-----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, BDZwi+bylr1KunaVmQ2kU5+4Y6h3KeORmETuBx6ydTQF+fp0RxfG/EdNU2g19Fmk 7u3fISeV8Nyq3OJRkrJ93g== 0000930661-99-002228.txt : 19991227 0000930661-99-002228.hdr.sgml : 19991227 ACCESSION NUMBER: 0000930661-99-002228 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990928 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-K SEC ACT: SEC FILE NUMBER: 001-10667 FILM NUMBER: 99718752 BUSINESS ADDRESS: STREET 1: 801 CHERRY STREET, SUITE 3900 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173027000 MAIL ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: URCARCO INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10667 AmeriCredit Corp. (Exact name of registrant as specified in its charter) Texas 75-2291093 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 801 Cherry Street, Suite 3900, 76102 Fort Worth, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (817) 302-7000 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on 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 9.875% Senior Notes due 2006/Guarantee of 9.875% Senior Notes due 2006 (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of 56,510,765 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 10, 1999 was approximately $734,639,945. 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 72,062,181 shares of Common Stock, $.01 par value outstanding as of September 10, 1999. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended June 30, 1999 ("the Annual Report") furnished to the Commission pursuant to Rule 14a- 3(b) and the definitive Proxy Statement pertaining to the 1999 Annual Meeting of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A are incorporated herein by reference into Parts II and IV, and Part III, respectively. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AMERICREDIT CORP. INDEX TO FORM 10-K
Item Page No. No. ---- ---- PART I 1. Business.......................................................... 3 2. Properties........................................................ 17 3. Legal Proceedings................................................. 18 4. Submission of Matters to a Vote of Security Holders............... 18 PART II 5. Market for Registrant's Common Equity and Related Stockholder 19 Matters........................................................... 6. Selected Financial Data........................................... 19 7. Management's Discussion and Analysis of Financial Condition and 19 Results of Operations............................................. 7A. Quantitative and Qualitative Disclosures About Market Risk........ 19 8. Financial Statements and Supplementary Data....................... 19 9. Changes in and Disagreements with Accountants on Accounting and 29 Financial Disclosure.............................................. PART III 10. Directors and Executive Officers of the Registrant................ 29 11. Executive Compensation............................................ 29 12. Security Ownership of Certain Beneficial Owners and Management.... 29 13. Certain Relationships and Related Transactions.................... 29 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 30 SIGNATURES 31
2 PART I ITEM 1. BUSINESS General AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. The Company's predecessor began the Company's business in March 1987, and the business has been operated continuously since that time. As used herein, the term "Company" refers to the Company, its wholly owned subsidiaries and its predecessor corporation. The Company's principal executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, 76102 and its telephone number is (817) 302-7000. The Company and its subsidiaries, including AmeriCredit Financial Services, Inc. ("AFSI"), a Delaware corporation, have been operating in the automobile finance business since September 1992. Through its AFSI branch network, the Company purchases loans made by franchised and select independent dealers to consumers buying late model used and, to a lesser extent, new automobiles. The Company targets consumers who are typically unable to obtain financing from traditional sources. Funding for the Company's auto lending activities is obtained primarily through the sale of loans in securitization transactions. The Company services its automobile lending portfolio at regional centers using automated loan servicing and collection systems. In November 1996, the Company acquired Americredit Corporation of California, a California corporation. This subsidiary, which operates as AmeriCredit Mortgage Services ("AMS"), originates mortgage loans and sells the loans and related servicing rights in the wholesale markets. Automobile Finance Operations Target Market. The Company's automobile lending programs are designed to serve customers who have limited access to traditional automobile financing. The Company's typical borrowers have experienced prior credit difficulties or have limited credit histories. Because the Company serves customers who are unable to meet the credit standards imposed by most traditional automobile financing sources, the Company generally charges interest at rates higher than those charged by traditional automobile financing sources. The Company also expects to sustain a higher level of credit losses than traditional automobile financing sources since the Company provides financing in a relatively high risk market. Dealership Marketing. Since the Company is primarily an indirect lender, the Company focuses its marketing activities on automobile dealerships. The Company is selective in choosing the dealers with whom it conducts business and primarily pursues manufacturer franchised dealerships with used car operations and select independent dealerships. The Company selects these dealers because they sell the type of used cars the Company prefers to finance, specifically later model, low mileage used cars. Of the contracts purchased by the Company during the fiscal year ended June 30, 1999, approximately 95% were originated by manufacturer franchised dealers with used car operations and 5% by select independent dealers. The Company purchased contracts from 12,590 dealers during the fiscal year ended June 30, 1999. No dealer accounted for more than 1% of the total volume of contracts purchased by the Company for that same period. Prior to entering into a relationship with a