value outstanding as of September 11, 1998. DOCUMENTS INCORPORATED BY REFERENCE None AMERICREDIT CORP. INDEX TO FORM 10-K/A AmeriCredit Corp. (the "Company") hereby amends and restates in their entirety each of the following items of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998 filed with the Securities and Exchange Commission on September 24, 1998.
ITEM PAGE NO. NO. - --------------------------------------------------------------------------- PART II 6. Selected Financial Data 4 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 7A. Quantitative and Qualitative Disclosures About Market Risk 5 8. Financial Statements and Supplementary Data 22 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 62 SIGNATURES 63
3 PART II Item 6. Selected Financial Data - ------------------------------- AMERICREDIT CORP. SUMMARY FINANCIAL AND OPERATING INFORMATION (dollars in thousands, except per share data)
Years Ended ------------------------------------------------------------------------------------ June 30, June 30, June 30, June 30, June 30, 1998 1997 1996 1995 (a) 1994 ---- ---- ---- -------- ---- OPERATING DATA: Auto loan originations $1,737,813 $ 906,794 $ 432,442 $ 230,176 $ 65,929 Finance charge income 55,837 44,910 51,706 30,249 12,788 Gain on sale of receivables 103,194 52,323 21,405 Servicing fee income 47,910 23,492 3,892 Income before income taxes 80,162 48,534 32,913 10,018 5,065 Net income 49,301 29,849 20,765 28,893 5,065 Diluted earnings per share 0.76 0.48 0.34 0.48 0.08 Weighted average shares and assumed incremental shares 65,203,460 61,574,548 60,406,596 60,761,498 63,636,166 June 30, June 30, June 30, June 30, June 30, 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Balance Sheet Data: Cash and cash equivalents $ 33,087 $ 6,027 $ 2,145 $ 18,314 $ 15,756 Receivables held for sale, net 342,853 266,657 250,484 221,888 72,150 Interest-only receivables from Trusts 131,694 53,465 10,476 Investments in Trust receivables 98,857 50,788 21,274 Restricted cash 55,758 57,142 9,986 Total assets 713,671 475,493 329,333 285,725 122,215 Total liabilities 425,823 267,232 166,934 138,499 2,714 Shareholders' equity 287,848 208,261 162,399 147,226 119,501 Managed auto receivables 2,302,516 1,138,255 523,981 240,491 67,636
(a) 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. 4 Item 7. Management's Discussion and Analysis of Financial Condition and - ----------------------------------------------------------------------- Results of Operations --------------------- Item 7A.Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- GENERAL The Company generates earnings and cash flow primarily from the purchase, securitization and servicing of auto receivables. The Company purchases auto finance contracts from franchised and select independent automobile dealerships. To fund the acquisition of receivables prior to securitization, the Company utilizes borrowings under its warehouse credit facilities. The Company generates finance charge income on its receivables pending securitization ("receivables held for sale") and pays interest expense on borrowings under its warehouse credit facilities. The Company sells receivables to securitization trusts ("Trusts") that, in turn sell asset-backed securities to investors. By securitizing its receivables, the Company is able to lock in the gross interest rate spread between the yield on such receivables and the interest rate payable on the asset-backed securities. The Company recognizes a gain on the sale of receivables to the Trusts which represents the difference between the sale proceeds to the Company, net of transaction costs, and the Company's net carrying value of the receivables, plus the present value of the estimated future excess cash flows to be received by the Company over the life of the securitization. Excess cash flows result from the difference between the interest received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses. Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by an insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to the Company. In addition to excess cash flows, the Company earns monthly base servicing fee income of 2.25% per annum of the outstanding principal balance of receivables securitized ("serviced receivables"). In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS"), which originates and sells mortgage loans. The acquisition was accounted for as a purchase and the results of operations for AMS have been included in the consolidated financial statements since the acquisition date. Receivables originated in this business are referred to as mortgage receivables. Such receivables are generally packaged and sold for cash on a servicing released whole-loan basis. The Company recognizes a gain at the time of sale. 5 RESULTS OF OPERATIONS Year Ended June 30, 1998 as compared to - --------------------------------------- Year Ended June 30, 1997 ------------------------ Revenue: The Company's average managed receivables outstanding consisted of the following (in thousands):
Years Ended June 30, ----------------------------- 1998 1997 ---- ---- Auto: Held for sale $ 250,304 $ 223,351 Serviced 1,399,112 568,804 ----------- ---------- 1,649,416 792,155 Mortgage 18,728 8,187 ----------- ---------- $ 1,668,144 $ 800,342 =========== ==========
Average managed receivables outstanding increased by 108% as a result of higher loan purchase volume. The Company purchased $1,737.8 million of auto loans during fiscal 1998, compared to purchases of $906.8 million during fiscal 1997. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 129 auto lending branch offices as of June 30, 1998, compared to 85 as of June 30, 1997. The Company originated $137.2 million of mortgage loans during fiscal 1998 compared to $53.8 million from the date of acquisition of AMS through June 30, 1997. Finance charge income consisted of the following (in thousands):
Years Ended June 30, ---------------------------- 1998 1997 ---- ---- Auto $ 54,125 $ 44,417 Mortgage 1,712 493 -------- -------- $ 55,837 $ 44,910 ======== ========
6 The increase in finance charge income is primarily due to an increase of 12% in average auto receivables held for sale in fiscal 1998 versus fiscal 1997. In addition, the Company's effective yield on its auto receivables held for sale increased to 21.6% for fiscal 1998 from 19.9% for fiscal 1997. The effective yield is higher than the contractual rates of the Company's auto finance contracts as a result of finance charge income earned between the date the auto finance contract is originated by the automobile dealership and the date the auto finance contract is funded by the Company. The gain on sale of receivables consisted of the following (in thousands):
Years Ended June 30, --------------------- 1998 1997 ---- ---- Auto $ 98,842 $49,405 Mortgage 4,352 2,918 -------- ------- $103,194 $52,323 ======== =======
The increase in gain on sale of auto receivables resulted from the sale of $1,637.5 million of receivables in fiscal 1998 compared to $817.5 million of receivables sold in fiscal 1997. The gains amounted to 6.0% of the sales proceeds for both fiscal 1998 and 1997. Significant assumptions used in determining the gain on sale of auto receivables were as follows:
Years Ended June 30, -------------------------------------- 1998 1997 ---- ---- Cumulative credit losses 10.7% 9.2% Discount rate used to estimate present value: Interest-only receivables from Trusts 12.0% 12.0% Investments in Trust receivables 7.8% 7.8% Restricted cash 7.8% 7.8%
The discount rates used to estimate the present value of credit enhancement assets are based on the relative risks of each asset type. Interest-only receivables represent estimated future excess cash flows in the Trusts, which 7 involves a greater degree of risk than investments in Trust receivables and restricted cash. Investments in Trust receivables and restricted cash represent assets currently held by the trustee and are senior to interest-only receivables for credit enhancement purposes. The increase in gain on sale of mortgage receivables resulted from the sale of $119.7 million of receivables in fiscal 1998 compared to $52.5 million of receivables sold from the date of acquisition of AMS through June 30, 1997. The average premium received on sales decreased to 3.6% for fiscal 1998 from 5.6% for the period from the date of acquisition of AMS through June 30, 1997. Servicing fee income increased to $47.9 million, or 3.4% of average serviced auto receivables, for fiscal 1998, compared to $23.5 million, or 4.1% of average serviced auto receivables, for fiscal 1997. Servicing fee income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. Servicing fee income for fiscal 1998 also includes an $8.9 million charge to increase credit loss reserves related to certain of the Company's fiscal 1997 and 1996 securitization transactions since the Company's current estimates of cumulative credit losses for these transactions exceed the original estimates. The Company has raised the assumptions for cumulative credit losses for securitization transactions completed in fiscal 1998 compared to assumptions used for transactions completed in prior fiscal years. The growth in servicing fee income exclusive of the aforementioned charge is attributable to the increase in average serviced auto receivables outstanding for fiscal 1998 compared to fiscal 1997. Costs and Expenses: Operating expenses as a percentage of average managed receivables outstanding decreased to 5.7% (5.4% excluding operating expenses of $5.1 million related to AMS) for fiscal 1998 compared to 6.6%(6.2% excluding operating expenses of $2.6 million related to AMS) for fiscal 1997. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $42.6 million, or 82%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses increased to $7.6 million for fiscal 1998 from $6.6 million for fiscal 1997 due to higher average amounts of receivables held for sale. As a percentage of average receivables held for sale, the provision for losses was 3.0% for fiscal 1998 and 1997. 8 Interest expense increased to $27.1 million for fiscal 1998 from $16.3 million for fiscal 1997 due to higher debt levels and effective interest rates. Average debt outstanding was $297.6 million and $187.6 million for fiscal 1998 and 1997, respectively. The Company's effective rate of interest paid on its debt increased to 9.1% from 8.7% as a result of the issuance of senior notes in February 1997 and January 1998. The Company's effective income tax rate was 38.5% for fiscal 1998 and 1997. 9 RESULTS OF OPERATIONS Year Ended June 30, 1997 as compared to - --------------------------------------- Year Ended June 30, 1996 ------------------------ Revenue: The Company's average managed receivables outstanding consisted of the following (in thousands):
Years Ended June 30, ------------------------------------------------- 1997 1996 ---- ---- Auto: Held for sale $ 223,351 $ 261,776 Serviced 568,804 96,190 ------------ ---------- 792,155 357,966 Mortgage 8,187 Other 443 ------------ ---------- $ 800,342 $ 358,409 ============ ==========
Average managed receivables outstanding increased by 123% as a result of higher loan purchase volume. The Company purchased $906.8 million of auto loans during fiscal 1997, compared to purchases of $432.4 million during fiscal 1996. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 85 auto lending branch offices as of June 30, 1997, compared to 51 as of June 30, 1996. The Company originated $53.8 million of mortgage loans from the date of acquisition of AMS through June 30, 1997. Finance charge income consisted of the following (in thousands):
Years Ended June 30, -------------------------------------------- 1997 1996 ---- ---- Auto $44,417 $51,679 Mortgage 493 Other 27 ------- ------- $44,910 $51,706 ======= =======
10 The decrease in finance charge income is due to a reduction of 15% in average auto receivables held for sale in fiscal 1997 versus fiscal 1996. Prior to December 1995, all of the auto finance contracts purchased by the Company were held on the Company's consolidated balance sheets. The Company began selling auto receivables to the Trusts in December 1995, reducing average receivables held for sale with corresponding increases in average serviced receivables. The Company's effective yield on its auto receivables held for sale increased to 19.9% for fiscal 1997 from 19.7% for fiscal 1996. The gain on sale of receivables consisted of the following (in thousands):
Years Ended June 30, ------------------------------------------ 1997 1996 ---- ---- Auto $49,405 $21,405 Mortgage 2,918 ------- ------- $52,323 $21,405 ======= =======