dealer, the Company considers the dealer's operating history and reputation in the marketplace. The Company then maintains a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet the Company's underwriting standards and profitability objectives. Due to the non-exclusive nature of the Company's relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from the Company or from another source for a customer seeking to finance a vehicle purchase. Branch managers and other branch office personnel regularly telephone and visit dealers to solicit new business and to answer any questions dealers may have regarding the Company's financing programs and capabilities. These personnel explain the Company's underwriting philosophy, including the preference for non-prime quality 3 contracts secured by later model, lower mileage vehicles and the Company's practice of underwriting in the local branch office. To increase the effectiveness of these contacts, the branch managers and other branch office personnel have access to the Company's management information systems which detail current information regarding the number of applications submitted by a dealership, the Company's response and the reasons why a particular application was rejected. Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the contract. To mitigate the Company's risk from potential credit losses, the Company typically charges dealers an acquisition fee when purchasing finance contracts. Such acquisition fees are negotiated with dealers on a contract-by-contract basis and are usually non- refundable. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon such representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer. Branch Office Network. The Company uses a branch office network to market its financing programs to selected dealers, develop relationships with these dealers and underwrite contracts submitted by dealerships. Branch office personnel are responsible for the solicitation, enrollment and education of dealers regarding the Company's financing programs. The Company believes a local presence enables the Company to more fully service dealers and be more responsive to dealer concerns and local market conditions. The Company selects markets for branch office locations based upon numerous factors, including demographic trends and data, competitive conditions, the regulatory environment and the availability of qualified personnel. Branch offices are typically situated in suburban office buildings which are accessible to local dealers. Each branch office solicits dealers for contracts and maintains the Company's relationship with the dealers in the geographic vicinity of that branch office. Branch office locations are typically staffed by a branch manager, an assistant manager and one or more dealer and customer service representatives. Larger branch offices may also have additional assistant managers and/or dealer marketing representatives. The Company believes that the personal relationships its branch managers and other branch personnel establish with the dealership staff are an important factor in creating and maintaining productive relationships with the Company's dealer customer base. Branch managers are compensated with base salaries and annual incentives based on overall branch performance including factors such as branch credit quality, loan pricing adequacy and loan volume objectives. The incentives are typically paid in cash and stock option grants. The branch managers report to regional vice presidents. The Company's regional vice presidents monitor branch office compliance with the Company's underwriting guidelines. The Company's management information systems provide the regional vice presidents access to credit application information enabling them to consult with the branch managers on daily credit decisions and review exceptions to the Company's underwriting guidelines. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews. The following table sets forth information with respect to the number of branches, dollar volume of contracts purchased and number of producing dealerships for the periods set forth below.
Year Ended June 30, ------------------------------ 1999 1998 1997 ---------- ---------- -------- (dollars in thousands) Number of branch offices........................ 176 129 85 Dollar volume of contracts purchased............ $2,879,796 $1,737,813 $906,794 Number of producing dealerships(1).............. 12,590 9,204 5,657
- -------- (1) A producing dealership refers to a dealership from which the Company had purchased contracts in the respective period. 4 Underwriting and Purchasing of Contracts Proprietary Credit Scoring System and Risk-based Pricing. The Company has implemented a proprietary credit scoring system throughout its branch office network to support the branch level credit approval process. The credit scoring system was developed with the assistance of Fair, Isaac and Co., Inc. from the Company's consumer demographic and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables the Company to tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, the Company could compensate for this higher default risk through the structuring and pricing of the transaction. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase could adversely affect the credit quality of the Company's receivables portfolio. The credit scoring system considers data contained in the customer's credit application and credit bureau report as well as the structure of the proposed loan and produces a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether risk is acceptable and the price the Company should charge for that risk. The Company's credit scorecards are validated on a monthly basis through the comparison of actual versus projected performance by score. The Company endeavors to refine its proprietary scorecards based on new information and identified correlations relating to receivables performance. Through the use of the Company's proprietary credit scoring system, branch office personnel with credit authority are able to more efficiently review and prioritize loan applications. Applications which receive a high score can be processed rapidly and credit decisions can be quickly faxed back to the dealer. Applications receiving low scores can be quickly rejected without further processing and review by the Company. This ability to prioritize applications allows for a more effective allocation of resources to those applications requiring more review. Decentralized Loan Approval Process. The Company purchases individual contracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. Each branch manager has a specific credit authority based upon their experience and historical loan portfolio results as well as established credit scoring parameters. In certain markets where a branch office is not present, contracts are purchased through the Company's regional purchasing offices. Although the credit approval process is decentralized, all credit decisions must comply with the Company's credit scoring strategies and underwriting policies and procedures. Loan application packages completed by prospective obligors are received via facsimile or electronic interface at the branch offices from dealers. Application data are entered into the Company's automated application processing system. A credit bureau report is automatically generated and a credit score is computed. Branch office personnel with credit authority review the application package and determine whether to approve the application, approve the application subject to conditions that must be met or deny the application. These personnel consider many factors in arriving at a credit decision, relying primarily on the applicant's credit score, but also taking into account the applicant's capacity to pay, stability, credit history, the contract terms and collateral value. The Company estimates that approximately 60% to 65% of applicants are denied credit by the Company typically because of their credit histories or other factors. Dealers are contacted regarding credit decisions by telefax, telephone or electronic interface. Declined and conditioned applicants are also provided with appropriate notification of the decision. The Company's underwriting and collateral guidelines as well as credit scoring parameters form the basis for the branch level credit decision; however, the qualitative judgment of the branch office personnel with credit authority with respect to the credit quality of an applicant is a significant factor in the final credit decision. Exceptions to credit policies and authorities must be approved by a regional vice president or other designated credit officer. 5 The dealers send completed loan packages to the branch office. As part of the credit decision process, a customer service representative investigates the residence, employment and credit history of the applicant. Loan terms and insurance coverages are generally reverified with the customer by branch office personnel and the loan packages are forwarded to the Company's centralized loan services department. All loan documentation is scanned to create electronic images and key original documents are stored in a fire resistant vault. The loans are reviewed for proper documentation and regulatory compliance and are entered into the Company's loan accounting system. Once cleared for funding, the loan services department issues a check or electronically transfers funds to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the automobile that was financed. Daily loan reports are generated for review by senior operations management. All of the Company's contracts are fully amortizing with substantially equal monthly installments. Servicing and Collections Procedures General. The Company's servicing activities consist of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent in payment of an installment, maintaining the security interest in the financed vehicle, maintaining physical damage insurance coverage of the financed vehicle and repossessing and liquidating collateral when necessary. The Company utilizes various automated systems to support its servicing and collections activities. The Company uses monthly billing statements to serve as a reminder to customers as well as an early warning mechanism in the event a customer has failed to notify the Company of an address change. Approximately 20 days before a customer's first payment due date and each month thereafter, the Company mails the customer a billing statement directing the customer to mail payments to a lockbox bank for deposit in a lockbox account. Payment receipt data is electronically transferred from the Company's lockbox bank to the Company for posting to the loan accounting system. Payments may also be received directly by the Company from customers. All payment processing and customer account maintenance is performed centrally in Fort Worth, Texas by the loan services department. The Company receives servicing fees for servicing securitized receivables equal to 2.25% per annum of the outstanding principal balance of such receivables. The Company's collections activities are performed at regional centers located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. A predictive dialing system is utilized to make phone calls to customers whose payments are past due. The predictive dialer is a computer-controlled telephone dialing system which dials phone numbers of customers from a file of records extracted from the Company's database. Once a live voice responds to the automated dialer's call, the system automatically transfers the call to a collector and the relevant account information to the collector's computer screen. The system also tracks and notifies collections management of phone numbers that the system has been unable to reach within a specified number of days, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating time wasted on attempting to reach customers, the system gives a single collector the ability to speak with a larger number of accounts daily. Once an account becomes more than 30 days delinquent, the account moves to the Company's mid-range collection unit. The objective of these collectors is to prevent the account from becoming further delinquent. After a scheduled payment on an account becomes approximately 60 to 90 days past due, the Company typically initiates repossession of the financed vehicle. However, the Company may repossess a financed vehicle without regard to the length of payment delinquency if an account is deemed uncollectible, the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, the customer deals in bad faith or the customer voluntarily surrenders the financed vehicle. Payment deferrals are at times offered to customers who have encountered