The increase in gain on sale of auto receivables resulted from the sale of $817.5 million of receivables in fiscal 1997 compared to $270.4 million of receivables sold in fiscal 1996. The gains amounted to 6.0% and 7.9% of the sales proceeds for fiscal 1997 and 1996, respectively. Significant assumptions used in determining the gain on sale of auto receivables were as follows:
Years Ended June 30, -------------------- 1997 1996 ---- ---- Cumulative credit losses 9.2% 9.3% Discount rate used to estimate present value: Interest-only receivables from Trusts 12.0% 12.0% Investments in Trust receivables 7.8% 7.8% Restricted cash 7.8% 7.8%
The discount rates used to estimate the present value of credit enhancement assets are based on the relative risks of each asset type. Interest-only receivables represent estimated future excess cash flows in the Trusts, which involves a greater degree of risk than investments in Trust receivables and restricted cash. Investments in Trust receivables and restricted cash represent assets currently held by the trustee and are senior to the interest-only receivables for credit enhancement purposes. The gain on sale of mortgage receivables resulted from the sale of $52.5 million of receivables from the date of acquisition of AMS through June 30, 1997. Servicing fee income increased to $23.5 million, or 4.1% of average serviced auto receivables, for fiscal 1997, compared to $3.9 million, or 4.0% of average serviced auto receivables, for fiscal 1996. Servicing fee income represents accretion of the present value discount on estimated future excess 11 cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. The growth in servicing fee income is attributable to the increase in average serviced auto receivables outstanding for fiscal 1997 compared to fiscal 1996. Costs and Expenses: Operating expenses as a percentage of average managed receivables outstanding decreased to 6.6% (6.2% excluding operating expenses of $2.6 million related to AMS) for fiscal 1997 compared to 7.2% for fiscal 1996. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $26.2 million, or 102%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses decreased to $6.6 million for fiscal 1997 from $7.9 million for fiscal 1996 due to lower average amounts of receivables held for sale. As a percentage of average receivables held for sale, the provision for losses was 3.0% for fiscal 1997 and 1996. Interest expense increased to $16.3 million for fiscal 1997 from $13.1 million for fiscal 1996 due to higher debt levels and effective interest rates. Average debt outstanding was $187.6 million and $156.4 million for fiscal 1997 and 1996, respectively. The Company's effective rate of interest paid on its debt increased to 8.7% from 8.4% as a result of the issuance of senior notes in February 1997. The Company's effective income tax rate increased to 38.5% for fiscal 1997 from 37.0% for fiscal 1996 due to a larger portion of the Company's income being generated in states which have higher tax rates. CREDIT QUALITY The Company provides financing in relatively high-risk markets and, therefore, charge-offs are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheets as a reserve against estimated losses in the receivables held for sale portfolio. The Company typically purchases individual finance contracts for 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. When the Company sells auto receivables to the Trusts, the calculation of the gain on sale of receivables is reduced by an estimate of cumulative credit losses over the expected life of the auto receivables sold. 12 The Company sells mortgage receivables for cash on a servicing released, whole-loan basis. Such receivables are generally held by the Company for less than 90 days. Accordingly, no allowance for losses has been provided by the Company for mortgage receivables. The Company reviews static pool origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the assumptions for cumulative credit losses in securitization transactions, provision for losses and allowance for losses. Although the Company uses many resources to assess the adequacy of loss reserves, there is no precise method for estimating the ultimate losses in the receivables portfolio. 13 The following table presents certain data related to the receivables portfolio (dollars in thousands):
June 30, 1998 -------------------------------------------------------------------------------- Held For Sale Auto Managed Auto -------------------------------------------- Auto Mortgage Total Serviced Portfolio (2) ---- -------- ----- -------- --------- Principal amount of receivables $ 334,110 $ 21,499 $ 355,609 $ 1,968,406 $ 2,302,516 ----------- ----------- Allowance for losses (12,756) (12,756) $ (179,359)(1) $ (192,115) --------- -------- --------- ----------- ----------- Receivables, net $ 321,354 $ 21,499 $ 342,853 --------- -------- --------- Number of outstanding contracts 26,035 187 187,514 213,549 --------- -------- ----------- ----------- Average amount of outstanding contract (principal amount) (in dollars) $ 12,833 $114,968 $ 10,497 $ 10,782 --------- -------- ----------- ----------- Allowance for losses as a percentage of receivables 3.8% - 9.1% 8.3% --- --- --- June 30, 1997 -------------------------------------------------------------------------------- Held For Sale Auto Managed Auto -------------------------------------------- Auto Mortgage Total Serviced Portfolio (2) ---- -------- ----- -------- --------- Principal amount of receivables $ 275,249 $ 4,354 $ 279,603 $ 863,006 $ 1,138,255 --------- ----------- Allowance for losses (12,946) (12,946) $ (74,925)(1) $ (87,871) --------- ------- --------- --------- ----------- Receivables, net $ 262,303 $ 4,354 $ 266,657 --------- ------- --------- Number of outstanding contracts 25,757 48 87,090 112,847 --------- ------- --------- ----------- Average amount of outstanding contract (principal amount) (in dollars) $ 10,686 $90,708 $ 9,909 $ 10,087 --------- ------- --------- ----------- Allowance for losses as a percentage of receivables 4.7% 8.7% 7.7% --- --- ---
(1) The allowance for losses related to serviced auto receivables is netted against interest-only receivables from Trusts in the Company's consolidated balance sheets. (2) Includes auto receivables only. 14 The following is a summary of managed auto receivables which are (i) more than 30 days delinquent, but not yet in repossession, and (ii) in repossession (dollars in thousands):
June 30, June 30, 1998 1997 --------------------------- ------------------------- Amount Percent Amount Percent ------ ------- ------ ------- Delinquent contracts: 31-60 days $ 126,012 5.5% $ 73,197 6.4% Greater than 60 days 59,175 2.6 36,421 3.2 --------- -------- --------- -------- 185,187 8.1 109,618 9.6 In repossession 18,818 0.8 14,471 1.3 --------- -------- --------- -------- $ 204,005 8.9% $ 124,089 10.9% ========= ======== ========= ========
In accordance with its policies and guidelines, the Company at times offers payment deferrals to consumers, whereby the consumer is allowed to move a delinquent payment to the end of the loan by paying a fee (approximately the interest portion of the payment deferred). Contracts receiving a payment deferral as an average quarterly percentage of average managed auto receivables outstanding were 4.5%, 4.3% and 1.9% for the years ended June 30, 1998, 1997 and 1996, respectively. The Company believes that payment deferrals granted according to its policies and guidelines are on effective portfolio management technique and result in higher ultimate cash collections from the portfolio. 15 The following table presents charge-off data with respect to the Company's managed auto receivables portfolio (dollars in thousands):
Years Ended June 30, ---------------------------------------- 1998 1997 1996 ---- ---- ---- Net charge-offs: Held for sale $ 9,140 $ 16,965 $ 18,322 Serviced 78,862 26,266 1,652 -------- -------- -------- $ 88,002 $ 43,231 $ 19,974 ======== ======== ======== Net charge-offs as a percentage of averaged managed auto receivables outstanding 5.3% 5.5% 5.6% ======== ======== ======== Net recoveries as a percentage of gross charge-offs 47.9% 47.3% 48.7% ======== ======== ========
Delinquency and charge-off ratios typically fluctuate over time as a portfolio matures. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a portfolio with a different level of seasoning. 16 LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands):
Years Ended June 30, ---------------------------------------------- 1998 1997 1996 ---- ---- ---- Operating activities $ 37,813 $ 36,003 $ 34,530 Investing activities (144,868) (92,947) (62,749) Financing activities 134,115 60,826 12,050 ---------- ---------- --------- Net increase (decrease) in cash and cash equivalents $ 27,060 $ 3,882 $ (16,169) ========== ========== =========
The Company's primary sources of liquidity have been cash flows from operating activities, including excess cash flow distributions from the Trusts, borrowings under its warehouse credit facilities, sales of auto receivables to Trusts in securitization transactions and the issuance of senior notes. The Company's primary uses of cash have been purchases and originations of receivables and funding credit enhancement requirements for securitization transactions. The Company purchased $1,737.8 million, $906.8 million and $432.4 million of auto finance contracts during the years ended June 30, 1998, 1997 and 1996 requiring cash of $1,717.0 million, $896.7 million and $417.2 million, respectively, net of acquisition fees and other items. These purchases were funded initially utilizing warehouse credit facilities and subsequently through the sale of receivables in securitization transactions The Company has a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available to the Company. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in October 1998 and the Company is negotiating to renew and expand the facility. A total of $140.7 million was outstanding under this facility as of June 30, 1998. In addition, the Company has a credit agreement with a group of banks that provides for borrowings up to $265 million, subject to a defined borrowing base. The Company utilizes the facility to fund its auto lending activities and daily operations. The facility matures in April 1999. There were no outstanding balances under the credit agreement as of June 30, 1998. 17 The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base, to fund mortgage loan originations. The facility expires in February 1999. A total of $24.9 million was outstanding under the mortgage facility as of June 30, 1998. The Company has completed thirteen auto receivables securitization transactions through June 30, 1998. The proceeds from the transactions were primarily used to repay borrowings outstanding under the Company's warehouse credit facilities. A summary of these transactions is as follows:
Original Balance at Amount June 30, 1998 Transaction Date (in millions) (in millions) - ----------- ---- ------------- ------------- 1994-A December 1994 $ 51.0 Paid in full 1995-A June 1995 99.2 Paid in full 1995-B December 1995 65.0 $ 8.7 1996-A March 1996 89.4 18.7 1996-B May 1996 115.9 35.1 1996-C August 1996 175.0 55.0 1996-D November 1996 200.0 87.5 1997-A March 1997 225.0 117.6 1997-B May 1997 250.0 146.1 1997-C August 1997 325.0 220.0 1997-D November 1997 400.0 322.5 1998-A February 1998 425.0 380.9 1998-B May 1998 525.0 507.5 ------------ -------------- $ 2,945.5 $ 1,899.6 ============ ==============