temporary financial difficulty, hindering their ability to pay as contracted, and when other methods of assisting the customer in meeting the contract terms and conditions have been exhausted. A deferral allows the customer to move a delinquent payment to the end of the loan by paying a fee (approximately the interest portion of the payment deferred). The collector reviews the customer's past payment history and statistically based behavioral score and assesses the customer's desire and capacity to make future payments. Before agreeing to a deferral, the collector must also ensure that 6 the deferment transaction complies with the Company's policies and guidelines. Exceptions to the Company's policies and guidelines for deferrals must be approved by a collections officer. The loan services department processes deferment transactions. As of June 30, 1999, approximately 14% of the Company's managed receivables had received a deferral. Repossessions. Repossessions are subject to prescribed legal procedures, which include peaceful repossession, one or more customer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the customer. Some jurisdictions provide the customer with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy, may restrict the Company's ability to dispose of the repossessed vehicle. Repossessions are handled by independent repossession firms engaged by the Company and must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The Company does not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. The Company may pursue collection of deficiencies when it deems such action to be appropriate. Charge-Off Policy. The Company's policy is to charge-off an account in the month in which the account becomes 120 days contractually delinquent even if the Company has not repossessed the related vehicle. On accounts less than 120 days delinquent, the Company charges-off the account when the vehicle securing the delinquent contract is repossessed and disposed of. The charge-off represents the difference between the actual net sales proceeds and the amount of the delinquent contract, including accrued interest. Accrual of finance charge income is suspended on accounts which are more than 60 days contractually delinquent. Risk Management Overview. The Company has developed procedures to evaluate and supervise the operations of each branch office on a centralized basis. The Company's risk management department is responsible for monitoring the contract purchase process and supporting the supervisory role of senior operations management. This department tracks via databases key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories. The risk management department also regularly reviews the performance of the Company's credit scoring system and is involved with third-party vendors in the development and enhancement of credit scorecards for the Company. The risk management department also prepares regular credit indicator packages reviewing portfolio performance at various levels of detail including total Company, branch office and dealer. Various daily reports and analytical data are also generated by the Company's management information systems. This information is used to monitor credit quality as well as to refine the structure and mix of new contract purchases. Portfolio returns can be reviewed on a consolidated basis, as well as at the branch office, dealer and contract levels. Behavioral Scoring. Statistically-based behavioral assessment models are used to project the relative probability that an individual account will default and to validate the credit scoring system after the receivable has aged for a sufficient period of time, generally six to nine months. Default probabilities are calculated for each account independent of the credit score. Projected default rates from the behavioral assessment models and credit scoring systems are compared and analyzed to monitor the effectiveness of the Company's credit strategies. Collateral Value Management. The value of the collateral underlying the Company's receivables portfolio is updated monthly with a loan-by-loan link to national wholesale auction values. This data, along with the Company's own experience relative to mileage and vehicle condition, are used for evaluating collateral disposition activities as well as for reserve analysis models. Compliance Audits. The Company's internal audit department conducts regular compliance audits of branch office operations, loan services, collections and other functional areas. The primary objective of the audits 7 is to measure compliance with the Company's written policies and procedures as well as regulatory matters. Branch office audits include a review of compliance with underwriting policies, completeness of loan documentation, collateral value assessment and extent of applicant data investigation. Written audit reports are distributed to local branch office personnel and the regional vice presidents for response and follow-up. Senior operations management reviews copies of these reports. Audit results and responses are also reviewed on a quarterly basis by an audit committee comprised of senior executive management. Securitization of Loans Since December 1994, the Company has pursued a strategy of securitizing its receivables to diversify its funding, improve liquidity and obtain a cost- effective source of funds for the purchase of additional automobile finance contracts. The Company applies the net proceeds from securitizations to pay down borrowings under its warehouse credit facilities, thereby increasing availability thereunder for further contract purchases. Through June 30, 1999, the Company had securitized approximately $5.8 billion of automobile receivables, including a $1.0 billion securitization completed in May 1999. In its securitizations, the Company, through a wholly-owned subsidiary, transfers automobile receivables to newly-formed securitization trusts, which issue one or more classes of asset-backed securities. The asset-backed securities are in turn sold to investors, except for certain subordinated interests, which may be retained by the Company. When receivables are transferred to securitization trusts, the Company recognizes a gain on sale of receivables and continues to service such receivables. The gain on sale of receivables primarily represents the present value of estimated excess cash flows the Company expects to receive from the pool of receivables sold. The estimated excess cash flows are the difference between the cash collected from obligors on securitized receivables and the sum of principal and interest paid to investors in the asset-backed securities, contractual servicing fees, defaults, net of recoveries and other expenses such as trustee fees and financial guarantee insurance premiums. Concurrently with recognizing such gain on sale of receivables, the Company records a corresponding asset, interest only receivables from trusts, which includes the present value of estimated excess cash flows as described above. The calculation of interest-only receivables from trusts includes estimates of future losses and prepayment rates for the remaining term of the receivables sold since these factors impact the amount and timing of future cash collected on the receivables sold. The carrying value of interest-only receivables is reviewed quarterly by the Company for each separate securitization transaction. If future losses or prepayment rates exceed the Company's original estimates, the asset will be adjusted through a charge to operations. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional income when realized. In connection with the Company's securitization program, the Company arranges for a financial guaranty insurance policy to achieve a high grade credit rating on the asset-backed securities issued. The policies for each of the Company's securitizations have been provided by Financial Security Assurance Inc. ("FSA"), a monoline insurer, which insures the timely payment of principal and interest due on the asset-backed securities. The Company has limited reimbursement obligations to FSA; however, credit enhancement requirements, including FSA's encumbrance of certain restricted cash accounts and subordinated interests in trusts, provide a source of funds to cover shortfalls in collections and to reimburse FSA for any claims which may be made under the policies issued with respect to the Company's securitizations. The credit enhancement requirements for any securitization include restricted cash accounts which are generally established with an initial deposit and subsequently funded through excess cash flows from securitized receivables. Funds would be withdrawn from the restricted cash accounts to cover any shortfalls in amounts payable on the asset-backed securities. Funds are also available to be withdrawn in an event of default to reimburse FSA for draws on its financial guaranty insurance policy. In addition, the restricted cash account for 8 each securitization trust is cross-collateralized to the restricted cash accounts established in connection with the Company's other securitization trusts, such that excess cash flow from a performing securitization trust insured by FSA may be used to support cash flow shortfalls from a non- performing securitization trust insured by FSA, thereby further restricting excess cash flow available to the Company. The Company is entitled to receive amounts from the restricted cash accounts to the extent the amounts deposited exceed predetermined required minimum levels. FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned subsidiary of the Company that owns the restricted cash accounts, interest- only receivables and any subordinated interests in the trusts, such that, if the pledge is foreclosed upon in the event of a payment by FSA under one of its insurance policies or certain material adverse changes in the business of the Company, FSA would control all of the restricted cash accounts, interest- only receivables and subordinated interests in the trusts. The terms of each securitization also provide that, under certain tests relating to delinquencies, defaults and losses, cash may be retained in the restricted cash account and not released to the Company until increased minimum levels of credit enhancement requirements have been reached and maintained. Trade Names The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. Regulation The Company's operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company's business. The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system used by the Company must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. The dealers who originate automobile loans purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with such statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company. 9 The Company believes that it maintains all material licenses and permits required for its current operations and is in substantial compliance with all applicable local, state and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits and the failure to satisfy those and other regulatory requirements could have a material adverse effect on its operations. Further, the adoption of additional, or the revision of existing rules and regulations could have a material adverse effect on the Company's business. Competition Competition in the field of non-prime automobile finance is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of major automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have substantially greater financial resources and lower costs of funds than the Company. Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which are not provided by the Company. Providers of automobile financing have traditionally competed on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish itself as one of the principal financing sources at the dealers it serves, the Company competes predominately on the basis of its high level of dealer service and strong dealer relationships and by offering flexible loan terms. There can be no assurance that the Company will be able to compete successfully in this market or against these competitors. Mortgage Loan Operations In November 1996, the Company acquired AMS. AMS originates and acquires mortgage loans through a network of mortgage brokers. AMS sells its mortgage loans and the related servicing rights in the wholesale markets. AMS does not currently represent a material portion of the Company's assets or revenues. Risk Factors Dependence on Warehouse Credit Facilities. The Company depends on warehouse credit facilities with financial institutions to finance its purchase of contracts pending securitization. At June 30, 1999, the Company has five warehouse credit facilities with various