In connection with securitization transactions, the Company is required to fund certain credit enhancement levels set by the insurer of the asset-backed securities issued by the Trusts. The Company typically makes an initial deposit to a restricted cash account and subsequently uses excess cash flows generated by the Trusts to either increase the restricted cash account or repay the outstanding asset-backed securities on an accelerated basis, thus creating additional credit enhancement through overcolleratization in the Trusts. When the credit enhancement levels reach specified percentages of the Trust's pool of receivables, excess cash flows are distributed to the Company. Initial deposits to restricted cash accounts were $56.7 million, $71.4 million and $2.9 million for the years ended June 30, 1998, 1997 and 1996. Excess cash flows distributed to the Company were $43.8 million, $19.3 million and $1.2 million for the years ended June 30, 1998, 1997 and 1996. 18 Certain agreements with the insurer provide that if delinquency, default and net loss ratios in a Trust's pool of receivables exceed certain targets, the specified credit enhancement levels would be increased. As of June 30, 1998, none of the Company's securitizations had delinquency, default and net loss ratios in excess of the targeted levels. The Company has outstanding $175 million of senior notes which are due in February 2004. Interest on the notes is payable semi-annually in August and February at a rate of 9 1/4% per annum. The notes may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. The Company's Board of Directors has authorized the repurchase of up to 12,000,000 shares of the Company's common stock. A total of 9,189,400 shares at an aggregate purchase price of $27.4 million had been purchased pursuant to this program through June 30, 1998, although no common stock has been repurchased since September 1996. The Indenture pursuant to which the senior notes were issued contains restrictions as to the amount of common stock which may be repurchased by the Company. The Company operated 129 auto lending branch offices as of June 30, 1998 and plans to open 45 branches in fiscal 1999. The Company may also expand loan production capacity at existing auto lending branch offices where appropriate and may expand its mortgage lending activities. While the Company has been able to establish and grow its finance thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. As of June 30, 1998, the Company had $33.1 million in cash and cash equivalents. The Company also had available borrowing capacity of $90.4 million under its bank credit agreement pursuant to the borrowing base requirement of such facility. The Company estimates that it will require additional external capital for fiscal 1999 in addition to existing capital resources in order to fund expansion of its lending activities. The Company anticipates that such funding will be in the form of additional securitization transactions, renewal and expansion of its warehouse credit facilities and implementation of other warehouse credit facilities. There can be no assurance that funding will be available to the Company through these sources or, if available, that it will be on terms acceptable to the Company. INTEREST RATE RISK Since the Company's funding strategy is dependent upon the issuance of interest-bearing securities and the incurrence of debt, fluctuations in interest rates impact the Company's profitability. The Company utilizes 19 several strategies to minimize the risk of interest rate fluctuations, including the use of derivative financial instruments, the regular sale of auto receivables to the Trusts and pre-funding securitizations, whereby the amount of asset-backed securities issued in a securitization exceeds the amount of receivables initially sold to the Trust. The proceeds from the pre-funded portion are held in an escrow account until the Company sells additional receivables to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, the Company locks in the borrowing costs with respect to the loans it subsequently delivers to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between the money market yields earned on the proceeds held in escrow prior to subsequent delivery of receivables and the interest rate paid on the asset- backed securities outstanding. Derivative financial instruments are utilized to manage the gross interest rate spread on the Company's securitization transactions. The Company sells fixed rate auto receivables to Trusts that, in turn, sell either fixed rate or floating rate securities to investors. The fixed rates on securities issued by the Trusts are indexed to rates on U.S. Treasury Notes with similar average maturities. The Company uses Forward U.S. Treasury Rate Lock agreements to lock in the indexed rate for specific anticipated securitization transactions. The floating rates on securities issued by the Trusts are indexed to London Interbank Offered Rates (LIBOR). The Company uses Interest Rate Swap agreements to convert the floating rate exposures on these securities to a fixed rate. The table below provides information about the Company's derivative financial instruments by expected maturity date as of June 30, 1998 (dollars in thousands). Notional amounts, which are used to calculate the contractual payments to be exchanged under the contracts, represent average amounts which will be outstanding for each of the years included in the table.
Years Ending ---------------------------------------------------- June 30, June 30, June 30, 1999 2000 2001 Fair Value ---- ---- ---- ---------- Interest Rate Swaps: Notional amounts $997,200 $466,000 $ 52,500 $ 659 Average pay rate 5.75% 5.70% 5.78% Average receive rate 5.76% 5.75% 5.90% U.S. Treasury Rate Locks: Notional amounts $300,000 $ 473 Average strike rate 5.42% Average forward rate 5.52%
20 There can be no assurance that the Company's strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on the Company's profitability. YEAR 2000 ISSUE The year 2000 issue is whether the Company's or its vendors' computer systems will properly recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or fail. The Company has developed a comprehensive project plan for achieving year 2000 readiness. An inventory of critical hardware and software has been completed and information technology components have been assessed. This assessment included major suppliers and business partners and the Company is monitoring their continued progress toward year 2000 compliance; however, the Company does not rely on any single supplier or partner to conduct business. The Company is currently in the process of renovating or replacing critical systems and plans to complete this phase by December 31, 1998. Integrated testing and installation of all renovated systems is planned for early calendar 1999 with an estimated completion date of March 31, 1999. In addition, the Company expects to have contingency plans for critical systems complete by December 31, 1998. Year 2000 project costs incurred through June 30, 1998 have not been material. Approximately $200,000 has been budgeted in fiscal 1999 to fund year 2000 project efforts. The Company presently believes that with modifications to existing systems and/or conversion to new systems, the year 2000 issue will not pose significant operational problems for the Company. However, if such modifications and conversions are not made, or are not completed in a timely manner, the year 2000 issue could have a material impact on the operations of the Company. In addition, there can be no assurance that unforeseen problems in the Company's computer systems, or the systems of third parties on which the Company's computers rely, would not have an adverse effect on the Company's systems or operations. FORWARD LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed above are forward looking statements that involve risks and uncertainties including competitive factors, the management of growth, portfolio credit quality, the availability of capital resources and other risks detailed from time to time in the Company's filings and reports with the Securities and Exchange Commission including the Company's Annual Report on Form 10-K for the year ended June 30, 1998. Such statements are only predictions and actual events or results may differ materially. 21 Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- Consolidated Financial Statements: AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS
June 30, June 30, 1998 1997 ---- ---- Cash and cash equivalents $ 33,087 $ 6,027 Receivables held for sale, net 342,853 266,657 Interest-only receivables from Trusts 131,694 53,465 Investments in Trust receivables 98,857 50,788 Restricted cash 55,758 57,142 Property and equipment,net 23,385 13,884 Other assets 28,037 27,530 --------- --------- Total assets $ 713,671 $ 475,493 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Warehouse credit facilities $ 165,608 $ 72,045 Senior notes 175,000 125,000 Other notes payable 6,410 27,206 Accrued taxes and expenses 47,132 34,858 Deferred income taxes 31,673 8,123 --------- --------- Total liabilities 425,823 267,232 --------- --------- Commitments and contingencies (Note 7) Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued Common stock, $.01 par value per share, 120,000,000 shares authorized; 69,272,948 and 66,510,346 shares issued 693 667 Additional paid-in capital 230,269 203,531 Unrealized gain on credit enhancement assets, net of income taxes 7,234 4,355 Retained earnings 72,770 23,469 --------- --------- 310,966 232,022 Treasury stock, at cost (7,667,318 and 7,918,142 shares) (23,118) (23,761) --------- --------- Total shareholders' equity 287,848 208,261 --------- --------- Total liabilities and shareholders' equity $ 713,671 $ 475,493 ========= =========
The accompanying notes are an integral part of these consolidated financial statemets 22 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data)
Years Ended ------------------------------------------------ June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Revenue: Finance charge income $ 55,837 $ 44,910 $ 51,706 Gain on sale of receivables 103,194 52,323 21,405 Servicing fee income 47,910 23,492 3,892 Other income 2,395 2,631 2,632 ---------- ---------- ---------- 209,336 123,356 79,635 ---------- ---------- ---------- Costs and expenses: Operating expenses 94,484 51,915 25,681 Provision for losses 7,555 6,595 7,912 Interest expense 27,135 16,312 13,129 ---------- ---------- ---------- 129,174 74,822 46,722 ---------- ---------- ---------- Income before income taxes 80,162 48,534 32,913 Income tax provision 30,861 18,685 12,148 ---------- ---------- ---------- Net income $ 49,301 $ 29,849 $ 20,765 ========== ========== ========== Earnings per share: Basic $ 0.82 $ 0.52 $ 0.36 ========== ========== ========== Diluted $ 0.76 $ 0.48 $ 0.34 ========== ========== ========== Weighted average shares outstanding 60,188,788 57,774,724 57,049,142 ========== ========== ========== Weighted average shares and assumed incremental shares 65,203,460 61,574,548 60,406,596 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements 23 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands)
Additional Retained Common Stock Paid-in Unrealized Earnings Treasury Stock ------------ -------------- Shares Amount Capital Gain (Deficit) Shares Amount ------ ------ ------- ---- --------- ------ ------ Balance at July 1, 1995 64,234,402 $ 643 $ 185,572 $ $ (27,145) 6,800,078 $ (11,844) Common stock issued on exercise of options 1,047,524 10 3,040 Income tax benefit from exercise of options 1,387 Purchase of treasury stock 1,658,000 (10,710) Common stock issued for employee benefit plans (217,112) 681 Net income 20,765 ---------- ------ --------- --------- --------- --------- --------- Balance at June 30, 1996 65,281,926 653 189,999 (6,380) 8,240,966 (21,873) Common stock issued on exercise of options 1,228,420 14 5,639 Common stock issued for acquisition 4,700 (800,000) 2,400 Income tax benefit from exercise of options 2,652 Unrealized gain on credit enhancement assets, net of income taxes of $2,726 4,355 Purchase of treasury stock 630,400 (4,387) Common stock issued for employee benefit plans 541 (153,224) 99 Net income 29,849 ---------- ----- --------- --------- --------- --------- --------- Balance at June 30, 1997 66,510,346 667 203,531 4,355 23,469 7,918,142 (23,761) Common stock issued on exercise of options 2,762,602 26 15,994 Income tax benefit from exercise of options 9,575 Unrealized gain on credit enhancement assets, net of income taxes of $1,845 2,879 Common stock issued for employee benefit plans 1,169 (250,824) 643 Net income 49,301 ---------- ----- --------- --------- --------- --------- --------- Balance at June 30, 1998 69,272,948 $ 693 $ 230,269 $ 7,234 $ 72,770 7,667,318 $ (23,118) ========== ===== ========= ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements 24 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended -------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Cash flows from operating activities: Net income $ 49,301 $ 29,849 $ 20,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,498 2,203 1,528 Provision for losses 7,555 6,595 7,912 Deferred income taxes 30,974 18,886 11,164 Non-cash servicing fee income (10,867) (7,991) (1,079) Non-cash gain on sale of auto receivables (96,405) (52,534) (15,417) Distributions from Trusts 43,807 19,347 1,235 Changes in assets and liabilities: Other assets (3,324) (2,341) (984) Accrued taxes and expenses 12,274 21,989 9,406 ---------- -------- -------- Net cash provided by operating activities 37,813 36,003 34,530 ---------- -------- -------- Cash flows from investing activities: Purchases of auto receivables (1,717,006) (896,711) (417,235) Originations of mortgage receivables (137,169) (53,770) Principal collections and recoveries on receivables 18,384 64,389 94,948 Net proceeds from sale of auto receivables 1,632,357 814,107 262,243 Net proceeds from sale of mortgage receivables 119,683 52,489 Initial deposits to restricted cash (56,725) (71,400) (2,939) Purchases of property and equipment (9,456) (4,511) (3,162) Decrease in other assets 5,064 2,460 3,396 ---------- -------- -------- Net cash used by investing activities (144,868) (92,947) (62,749) ---------- -------- -------- Cash flows from financing activities: Net change in warehouse credit facilities 93,563 (17,264) 86,000 Proceeds from issuance of senior notes 47,762 120,894 Payments on other notes payable (25,042) (44,710) (66,971) Proceeds from issuance of common stock 17,832 6,293 3,731 Purchase of treasury stock (4,387) (10,710) ---------- -------- -------- Net cash provided by financing activities 134,115 60,826 12,050 ---------- -------- -------- Net increase (decrease) in cash and cash equivalents 27,060 3,882 (16,169) Cash and cash equivalents at beginning of year 6,027 2,145 18,314 ---------- -------- -------- Cash and cash equivalents at end of year $ 33,087 $ 6,027 $ 2,145 ========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements 25 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies - --------------------------------------------- History and Operations - ---------------------- AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since September 1992, has been in the business of purchasing, securitizing and servicing automobile sales finance contracts. The Company operated 129 auto lending branch offices in 36 states as of June 30, 1998. The Company also acquired a subsidiary in November 1996 which originates and sells mortgage loans. Basis of Presentation - --------------------- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates. These estimates include, among other things, assumptions for cumulative credit losses, timing of cash flows, discount rates and to a lesser extent, anticipated prepayments on receivables sold in securitization transactions and the determination of the allowance for losses on receivables held for sale. Cash Equivalents - ---------------- Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. Receivables Held for Sale - ------------------------- Receivables held for sale are carried at the lower of cost or fair value. Finance charge income related to receivables held for sale is recognized using the interest method. Accrual of finance charge income is suspended on accounts which are more than 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related receivables using the interest method. 26 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Receivables Held for Sale (cont.) - --------------------------------- Provisions for losses are charged to operations in amounts sufficient to maintain the allowance for losses at a level considered adequate to cover estimated losses in the receivables held for sale portfolio. Automobile sales finance contracts are typically purchased by the Company for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews historical origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the provision for losses and the allowance for losses. Receivables are charged-off to the allowance for losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectible. Credit Enhancement Assets - ------------------------- The Company periodically sells auto receivables to certain special purpose financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed securities to investors. The Company retains an interest in the receivables sold in the form of a residual or interest-only strip and may also retain other subordinated interests in the receivables sold to the Trusts. The residual or interest-only strips represent the present value of future excess cash flows resulting from the difference between the finance charge income received from the obligors on the receivables and the interest paid to the investors in the asset-backed securities, net of credit losses, servicing fees and other expenses. Upon the transfer of receivables to the Trusts, the Company removes the net book value of the receivables sold from its consolidated balance sheets and allocates such carrying value between the assets transferred and the interests retained, based upon their relative fair values at the settlement date. The difference between the sales proceeds, net of transaction costs, and the allocated basis of the assets transferred is recognized as a gain on sale of receivables. The allocated basis of the interests retained is classified as either interest-only receivables from Trusts, investments in Trust receivables or restricted cash in the Company's consolidated balance sheets depending upon the form of interest retained by the Company. These interests are collectively referred to as credit enhancement assets. 27 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Credit Enhancement Assets (cont.) - --------------------------------- Since the interests retained by the Company can be contractually prepaid or otherwise settled in such a way that the holder would not recover all of its recorded investment, these assets are classified as available for sale and are measured at fair value. Unrealized holding gains or temporary holding losses are reported net of income tax effects as a separate component of shareholders' equity until realized. If a decline in fair value is deemed other than temporary, the assets are written down through a charge to operations. The fair value of credit enhancement assets is estimated by calculating the present value of the excess cash flows from the Trusts using discount rates commensurate with the risks involved. Such calculations include estimates of cumulative credit losses and prepayment rates for the remaining term of the receivables transferred to the Trusts since these factors impact the amount and timing of future excess cash flows. If cumulative credit losses and prepayment rates exceed the Company's original estimates, the assets are written down through a charge to operations. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional earnings when realized. A financial guaranty insurance company (the "Insurer") has provided a financial guaranty insurance policy for the benefit of the investors in each series of asset-backed securities issued by the Trusts. In connection with the issuance of the policies, the Company is required to establish a separate cash account with a trustee for the benefit of the Insurer for each series of securities and related receivables pools. Monthly cash collections from the pools of receivables in excess of required principal and interest payments on the asset-backed securities and servicing fees and other expenses are either added to the restricted cash accounts or used to repay the outstanding asset-backed securities on an accelerated basis, thus creating additional credit enhancement through overcollateralization in the Trusts. This overcollateralization is recognized as investments in Trust receivables in the Company's consolidated balance sheets. When the credit enhancement levels reach specified percentages of the pools of receivables, excess cash flows are distributed to the Company. In the event that monthly cash collections from any pool of receivables are insufficient to make required principal and interest payments to the investors and pay servicing fees and other expenses, any shortfall would be drawn from the restricted cash accounts. Certain agreements with the Insurer provide that if delinquency, default and net loss ratios in the pools of receivables supporting the asset-backed 28 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Credit Enhancement Assets (cont.) - --------------------------------- securities exceed certain targets, the specified levels of credit enhancement would be increased and, in certain cases, the Company would be removed as servicer of the receivables. Property and Equipment - ---------------------- Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition and any resulting gain or loss is included in operations. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. Off Balance Sheet Financial Instruments - --------------------------------------- The Company periodically enters into arrangements to manage the gross interest rate spread on its securitization transactions. These arrangements include the use of Forward U.S. Treasury Rate Lock and Interest Rate Swap Agreements. The face amount and terms of the Forward U.S. Treasury Rate Lock Agreements generally correspond to the principal amount and average maturities of receivables expected to be sold to the Trusts and the related asset-backed securities to be issued by the Trusts. Gains or losses on these agreements are deferred and recognized as a component of the gain on sale of receivables at the time that receivables are transferred to the Trusts. The Interest Rate Swap Agreements are used to convert the interest rates on floating rate securities issued by the Trusts to a fixed rate. The notional amounts of these agreements approximate the outstanding balance of certain floating rate securities. The estimated differential payments required under these agreements are recognized as a component of the gain on sale of receivables at the time that receivables are transferred to the Trusts. Income Taxes - ------------ Deferred income taxes are provided in accordance with the asset and liability method of accounting for income taxes to recognize the tax effects of temporary differences between financial statement and income tax accounting. Earnings Per Share - ------------------ The Company adopted the requirements of Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") effective for periods 29 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnings Per Share (cont.) - -------------------------- ended December 31, 1997 and thereafter. SFAS 128 establishes new standards for computing and presenting earnings per share, replacing existing accounting standards. The new standard requires dual presentation of basic and diluted earnings per share and a reconciliation between the two amounts. Basic earnings per share excludes dilution and diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. All prior period earnings per share and related weighted average share amounts have been restated to conform to the requirements of SFAS 128. Recent Accounting Developments - ------------------------------ Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 established accounting and reporting standards for transfers of financial assets and applies to the Company's sales of auto receivables to the Trusts. Adoption of SFAS 125, which was applied prospectively to transactions occurring subsequent to December 1996, resulted in increases of $2,577,000 in credit enhancement assets, $992,000 in deferred income taxes and $1,585,000 in shareholders' equity as of June 30, 1997. In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income and its components in a full set of financial statements. The new standard requires that all items that are required to be recognized under accounting standards as components of comprehensive income, including an amount representing total comprehensive income, be reported in a financial statement that is displayed with the same prominence as other financial statements. Pursuant to SFAS 130, the Company will be required to display total comprehensive income, including net income and changes in the unrealized gain on interest-only receivables, in its consolidated financial statements for the year ending June 30, 1999 and thereafter. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way companies report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments 30 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Developments (cont.) - -------------------------------------- in interim financial reports. The new pronouncement also establishes standards for related disclosures about products and services, geographic areas and major customers. The statement is effective for financial statements for periods beginning after December 15, 1997. The Company's auto finance business is currently the only segment reportable under SFAS 131. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The new standard requires that all derivatives be recognized as either assets or liabilities in the consolidated balance sheets and that those instruments be measured at fair value. If certain conditions are met, a derivative may be specifically designated as a hedging instrument. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. While the new standard will apply to the Company's derivative financial instruments, the Company does not believe that adoption of SFAS 133 will have a material effect on the Company's consolidated financial position or results of operations. 2. Restatement - -------------- On January 14, 1999, the Company issued a press release reporting a restatement of its financial statements for the fiscal years ended June 30, 1998, 1997 and 1996. As required by the FASB Special Report, "A Guide to Implementation of Statement 125 on Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, Second Edition", dated December 1998, and related guidance set forth in statements made by the staff of the Securities and Exchange Commission ("SEC") on December 8, 1998, the Company retroactively changed its method of measuring and accounting for credit enhancement assets to the cash-out method from the cash-in method. Initial deposits to restricted cash accounts and subsequent cash flows received by securitization trusts sponsored by the Company accumulate as credit enhancement assets until certain targeted levels are achieved, after which cash is distributed to the Company on an unrestricted basis. Under the cash-in method previously used by the Company, (i) the assumed discount period for measuring the present value of credit enhancement assets ended when cash flows were received by the securitization trusts and (ii) initial deposits to 31 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Restatement (cont.) - ---------------------- restricted cash accounts were recorded at face value. Under the cash-out method required by the FASB and SEC, the assumed discount period for measuring the present value of credit enhancement assets ends when cash, including return of the initial deposits, is distributed to the Company on an unrestricted basis. The change to the cash-out method results only in a difference in the timing of revenue recognition from a securitization and has no effect on the total cash flows of such transactions. While the total amount of revenue recognized over the term of a securitization transaction is the same under either method, the cash-out method results in (i) lower initial gains on the sale of receivables due to the longer discount period and (ii) higher subsequent servicing fee income from accretion of the additional cash-out discount. The restatement resulted in the following changes to prior period financial statements:
Years Ended --------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Revenue Previous $227,940 $137,747 $ 80,978 As restated 209,336 123,356 79,635 Net Income Previous $ 60,741 $ 38,699 $ 21,591 As restated 49,301 29,849 20,765 Earnings per share Previous $0.93 $0.63 $0.36 As restated 0.76 0.48 0.34 Credit enhancement assets (end of period) Previous $321,199 $179,355 $ 43,079 As restated 286,309 161,395 41,736 Shareholders' equity (end of period) Previous $306,161 $216,536 $163,225 As restated 287,848 208,261 162,399
32 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Receivables Held for Sale - ---------------------------- Receivables held for sale consist of the following (in thousands):
June 30, June 30, 1998 1997 ---- ---- Auto receivables $334,110 $275,249 Less allowance for losses (12,756) (12,946) -------- -------- Auto receivables, net 321,354 262,303 Mortgage receivables 21,499 4,354 -------- -------- $342,853 $266,657 ======== ========
Auto receivables are collateralized by vehicle titles and the Company has the right to repossess the vehicle in the event that the consumer defaults on the payment terms of the contract. Mortgage receivables are collateralized by liens on real property and the Company has the right to foreclose in the event that the consumer defaults on the payment terms of the contract. The accrual of finance charge income has been suspended on $8,729,000 and $12,704,000 of delinquent auto receivables as of June 30, 1998 and 1997, respectively. 33 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Receivables Held for Sale (cont.) - ------------------------------------ A summary of the allowance for losses is as follows (in thousands):
Years Ended ------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 --------------- --------------- --------------- Balance at beginning of year $12,946 $13,602 $19,951 Provision for losses 7,555 6,595 7,912 Acquisition fees 49,859 30,688 18,097 Allowance related to receivables sold to Trusts (48,464) (20,974) (13,461) Net charge-offs-auto receivables (9,140) (16,965) (18,322) Net charge-offs-other (575) --------------- --------------- --------------- Balance at end of year $12,756 $12,946 $13,602 =============== =============== ===============
4. Credit Enhancement Assets - ---------------------------- As of June 30, 1998 and 1997, the Company was servicing $1,968.4 million and $863.0 million, respectively, of auto receivables which have been sold to the Trusts. The Company has retained an interest in these receivables in the form of credit enhancement assets. Credit enhancement assets consist of the following (in thousands):
June 30, June 30, 1998 1997 ---- ---- Interest-only receivables from Trusts $131,694 $53,465 Investments in Trust receivables 98,857 50,788 Restricted cash 55,758 57,142 -------- -------- $286,309 $161,395 ======== ========
34 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Credit Enhancement Assets (cont.) - ------------------------------------ A summary of credit enhancement assets is as follows (in thousands):
Years Ended -------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Balance at beginning of year $ 161,395 $ 41,736 Non-cash gain on sale of auto receivables 96,405 52,534 $ 15,417 Accretion of present value discount 19,717 7,991 1,079 Initial deposits to restricted cash 56,725 71,400 2,939 Change in unrealized gain 4,724 7,081 Distributions from Trusts (43,807) (19,347) (1,235) Retained certificates 23,536 Permanent impairment write-down (8,850) --------- --------- --------- Balance at end of year $ 286,309 $ 161,395 $ 41,736 ========= ========= =========
A summary of the allowance for losses included as a component of the interest-only receivables is as follows (in thousands):
Years Ended ---------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Balance at beginning of year $ 74,925 $25,616 $ Assumptions for cumulative credit losses 174,446 75,575 27,268 Permanent impairment write-down 8,850 Net charge-offs (78,862) (26,266) (1,652) -------- ------- ------- Balance at end of year $179,359 $74,925 $25,616 ======== ======= =======
35 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Warehouse Credit Facilities - ------------------------------ Warehouse credit facilities consist of the following (in thousands:)
June 30, June 30, 1998 1997 ----------------- ----------------- Commercial paper facility $140,708 Bank credit agreement $ 71,700 Mortgage facility 24,900 345 -------- -------- $165,608 $ 72,045 ======== ========
The Company has a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available. Under the funding agreement, the Company transfers auto receivables to CP Funding Corp. ("CPFC"), a special purpose finance subsidiary of the Company, and CPFC in turn issues a note, collateralized by such auto receivables, to the agent. The agent provides funding under the note to CPFC pursuant to an advance formula and CPFC forwards the funds to the Company in consideration for the transfer of auto receivables. While CPFC is a consolidated subsidiary of the Company, CPFC is a separate legal entity and the auto receivables transferred to CPFC and the other assets of CPFC are legally owned by CPFC and not available to creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the note bear interest at commercial paper, London Interbank Offered Rates ("LIBOR") or prime rates plus specified fees depending upon the source of funds provided by the agent to CPFC. The funding agreement, which expires in October 1998, contains various covenants requiring certain minimum financial ratios and results. The Company has a revolving credit agreement with a group of banks under which the Company may borrow up to $265 million, subject to a defined borrowing base. Borrowings under the credit agreement are collateralized by certain auto receivables and bear interest, based upon the Company's option, at either the prime rate (8.5% as of June 30, 1998) or LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/4% of the unused portion of the credit agreement. The credit agreement, which expires in April 1999, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the incurrence 36 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Warehouse Credit Facilities (cont.) - -------------------------------------- of additional debt, capital expenditures, cash dividends and repurchase of common stock. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base. Borrowings under the facility are collateralized by certain mortgage receivables and bear interest, based upon the Company's option, at either the prime rate or LIBOR plus 1%. The Company is also required to pay an annual commitment fee equal to 1/8% of the unused portion of the facility. The facility expires in February 1999. 6. Senior Notes - --------------- The Company has outstanding $175 million of senior notes which are due in February 2004. Interest on the notes is payable semi-annually at a rate of 9 1/4% per annum. The notes, which are uncollateralized, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. The Indenture pursuant to which the notes were issued contains restrictions including limitations on the Company's ability to incur additional indebtedness other than certain collateralized indebtedness, pay cash dividends and repurchase common stock. Debt issuance costs are being amortized over the term of the notes, and unamortized costs of $5,478,000 and $3,983,000 as of June 30, 1998 and 1997, respectively, are included in other assets in the consolidated balance sheets. 7. Commitments and Contingencies - -------------------------------- Leases Branch lending offices are generally leased for terms of up to five years with certain rights to extend for additional periods. The Company also leases office space for its loan servicing facilities and other operations under leases with terms up to ten years with renewal options. Lease expense was $4,206,000, $2,132,000 and $875,000 for the years ended June 30, 1998, 1997 and 1996, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 1999 $ 5,608 2000 5,218 2001 4,557 2002 3,638 2003 2,461 Thereafter 5,744 ------- $27,226 ======= 37 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Commitments and Contingencies - -------------------------------- Derivative Financial Instruments As of June 30, 1998, the Company had Forward U.S. Treasury Rate Lock Agreements to sell $150 million of U.S. Treasury Notes due August 2001 and $150 million of U.S. Treasury Notes due November 2001. The agreements expire August 20, 1998 and November 20, 1998, respectively. Any gain or loss on these agreements will be recognized as a component of the gain on sale of receivables upon transfers of receivables to the Trusts subsequent to June 30, 1998. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash equivalents, restricted cash, derivative financial instruments and managed auto receivables, which include auto receivables held for sale and auto receivables serviced by the Company on behalf of the Trusts. The Company's cash equivalents and restricted cash represent investments in highly rated securities placed through various major financial institutions. The counterparties to the Company's derivative financial instruments are various major financial institutions. Managed auto receivables represent contracts with consumers residing throughout the United States, with borrowers located in California and Texas accounting for 14% and 11%, respectively, of the managed auto receivables portfolio as of June 30, 1998. No other state accounted for more than 10% of managed auto receivables. Legal Proceedings In the normal course of its business, the Company is named as a defendant in legal proceedings. These cases include claims for alleged truth-in-lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. 38 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options - ---------------- General The Company has certain stock-based compensation plans for employees, non-employee directors and key executive officers. A total of 18,000,000 shares have been authorized for grants of options under the employee plans, of which 3,617,144 shares remain available for future grants as of June 30, 1998. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. The vesting period is typically four years. Option grants, vesting periods and the term of each option are determined by a committee of the Company's Board of Directors. A total of 2,605,000 shares have been authorized for grants of options under the non-employee director plans, of which 960,000 shares remain available for future grants as of June 30, 1998. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. Option grants, vesting periods and the term of each option are established by the terms of the plans. A total of 1,700,000 shares have been authorized for grants of options under the key executive officer plan, none of which remain available for future grants as of June 30, 1998. The exercise price of each option under this plan is $8 per share and the term of each option is seven years. These options became fully vested when the Company's common stock traded above certain targeted price levels for a specified time period. The Company has elected not to adopt the fair value-based method of accounting for stock based awards and, accordingly, no compensation expense has been recognized for options granted under the plans described above. Had compensation expense for the Company's plans been determined using the fair value-based method, pro forma net income would have been $45,598,000, $24,367,000 and $14,398,000 and pro forma diluted earnings per share would have been $0.70, $0.40 and $0.24 for the years ended June 30, 1998, 1997 and 1996, respectively. 39 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ The following tables present information related to the Company's stock-based compensation plans. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Years Ended ------------------------------------------------------------ June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Expected dividends 0 0 0 Expected volatility 32% 20% 20% Risk-free interest rate 5.68% 5.87% 5.87% Expected life 5 Years 5 Years 5 Years