financial institutions providing for revolving credit borrowings of up to a total of $1,070 million and $20 million Cdn., subject to defined borrowing bases. The Company has a $505 million warehouse facility which expires in September 1999 and a $375 million warehouse facility which expires in March 2000. The Company's bank credit agreement, which provides for up to $115 million of revolving borrowings subject to a borrowing base, matures in March 2000 and the $20 million Cdn. bank facility to fund Canadian auto receivables expires in November 1999. In July 1999, the Company renewed the mortgage subsidiary credit agreement reducing the amount the Company can borrow from $75 million to $25 million, subject to a borrowing base, and extending the maturity date to July 2000. The Company cannot guarantee that any of these financing resources will continue to be available at reasonable terms or at all. The availability of these financing sources depends on factors outside of the Company's control, including regulatory capital treatment for unfunded bank lines of credit and the availability of bank liquidity in general. If the Company is unable to extend or replace any of these facilities and arrange new warehouse credit facilities, it will have to curtail contract purchasing activities, which would have a material adverse effect on the Company's financial position, liquidity and results of operation. The Company's warehouse credit facilities contain extensive restrictions and covenants and require the Company to maintain specified financial ratios and satisfy specified financial tests, including maintenance of asset quality and portfolio performance tests. Failure to meet any of these convenants, financial ratios or financial tests could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under such agreements and restrict the Company's 10 ability to obtain additional borrowings under these agreements. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control and the Company cannot guarantee that it will meet those financial ratios and tests. Dependence on Securitization Program. Since December 1994, the Company has relied upon its ability to aggregate and sell receivables in the asset-backed securities market to generate cash proceeds for repayment of warehouse credit facilities and to purchase additional contracts from automobile dealers. Further, gains on sales generated by the Company's securitizations currently represent the single largest component of the Company's revenues. The Company endeavors to effect securitizations of its receivables on at least a quarterly basis. Accordingly, adverse changes in the Company's asset-backed securities program or in the asset-backed securities market for automobile receivables generally could materially adversely affect the Company's ability to purchase and resell loans on a timely basis and upon terms reasonably favorable to the Company. Any delay in the sale of receivables beyond a quarter-end would eliminate the gain on sale that quarter and adversely affect the Company's reported earnings for that quarter. Any of these adverse changes or delays would have a material adverse effect on the Company's financial position, liquidity and results of operations. Dependence on Credit Enhancement. To date, all of the Company's securitizations have utilized credit enhancement in the form of financial guaranty insurance policies issued by Financial Security Assurance, Inc. ("FSA") in order to achieve AAA/Aaa ratings which reduces the costs of securitizations relative to alternative forms of financing available to the Company. FSA is not required to insure Company-sponsored securitizations and there can be no assurance that it will continue to do so or that future Company-sponsored securitizations will be similarly rated. Likewise, the Company is not required to utilize financial guaranty insurance policies issued by FSA or any other form of credit enhancement in connection with its securitizations. The Company recently began to utilize reinsurance and other credit enhancement alternatives to reduce the initial cash deposit related to securitization. A downgrading of FSA's credit rating or FSA's withdrawal of credit enhancement or the lack of availability of reinsurance or other alternative credit enhancements from the Company's securitization program could result in higher interest costs for future Company-sponsored securitizations and larger initial cash deposit requirements. These events could have a material adverse effect on the Company's financial position, liquidity and results of operations. Liquidity and Capital Needs. The Company's ability to make payments on and to refinance its indebtedness and to fund planned capital expenditures depends on its ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company's control. The Company requires substantial amounts of cash to fund its contract purchase and securitization activities. Although the Company recognizes a gain on the sale of receivables upon the closing of a securitization, it typically receives the cash representing that gain over the actual life of the receivables securitized. The Company also incurs significant transaction costs in connection with a securitization. Accordingly, the Company's strategy of securitizing substantially all of its newly purchased receivables and increasing the number of contracts purchased will require substantial amounts of cash. The Company expects to continue to require substantial amounts of cash as the volume of the Company's contract purchases increases and its securitization program grows. The Company's primary cash requirements include the funding of: (i) contract purchases pending their securitization and sale; (ii) credit enhancement requirements in connection with the securitization and sale of the receivables; (iii) interest and principal payments under warehouse credit facilities, the Company's senior notes and other indebtedness; (iv) fees and expenses incurred in connection with the securitization and servicing of receivables; (v) capital expenditures for technology; (vi) ongoing operating expenses; and (vii) income tax payments due on receipt of excess cash flows from securitization trusts. The Company's primary sources of liquidity in the future are expected to be existing cash, financings under its warehouse credit facilities, sales of automobile receivables through securitizations, excess cash flow received from securitization trusts and further issuances of debt or equity securities, depending on capital market conditions. 11 Because the Company's principal credit facilities are initially 364 days in length, the Company must renew these facilities annually. In addition, because the Company expects to continue to require substantial amounts of cash for the foreseeable future, it anticipates that it will need to enter into debt or equity financings regularly, in addition to quarterly securitizations. The type, timing and terms of financing selected by the Company will be dependent upon the Company's cash needs, the availability of various financing sources and the prevailing conditions in the financial markets. There can be no assurance that any such sources will be available to the Company at any given time or as to whether the terms on which such sources may be available will be acceptable. Leverage. The Company currently has substantial outstanding indebtedness. The Company's ability to make payments of principal or interest on, or to refinance its indebtedness will depend on its future operating performance and its ability to enter into additional securitizations and debt and/or equity financings, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. If the Company is unable to generate sufficient cash flow in the future to service its debt, it may be required to refinance all or a portion of its existing debt, or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained on acceptable terms. The inability to obtain additional financing could have a material adverse effect on the Company. The degree to which the Company is leveraged creates risks including: (i) the Company may be unable to satisfy its obligations under its outstanding senior notes; (ii) the Company may be more vulnerable to adverse general economic and industry conditions; (iii) the Company may find it more difficult to fund future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; and (iv) the Company will have to dedicate a substantial portion of its cash resources to the payment of principal and interest on indebtedness outstanding thereby reducing the funds available for operations and future business opportunities. The Company's warehouse credit facilities and its indentures restrict its ability to, among other things: (i) sell or transfer assets; (ii) incur additional debt; (iii) repay other debt; (iv) pay dividends; (v) make certain investments or acquisitions; (vi) repurchase or redeem capital stock; (vii) engage in mergers or consolidations; and (viii) engage in certain transactions with subsidiaries and affiliates. The warehouse credit facilities and the indentures also require the Company to comply with certain financial ratios, covenants and asset quality maintenance requirements. These restrictions may interfere with the Company's ability to obtain financing or to engage in other necessary or desirable business activities. If the Company cannot comply with the requirements in its warehouse credit facilities, then the lenders may require it to immediately repay all of the outstanding debt under its facilities. If its debt payments were accelerated, the Company's assets might not be sufficient to fully repay the debt. These lenders may also require the Company to use all of its available cash to repay its debt, they may foreclose upon their collateral or they may prevent the Company from making payments to other creditors on certain portions of the Company's outstanding debt. The Company may not be able to obtain a waiver of these provisions or refinance its debt, if needed. In such a case, the Company's business, results of operations and financial condition would suffer. Default and Prepayment Risks. The Company's results of operations, financial condition and liquidity depend, to a material extent, on the performance of contracts purchased and held by the Company prior to their sale in a securitization transaction as well as the subsequent performance of receivables sold to securitization trusts. Obligors under loans acquired by the Company may default or prepay during the period prior to their sale in a securitization transaction or if they remain owned by the Company. The Company bears the full risk of losses resulting from payment defaults during such period. In the event of a payment default, the collateral value of the financed vehicle usually does not cover the outstanding loan balance and costs of recovery. The Company maintains an allowance for losses on loans held for sale by the Company, which reflects management's estimates of anticipated losses for such loans. If the allowance is inadequate, then the Company would recognize as an 12 expense the losses in excess of that allowance and results of operations could be adversely affected. In addition, under the terms of the warehouse credit facilities, the Company is not able to borrow against defaulted loans and loans greater than 30 days delinquent held by the Company. The Company also retains a substantial portion of the default and prepayment risk associated with the receivables that it sells pursuant to Company- sponsored securitizations. A large component of the gain recognized on these sales and the corresponding assets recorded on the Company's balance sheet are credit enhancement assets which are based on the present value of estimated future excess cash flows from the securitized receivables which will be received by the Company. Accordingly, credit enhancement assets are calculated on the basis of management's assumptions concerning, among other things, defaults and prepayments. Actual defaults and prepayments may vary from management's assumptions, possibly to a material degree. As of June 30, 1999, credit enhancement assets totaled $494.9 million. Depending on the Company's growth, credit enhancement assets may become a larger share of the Company's overall assets. The Company is required to deposit substantial amounts of the cash flows generated by its interests in Company sponsored securitizations ("restricted cash") into spread accounts which are pledged to FSA as security for the Company's obligation to reimburse FSA for any amounts which may be paid out on financial guarantee insurance policies. The Company regularly measures its default, prepayment and other assumptions against the actual performance of securitized receivables. If the