Employee Plans A summary of stock option activity under the Company's employee plans is as follows (shares in thousands):
Years Ended ------------------------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------------------- ------------------------- ------------------------- Outstanding at beginning of year 8,752 $ 4.68 7,328 $ 3.61 6,820 $ 2.50 Granted 3,640 13.14 2,502 7.74 1,344 6.80 Exercised (2,034) 5.29 (846) 3.96 (746) 2.61 Forfeited (288) 8.31 (232) 5.84 (90) 3.48 ------- ------ ------- ------- ------- ------ Outstanding at end of year 10,070 $ 7.51 8,752 $ 4.68 7,328 $ 3.61 ======= ====== ======= ======= ======= ====== Options exerciseable at end of year 6,030 $ 5.11 6,322 $ 3.89 5,622 $ 2.26 ======= ====== ======= ======= ======= ====== Weighted average fair value of options granted during year $ 5.06 $ 2.11 $ 1.86 ====== ======= ======
40 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ A summary of options outstanding under employee plans as of June 30, 1998 is as follows (shares in thousands):
Options Outstanding Options Exerciseable ---------------------------------------------------------- -------------------------------- Weighted Weighted Weighted Average Years Average Average Range of Number of Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Outstanding Price - --------------- -------------- ---------------- ----- ----------- ----- $1.25 to 2.32 1,754 3.14 $1.68 1,754 $ 1.68 $2.75 to 4.57 2,280 6.34 3.68 2,198 3.67 $5.50 to 7.88 1,988 7.32 6.98 1,146 6.88 $8.19 to 9.19 582 8.53 8.39 216 8.34 $10.13 to 13.07 2,114 9.46 11.63 244 11.20 $13.38 to 16.38 1,352 9.71 15.69 472 15.64 ----------- ------------ 10,070 6,030 =========== ============
Non-employee Director Plans 41 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. STOCK OPTIONS (CONT.) - ------------------------ A summary of stock option activity under the Company's non-employee director plans is as follows (shares in thousands):
Years Ended ------------------------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------------------- ------------------------- ------------------------- Outstanding at beginning of year 1,708 $ 2.21 1,826 $ 1.80 1,892 $ 1.40 Granted 80 14.63 80 9.38 80 6.44 Exercised (262) 2.17 (198) 1.40 (146) 1.40 ------ ------- ------ ------ ------ ------- Outstanding at end of year 1,526 $ 2.87 1,708 $ 2.21 1,826 $ 1.80 ====== ======= ====== ====== ====== ====== Options exerciseable at end of year 1,526 $ 2.87 1,708 $ 2.21 1,746 $ 1.77 ====== ======= ====== ====== ====== ====== Weighted average fair value of options granted during year $ 5.66 $ 2.57 $ 1.77 ======= ====== ======
A summary of options outstanding under non-employee director plans as of June 30, 1998 is as follows (shares in thousands):
Options Outstanding -------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Years Average Average Range of Number of Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Outstanding Price --------------- ----------- ---------------- ----- ----------- ----- $1.40 to 3.25 1,306 3.05 $1.58 1,306 $1.58 $6.44 to 9.38 140 7.97 8.14 140 8.14 $14.63 80 9.35 14.63 80 14.63 ------- ------- 1,526 1,526 ======= =======
42 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. STOCK OPTIONS (CONT.) - ------------------------- Key Executive Officer Plan - -------------------------- A summary of stock option activity under the Company's key executive officer plan is as follows (shares in thousands):
Years Ended ----------------------------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price -------------------------- ------------------------ -------------------------- Outstanding at beginning of year 1,700 $ 8.00 1,700 $ 8.00 Granted 1,700 8.00 ------- ------- ------- ------- ------ ------- Outstanding at end of year 1,700 $ 8.00 1,700 $ 8.00 1,700 $ 8.00 ======= ======= ======= ======= ====== ======= Options exercisable at end of year 1,700 $ 8.00 ======= ======= Weighted average fair value of options granted during year $ 2.19 =======
A summary of options outstanding under the key executive officer plan as of June 30, 1998 is as follows (shares in thousands):
Options Outstanding ---------------------------------------------------------------- Weighted Weighted Average Years Average Range of Number of Remaining Exercise Exercise Prices Outstanding Contractual Life Price - ------------------ ---------------- --------------------- -------------- $8.00 1,700 4.81 $8.00
9. EMPLOYEE BENEFIT PLANS - ------------------------- The Company has a defined contribution retirement plan covering substantially all employees. The Company's contributions to the plan were $358,000, $201,000 and $133,000 for the years ended June 30, 1998, 1997 and 1996, respectively. 43 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Employee Benefit Plans (cont.) - --------------------------------- The Company also has an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the market value at specified dates. A total of 1,000,000 shares have been reserved for issuance under the plan. Shares purchased under the plan were 260,892, 208,430 and 194,286 for the years ended June 30, 1998, 1997 and 1996, respectively. 10. Income Taxes - ---------------- The income tax provision consists of the following (in thousands):
Years Ended ---------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---------------- ---------------- ----------------- Current $ (113) $ (201) $ 984 Deferred 30,974 18,886 11,164 ---------------- ---------------- ----------------- $ 30,861 $ 18,685 $ 12,148 ================ ================ =================
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, 1998 1997 1996 ------------- ------------- -------------- U.S. statutory tax rate 35.0% 35.0% 35.0% Other 3.5 3.5 2.0 ------------- ------------- -------------- 38.5% 38.5% 37.0% ============= ============= ==============
44 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Income Taxes (cont.) - ------------------------ The deferred income tax provision consists of the following (in thousands):
Years Ended ----------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---------------- ---------------- ------------------ Net operating loss carryforward $ (9,051) $ 5,501 $ 8,387 Allowance for losses 993 (1,046) 1,556 Gain on sale of receivables 32,606 9,282 (517) Change in valuation allowance (320) Other 6,426 5,149 2,058 ---------------- ---------------- ------------------ $ 30,974 $ 18,886 $ 11,164 ================ ================ ==================
The tax effects of temporary differences that give rise to deferred tax liabilities and assets are as follows (in thousands):
June 30, June 30, 1998 1997 ---- ---- Deferred tax liabilities: Gain on sale of receivables $(41,372) $ (8,766) Unrealized gain on credit enhancement assets (4,571) (2,726) Other (2,340) (2,613) ---------- -------- (48,283) (14,105) ---------- -------- Deferred tax assets: Net operating loss carryforward 12,519 3,468 Alternative minimum tax credits 1,567 1,873 Other 2,524 641 ---------- -------- 16,610 5,982 ---------- -------- Net deferred tax liability $(31,673) $ (8,123) ========== =========
As of June 30, 1998, the Company has a net operating loss carryforward of approximately $28,700,000 for federal income tax reporting purposes which 45 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Income Taxes (cont.) - ------------------------ expires between June 30, 2008 and 2013 and an alternative minimum tax credit carryforward of approximately $1,600,000 with no expiration date. 11. Earnings Per Share - ---------------------- A reconciliation of weighted average shares used to compute basic and diluted earnings per share is as follows:
Years Ended ----------------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 ---- ---- ---- Weighted average shares outstanding 60,188,788 57,774,724 57,049,142 Incremental shares resulting from assumed exercise of stock options 5,014,672 3,799,824 3,357,454 ------------ ---------- ---------- Weighted average shares and assumed incremental shares 65,203,460 61,574,548 60,406,596 ============ ========== ==========
Basic earnings per share have been computed by dividing net income by the weighted average shares outstanding. Diluted earnings per share have been computed by dividing net income by the weighted average shares and assumed incremental shares. 12. Supplemental Information - ---------------------------- Cash payments for interest costs and income taxes consist of the following (in thousands):
Years Ended --------------------------------------------------------------- June 30, June 30, June 30, 1998 1997 1996 --------------- --------------- ----------------- Interest costs (none capitalized) $26,369 $15,196 $ 12,179 Income taxes 14,804 599 1,447
46 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. Supplemental Information (cont.) - ------------------------------------- During the years ended June 30, 1998 and 1997, the Company entered into lease agreements for property and equipment of $4,246,000 and $3,651,000, respectively. 13. Fair Value of Financial Instruments - ---------------------------------------- Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair value information about financial instruments, whether or not recognized in the Company's consolidated balance sheets. Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts which ultimately may be realized or paid at settlement or maturity of the financial instruments. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. 47 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Fair Value of Financial Instruments (cont.) - ------------------------------------------------ Estimated fair values, carrying values and various methods and assumptions used in valuing the Company's financial instruments are set forth below (in thousands):
June 30, 1998 June 30, 1997 ------------------------------- ------------------------------ Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value ----- ---------- ----- ---------- Financial assets: Cash and cash equivalents (a) $ 33,087 $ 33,087 $ 6,027 $ 6,027 Receivables held for sale, net (b) 342,853 367,613 266,657 283,386 Interest-only receivables from Trusts (c) 131,694 131,694 53,465 53,465 Investments in Trust receivables (c) 98,857 98,857 50,788 50,788 Restricted cash (c) 55,758 55,758 57,142 57,142 Financial liabilities: Warehouse credit facilities (d) 165,608 165,608 72,045 72,045 Senior notes (e) 175,000 177,625 125,000 123,825 Other notes payable (f) 6,410 6,410 27,206 28,299 Interest rate swaps (g) (269) 170 735 236 Unrecognized financial instruments: Forward U.S. Treasury Note sales (h) 473 164 Forward interest rate swaps (g) 489
(a) The carrying value of cash and cash equivalents is considered to be a reasonable estimate of fair value since these investments bear interest at market rates and have maturities of less than 90 days. (b) Since the Company periodically sells its receivables, fair value is estimated by discounting future net cash flows expected to be realized from the sale of the receivables using interest rate, prepayment and credit loss assumptions similar to the Company's historical experience. (c) The fair value of interest-only receivables from Trusts, investments in Trust receivables and restricted cash is estimated by discounting the associated future net cash flows using discount rate, prepayment and credit loss assumptions similar to the Company's historical experience. 48 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Fair Value of Financial Instruments (cont.) - ------------------------------------------------ (d) The warehouse credit facilities have variable rates of interest and maturities of less than one year. Therefore, carrying value is considered to be a reasonable estimate of fair value. (e) The fair value of the senior notes is based on the quoted market price. (f) The fair value of other notes payable is estimated based on rates currently available for debt with similar terms and remaining maturities. (g) The fair value of the interest rate swaps is based on the quoted termination cost. (h) The fair value of the forward U.S. Treasury Note sales are estimated based upon market prices for similar financial instruments. 14. Stock Split - ---------------- On August 6, 1998, the Company's Board of Directors approved a two for one stock split to be effected in the form of a 100% stock dividend for shareholders of record on September 11, 1998, paid on September 30, 1998. All share data for the periods presented, except shares authorized, have been adjusted to reflect the stock split on a retroactive basis. 49 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders AmeriCredit Corp. We have audited the accompanying consolidated balance sheets of AmeriCredit Corp. as of June 30, 1998 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmeriCredit Corp. as of June 30, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1998, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1997, AmeriCredit Corp. changed its method of accounting for transfers and servicing of financial assets and extinguishment of liabilities. As discussed in Note 2 to the consolidated financial statements, AmeriCredit Corp. retroactively changed its method of measuring and accounting for credit enhancement assets. PricewaterhouseCoopers LLP Fort Worth, Texas August 4, 1998, except as to the information presented in Note 14 for which the date is September 30, 1998 and except as to the information presented in Note 2 for which the date is January 14, 1999. 50 Selected Quarterly Financial Data:
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Fiscal year ended June 30, 1998 Finance charge income $ 13,061 $ 13,129 $ 13,862 $ 15,785 Gain on sale of receivables 20,680 23,655 27,503 31,356 Servicing fee income 10,289 11,882 12,218 13,521 Income before income taxes 16,634 19,368 21,557 22,603 Net income 10,230 11,912 13,258 13,901 Diluted earnings per share 0.16 0.18 0.20 0.21 Weighted average shares and assumed incremental shares 63,983,916 64,813,118 64,969,618 66,597,676 Fiscal year ended June 30, 1997 Finance charge income $ 10,764 $ 10,739 $ 12,101 $ 11,306 Gain on sale of receivables 9,775 11,485 14,117 16,946 Servicing fee income 3,853 4,962 6,200 8,477 Income before income taxes 10,320 10,839 12,827 14,548 Net income 6,347 6,667 7,889 8,946 Diluted earnings per share 0.11 0.11 0.13 0.14 Weighted average shares and assumed incremental shares 60,237,878 61,356,378 62,066,460 62,196,652
51 Consolidating Financial Information: The payment of principal, premium, if any, and interest on the Company's 9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly- owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the 9 1/4% Senior Notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. Therefore, the separate financial statements of the Subsidiary Guarantors are not deemed material. The following supplementary information presents consolidating financial data for (i) the Company (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the Company and its subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on a consolidated basis as of June 30, 1998 and 1997 and for each of the three years in the period ended June 30, 1998. Investments in subsidiaries are accounted for by the parent company on the equity method for purposes of the presentation set forth below. Earnings of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. 52 AmeriCredit Corp. Supplementary Information Consolidating Balance Sheet June 30, 1998 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ------------ ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ 30,157 $ 2,930 $ 33,087 Receivables held for sale, net 178,219 164,634 342,853 Interest-only receivables from Trusts $ (2,151) 3,623 130,222 131,694 Investments in Trust receivables 2,109 96,748 98,857 Restricted cash 55,758 55,758 Property and equipment, net 175 23,210 23,385 Other assets 8,911 13,003 6,123 28,037 Due (to) from affiliates 330,924 (226,892) (104,032) Investment in affiliates 110,623 13,921 2 $ (124,546) ------------ ---------- -------------- ------------ ------------ Total assets $ 448,482 $ 37,350 $ 352,385 $ (124,546) $ 713,671 ============ ========== ============== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Warehouse credit facilities $ 24,900 $ 140,708 $ 165,608 Senior notes $ 175,000 175,000 Other notes payable 6,384 26 6,410 Accrued taxes and expenses (2,280) 53,950 (4,538) 47,132 Deferred income taxes (18,470) (16,637) 66,780 31,673 ------------ ---------- -------------- ------------ ------------ Total liabilities 160,634 62,239 202,950 425,823 ------------ ---------- -------------- ------------ ------------ Shareholders' equity: Common stock 693 203 3 $ (206) 693 Additional paid-in capital 230,269 108,336 13,921 (122,257) 230,269 Unrealized gain on credit enhancement assets 7,234 7,234 (7,234) 7,234 Retained earnings 72,770 (133,428) 128,277 5,151 72,770 ------------ ---------- -------------- ------------ ------------ 310,966 (24,889) 149,435 (124,546) 310,966 Treasury stock (23,118) (23,118) ------------ ---------- -------------- ------------ ------------ Total shareholders' equity 287,848 (24,889) 149,435 (124,546) 287,848 ------------ ---------- -------------- ------------ ------------ Total liabilities and shareholders' equity $ 448,482 $ 37,350 $ 352,385 $ (124,546) $ 713,671 ============ ========== ============== ============ ============
53 AmeriCredit Corp. Supplementary Information Consolidating Balance Sheet June 30, 1997 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ------------ ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ 3,988 $ 2,039 $ 6,027 Receivables held for sale, net 240,912 25,745 266,657 Interest-only receivables from Trusts $ (777) 4,136 50,106 53,465 Investments in Trust receivables 7,432 43,356 50,788 Restricted cash 57,142 57,142 Property and equipment, net 136 13,748 13,884 Other assets 10,947 12,564 4,019 27,530 Due (to) from affiliates 277,369 (197,957) (79,412) Investment in affiliates 47,567 $ (47,567) ----------- ---------- -------------- ------------ ------------ Total assets $ 335,242 $ 84,823 $ 102,995 $ (47,567) $ 475,493 =========== ========== ============== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Warehouse credit facilities $ 72,045 $ 72,045 Senior notes $ 125,000 125,000 Other notes payable 3,484 33 $ 23,689 27,206 Accrued taxes and expenses 8,088 27,987 (1,217) 34,858 Deferred income taxes (9,591) (4,811) 22,525 8,123 ----------- ---------- -------------- ------------ ------------ Total liabilities 126,981 95,254 44,997 267,232 ----------- ---------- -------------- ------------ ------------ Shareholders' equity: Common stock 667 203 3 $ (206) 667 Additional paid-in capital 203,531 98,336 (98,336) 203,531 Unrealized gain on credit enhancement assets 4,355 4,355 (4,355) 4,355 Retained earnings 23,469 (108,970) 53,640 55,330 23,469 ----------- ---------- -------------- ------------ ------------ 232,022 (10,431) 57,998 (47,567) 232,022 Treasury stock (23,761) (23,761) ----------- ---------- -------------- ------------ ------------ Total shareholders' equity 208,261 (10,431) 57,998 (47,567) 208,261 ----------- ---------- -------------- ------------ ------------ Total liabilities and shareholders' equity $ 335,242 $ 84,823 $ 102,995 $ (47,567) $ 475,493 =========== ========== ============== ============ ============
54 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1998 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $ 39,114 $ 16,723 $ 55,837 Gain on sale of receivables $ (6,729) 1,350 108,573 103,194 Servicing fee income 91,682 9,822 $ (53,594) 47,910 Other income 31,029 1,268 741 (30,643) 2,395 Equity in income of affiliates 50,179 (50,179) ----------- ---------- -------------- ------------ ------------ 74,479 133,414 135,859 (134,416) 209,336 ----------- ---------- -------------- ------------ ------------ Costs and expenses: Operating expenses 10,800 137,273 5 (53,594) 94,484 Provision for losses 7,555 7,555 Interest expense 14,776 24,192 18,810 (30,643) 27,135 ----------- ---------- -------------- ------------ ------------ 25,576 169,020 18,815 (84,237) 129,174 ----------- ---------- -------------- ------------ ------------ Income before income taxes 48,903 (35,606) 117,044 (50,179) 80,162 Income tax provision (398) (11,148) 42,407 30,861 ----------- ---------- -------------- ------------ ------------ Net income $ 49,301 $ (24,458) $ 74,637 $ (50,179) $ 49,301 =========== ========== ============== ============ ============
55 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1997 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ------------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $36,633 $ 8,277 $ 44,910 Gain on sale of receivables $ (855) 2,939 50,239 52,323 Servicing fee income 56,343 6,230 $ (39,081) 23,492 Other income 18,348 1,280 914 (17,911) 2,631 Equity in income of affiliates 24,119 (24,119) ------------- ---------- -------------- ------------ ------------ 41,612 97,195 65,660 (81,111) 123,356 ------------- ---------- -------------- ------------ ------------ Costs and expenses: Operating expenses 5,282 83,997 1,717 (39,081) 51,915 Provision for losses 6,595 6,595 Interest expense 5,116 17,202 11,905 (17,911) 16,312 ------------- ---------- -------------- ------------ ----------- 10,398 107,794 13,622 (56,992) 74,822 ------------- ---------- -------------- ------------ ----------- Income before income taxes 31,214 (10,599) 52,038 (24,119) 48,534 Income tax provision 1,365 (2,481) 19,801 18,685 ------------- ---------- -------------- ------------ ---------- Net income $ 29,849 $ (8,118) $32,237 $ (24,119) $ 29,849 ============= ========== ============== ============ ==========
56 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1996 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ------------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $ 32,050 $ 19,656 $ 51,706 Gain on sale of receivables 11,459 9,946 21,405 Servicing fee income 26,398 161 $ (22,667) 3,892 Other income $ 11,499 1,780 653 (11,300) 2,632 Equity in income of affiliates 24,571 (24,571) ------------- ---------- -------------- ------------ ------------ 36,070 71,687 30,416 (58,538) 79,635 ------------- ---------- -------------- ------------ ------------ Costs and expenses: Operating expenses 3,700 41,359 3,289 (22,667) 25,681 Provision for losses 7,912 7,912 Interest expense 371 15,212 8,846 (11,300) 13,129 ------------- ---------- -------------- ------------ ------------ 4,071 64,483 12,135 (33,967) 46,722 ------------- ---------- -------------- ------------ ------------ Income before income taxes 31,999 7,204 18,281 (24,571) 32,913 Income tax provision 11,234 914 12,148 ------------- ---------- -------------- ------------ ------------ Net income $ 20,765 $ 6,290 $ 18,281 $ (24,571) $ 20,765 ============= ========== ============== ============ ============
57 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1998 (Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated ----------- ---------- ---------- ------------ ------------ Cash flows from operating activities Net income $ 49,301 $ (24,458) $ 74,637 $ (50,179) $ 49,301 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 50 4,448 4,498 Provision for losses 7,555 7,555 Deferred income taxes 390 (11,826) 42,410 30,974 Non-cash servicing fee income (10,867) (10,867) Non-cash gain on sale of auto receivables (96,405) (96,405) Distributions from Trusts 43,807 43,807 Equity in income of affiliates (50,179) 50,179 Changes in assets and liabilities Other assets (420) (739) (2,165) (3,324) Accrued taxes and expenses (10,368) 25,963 (3,321) 12,274 ----------- --------- --------- --------- --------- Net cash provided by operating activities (11,226) 943 48,096 37,813 ----------- --------- --------- --------- --------- Cash flows from investing activities Purchases of auto receivables (1,717,006) (1,777,748) 1,777,748 (1,717,006) Originations of mortgage receivables (137,169) (137,169) Principal collections and recoveries on receivables 11,984 6,400 18,384 Net proceeds from sale of auto receivables 1,777,748 1,632,357 (1,777,748) 1,632,357 Net proceeds from sale of mortgage receivables 119,683 119,683 Initial deposits to restricted cash (56,725) (56,725) Purchases of property and equipment 11 (9,467) (9,456) Decrease in other assets 5,000 64 5,064 Net change in investment in affiliates (9,998) (3,921) (2) 13,921 ----------- --------- --------- --------- --------- Net cash used by investment activities (4,987) 41,852 (195,654) 13,921 (144,868) ----------- --------- --------- --------- --------- Cash flows from financing activities Net change in warehouse credit facilities (47,145) 140,708 93,563 Proceeds from issuance of senior notes 47,762 47,762 Payments on other notes payable (1,346) (7) (23,689) (25,042) Proceeds from issuance of common stock 17,832 13,921 (13,921) 17,832 Net change in due (to) from affiliates (48,035) 30,526 17,509 ----------- --------- --------- ---------- --------- Net cash provided by financing activities 16,213 (16,626) 148,449 (13,921) 134,115 ----------- --------- --------- ---------- --------- Net increase (decrease) in cash and cash equivalents 26,169 891 27,060 Cash and cash equivalents at beginning of year 3,988 2,039 6,027 ----------- --------- --------- ---------- --------- Cash and cash equivalents at end of year $ 30,157 $ 2,930 $ 33,087 =========== ========= ========= =========== =========
58 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1997 (Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated ----------- ---------- ---------- ------------ ------------ Cash flows from operating activities Net income $ 29,849 $ (8,118) $ 32,237 $ (24,119) $ 29,849 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28 2,175 2,203 Provision for losses 6,595 6,595 Deferred income taxes 135 (1,048) 19,799 18,886 Non-cash servicing fee income (7,991) (7,991) Non-cash gain on sale of auto receivables (52,534) (52,534) Distributions from Trusts 19,347 19,347 Equity in income of affiliates (24,119) 24,119 Changes in assets and liabilities Other assets 917 (3,083) (175) (2,341) Accrued taxes and expenses 4,835 18,278 (1,124) 21,989 -------- -------- -------- --------- -------- Net cash provided by operating activities 11,645 (37,735) 62,093 36,003 -------- -------- -------- --------- -------- Cash flows from investing activities Purchases of auto receivables (896,711) (814,107) 814,107 (896,711) Originations of mortgage receivables (53,770) (53,770) Principal collections and recoveries on receivables 22,672 41,717 64,389 Net proceeds from sale of auto receivables 814,107 814,107 (814,107) 814,107 Net proceeds from sale of mortgage receivables 52,489 52,489 Initial deposits to restricted cash (71,400) (71,400) Decrease in other assets 58 2,402 2,460 Purchases of property and equipment (81) (4,430) (4,511) Net change in investment in affiliates 25,605 (22,981) (2,624) -------- -------- -------- --------- -------- Net cash used by investment activities 25,582 (88,624) (29,905) (92,947) -------- -------- -------- --------- -------- Cash flows from financing activities Net change in warehouse credit facilities (17,264) (17,264) Proceeds from issuance of senior notes 120,894 120,894 Payments on other notes payable (552) (44,158) (44,710) Purchase of treasury stock (4,387) (4,387) Proceeds from issuance of common stock 6,293 6,293 Net change in due (to) from affiliates (154,562) 147,698 6,864 -------- -------- -------- --------- -------- Net cash provided by financing activities (32,314) 130,434 (37,294) 60,826 -------- -------- -------- --------- -------- Net increase (decrease) in cash and cash equivalents 4,913 4,075 (5,106) 3,882 Cash and cash equivalents at beginning of year (4,913) (87) 7,145 2,145 -------- -------- -------- --------- -------- Cash and cash equivalents at end of year $ 3,988 $ 2,039 $ 6,027 ======== ======== ======== ========= ========
59 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1996 (Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated ----------- ---------- ---------- ------------ ------------ Cash flows from operating activities Net income $ 20,765 $ 6,290 $ 18,281 $ (24,571) $ 20,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49 1,479 1,528 Provision for losses 7,912 7,912 Deferred income taxes 13,596 (2,432) 11,164 Non-cash servicing fee income (1,079) (1,079) Non-cash gain on sale of auto receivables 1,014 (16,431) (15,417) Distributions from Trusts 1,235 1,235 Equity in income of affiliates (24,571) 24,571 Changes in assets and liabilities Other assets 362 (1,857) 511 (984) Accrued taxes and expenses 1,273 8,606 (473) 9,406 -------- -------- -------- --------- ------- Net cash provided by operating activities 11,474 21,012 2,044 34,530 -------- -------- -------- --------- ------- Cash flows from investing activities Purchases of auto receivables (417,235) (115,646) 115,646 (417,235) Principal collections and recoveries on receivables 37,894 57,054 94,948 Net proceeds from sale of auto receivables 262,243 115,646 (115,646) 262,243 Initial deposits to restricted cash (2,939) (2,939) Purchases of property and equipment 2,536 (5,698) (3,162) Decrease in other assets 3,707 (311) 3,396 Net change in investment in affiliates (2,746) 2,743 3 -------- -------- -------- --------- ------- Net cash used by investment activities 3,497 (120,053) 53,807 (62,749) -------- -------- -------- --------- ------- Cash flows from financing activities Net change in warehouse credit facilities 86,000 86,000 Payments on other notes payable (298) (66,673) (66,971) Proceeds from issuance of common stock 3,731 3,731 Purchase of treasury stock (10,710) (10,710) Net change in due (to) from affiliates (29,794) 19,348 10,446 -------- -------- -------- --------- ------- Net cash provided by financing activities (37,071) 105,348 (56,227) - 12,050 -------- -------- -------- --------- ------- Net increase (decrease) in cash and cash equivalents (22,100) 6,307 (376) (16,169) Cash and cash equivalents at beginning of year 17,187 (6,394) 7,521 18,314 -------- -------- -------- --------- ------- Cash and cash equivalents at end of year $ (4,913) $ (87) $ 7,145 $ 2,145 ======== ======== ======== ========= =======
60 Report of Independent Accountants on Supplementary Information Board of Directors and Shareholders AmeriCredit Corp. Our report on the audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1998 and 1997 and for the three years ended June 30, 1998, 1997 and 1996 is included on page 50 of this Form 10-K/A. These audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information appearing on pages 53 to 60 of this Form 10-K/A is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such supplementary information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, when considered in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers LLP Fort Worth, Texas August 4, 1998, except as to Note 14 and Note 2 to the consolidated financial statements for which the dates are September 30, 1998 and January 14, 1999, respectively. 61 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 included herein under Item 8. Consolidated Financial Statements: Consolidated Balance Sheets as of June 30, 1998 and 1997. Consolidated Statements of Income for the years ended June 30, 1998, 1997 and 1996. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1998, 1997 and 1996. Consolidated Statements of Cash Flows for the years ended June 30, 1998, 1997 and 1996. Notes to Consolidated Financial Statements Report of Independent Accountants (1) Consolidating financial information for AmeriCredit Corp. (on a parent only basis), the combined Subsidiary Guarantors and the combined Non- Guarantor Subsidiaries is included herein under Item 8. (3) 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. (4) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Index to Exhibits. (5) The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 1998. Certain subsidiaries and affiliates of the Company filed reports on Form 8-K during the quarterly period ended June 30, 1998 reporting monthly information related to securitization trusts. 62 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 February 16, 1999. AmeriCredit Corp. BY: /s/ Clifton H. Morris, Jr. Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities 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 and February 16, 1999 - ---------------------------- Clifton H. Morris, Jr. Chief Executive Officer /s/ Daniel E. Berce Vice Chairman and February 16, 1999 - ---------------------------- Daniel E. Berce Chief Financial Officer /s/ Michael R. Barrington Vice Chairman, President February 16, 1999 - ---------------------------- Michael R. Barrington and Chief Operating Officer /s/ A. R. Dike Director February 16, 1999 - ---------------------------- A. R. Dike /s/ Edward H. Esstman Executive Vice President, February 16, 1999 - ---------------------------- Edward H. Esstman Auto Finance Division and Director James H. Greer Director - ---------------------------- James H. Greer Douglas K. Higgins Director - ---------------------------- Douglas K. Higgins Kenneth H. Jones, Jr. Director - ---------------------------- Kenneth H. Jones, Jr.
63 INDEX TO EXHIBITS The following exhibits are hereby amended and filed as a part of this report. Exhibit Number Description - ------- ----------- 11.1@ -- Statement Re Computation of Per Share Earnings 12.1@ -- Statement Re Computation of Ratios 23.1@ -- Consent of PricewaterhouseCoopers LLP 27.1@ -- Restated Financial Data Schedule 1996 27.2 -- Restated Financial Data Schedule 1997 27.3 -- Restated Financial Data Schedule 1998 - --------------------------------------------------------------------- 64 EX-11.1 2 STATEMENT: RE COMPUTATIONS OF PER SHARE EARNINGS EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts)
1998 1997 1996 ---- ---- ---- Weighted average shares outstanding 60,188,788 57,774,724 57,049,142 Incremental shares resulting from assumed exercise of stock options 5,014,672 3,799,824 3,357,454 ---------- ---------- ---------- Weighted average shares and assumed incremental shares 65,203,460 61,574,548 60,406,596 ========== ========== ========== NET INCOME $ 49,301 $ 29,849 $ 20,765 ========== ========== ========== EARNINGS PER SHARE: Basic $ 0.82 $ 0.52 $ 0.36 ========== ========== ========== Diluted $ 0.76 $ 0.48 $ 0.34 ========== ========== ==========
Basic earnings per share has been computed by dividing net income by the weighted average shares outstanding. Diluted earnings per share has been computed by dividing net income by the weighted average shares and assumed incremental shares. Assumed incremental shares were computed using the treasury stock method. The average common stock market price for the period was used to determine the number of incremental shares. EX-12.1 3 STATEMENT: RE COMPUTATION OF RATIOS EXHIBIT 12.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF RATIOS (dollars in thousands)
Years Ended June 30, ----------------------------------------------- 1998 1997 1996 ---- ---- ---- COMPUTATION OF EARNINGS: Income before income taxes $ 80,162 $ 48,534 $ 32,913 Interest expense (none capitalized) 27,135 16,312 13,129 -------- -------- -------- $107,297 $ 64,846 $ 46,042 ======== ======== ======== COMPUTATION OF FIXED CHARGES: Interest expense $ 27,135 $ 16,312 $ 13,129 ======== ======== ======== $ 27,135 $ 16,312 $ 13,129 ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 4.0x 4.0x 3.5x ======== ======== ========
EX-23.1 4 CONSENT OF PRICEWATERHOUSECOOPERS LLP 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. 33-39883, 33-39881, 33-56501, 33-48162, 33-41203 and 33-01111) and Form S-3 (File Nos. 333-52283, 333-575157 and 33- 52679) of our report, dated August 4, 1998, except for Note 14 for which the date is September 30, 1998 and except for Note 2 for which the date is January 14, 1999, on our audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1998 and 1997 and for the three years in the period ended June 30, 1998, which report is included in this Annual Report on Form 10-K/A. Fort Worth, Texas February 16, 1999 EX-27.1 5 RESTATED FINANCIAL DATA SCHEDULE 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF AMERICREDIT CORP. INCLUDED IN ITS ANNUAL REPORT ON FORM 10K/A 0000804269 AMERICREDIT CORP 1,000 YEAR JUN-30-1996 JUL-01-1995 JUN-30-1996 17,449 0 264,086 (13,602) 0 0 10,395 2,725 329,333 0 154,265 0 0 653 161,746 329,333 0 79,635 0 25,681 0 7,912 13,129 32,913 12,148 20,765 0 0 0 20,765 0.36 0.34
EX-27.2 6 RESTATED FINANCIAL DATA SCHEDULE 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCLUDED IN ITS ANNUAL REPORT ON FORM 10K/A 0000804269 AMERICREDIT CORP 1,000 YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 66,085 0 279,603 (12,946) 0 0 17,722 3,838 475,493 0 224,251 0 0 667 207,594 475,493 0 123,356 0 51,915 0 6,595 16,312 48,534 18,685 29,849 0 0 0 29,849 0.52 0.48
EX-27.3 7 RESTATED FINANCIAL DATA SCHEDULE 1998
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENT OF AMERICREDIT CORP. INCLUDED IN IT ANNUAL REPORT ON FORM 10K/A 0000804269 AMERICORP CORP 1,000 YEAR JUN-30-1998 JUL-01-1997 JUN-30-1998 134,796 0 355,609 (12,756) 0 0 31,334 7,949 713,671 0 347,018 0 0 693 287,155 713,671 0 209,336 0 94,484 0 7,555 27,135 80,162 30,861 49,301 0 0 0 49,301 0.82 0.76
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