Company were to determine, as a result of such regular review or otherwise, that it underestimated defaults and/or prepayments, or that any other material assumptions were inaccurate, the Company would be required to adjust the carrying value of its credit enhancement assets, which consist of restricted cash, investments in trust receivables and interest-only receivables, by recording a charge to income and writing down the carrying value of these assets on its balance sheet. Future cash flows from securitization trusts may also be less than expected and the Company's results of operations and liquidity would be adversely affected, possibly to a material degree. In addition, an increase in defaults or prepayments would reduce the size of the Company's servicing portfolio, which would reduce the Company's servicing fee income, further adversely affecting results of operations and cash flow. A material write-down of credit enhancement assets and the corresponding decreases in earnings and cash flow could limit the Company's ability to service debt and to enter into future securitizations and other financings. Although the Company believes that it has made reasonable assumptions as to the future cash flows of the various pools of receivables that have been sold in securitization transactions, actual rates of default or prepayment may differ from those assumed and other assumptions may be required to be revised upon future events. Portfolio Performance; Negative Impact on Cash Flows; Right to Terminate Normal Servicing. Generally, the form of credit enhancement agreement the Company enters into in connection with securitization transactions contains specified limits on the delinquency, default and loss rates on the receivables included in each securitization trust. If, at any measurement date, the delinquency, default or loss rate with respect to any trust were to exceed the specified limits, provisions of the credit enhancement agreement would automatically increase the level of credit enhancement requirements for that trust. During the period in which the specified delinquency, default and loss rates were exceeded, excess cash flow, if any, from the trust would be used to fund the increased credit enhancement levels instead of being distributed to the Company, which would have an adverse effect on the Company's cash flow. Further, the credit enhancement requirements for each securitization trust are cross-collateralized to the credit enhancement requirements established in connection with each of the Company's other securitization trusts, so that excess cash flow from a performing securitization trust insured by FSA may be used to support increased credit enhancement requirements for a non-performing securitization trust insured by FSA, which would further restrict excess cash flow available to the Company. The Company has on occasion exceeded these specified limits, however, FSA has either waived each of these occurrences or amended the agreements. The Company can give no assurance that FSA would waive any such future occurrence or amend the agreements. Any refusal of FSA to waive any such future occurrence or amend the agreements could have a material adverse effect on the Company's financial position, liquidity and results of operations. 13 The credit enhancement agreements entered into in connection with securitization transactions contain additional specified limits on the delinquency, default and loss rates on the receivables included in each trust which are higher than the limits referred to in the preceding paragraph. If, at any measurement date, the delinquency, default or loss rate with respect to any trust were to exceed these additional specified limits applicable to that trust, provisions of the credit enhancement agreements permit FSA to terminate the Company's servicing rights to the receivables sold to that trust. In addition, the servicing agreements are cross-defaulted so that a default under one servicing agreement would allow FSA to terminate the Company's servicing rights under all of its servicing agreements. Although the Company has never exceeded such delinquency, default or loss rates, there can be no assurance that the Company's servicing rights with respect to the automobile receivables in such trusts or any other trust which exceeds the specified limits in future periods will not be terminated. FSA has other rights to terminate the Company as servicer if (i) the Company were to breach its obligations under the servicing agreements, (ii) FSA was required to make payments under its policies or (iii) certain bankruptcy or insolvency events were to occur. As of June 30, 1999, no such termination events have occurred with respect to any of the trusts formed by the Company. Reliance on Revenue Generated from the Sale of Loans to Trusts. The Company periodically sells auto receivables to certain special purpose financing trusts and these 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 the 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. For the year ended June 30, 1999, the Company recognized a gain on sale of auto receivables of $162.4 million or approximately 48% of revenue during that period. If the Company is unable to originate new loans and sell them to the trusts, the Company could experience a significant change in the timing of revenue recognition and reported income. Further, there can be no assurance that the Company will recognize gains on future sales of receivables to the trusts consistent with the gains on previous sales. Implementation of Business Strategy. The Company's financial position and results of operations depend on Company management's ability to execute its business strategy. Key factors involved in execution of such business strategy include continued expansion of automobile contract purchase volume, continued and successful use of proprietary scoring models for risk-based pricing, the use of sophisticated risk management techniques, continued investment in technology to support operating efficiency and growth and funding and liquidity through securitizations. The failure or inability of the Company to execute any element of its business strategy could materially adversely affect its financial position, liquidity and results of operations. The Company's business strategy also includes leveraging its expertise to broaden its lending to non-prime borrowers through the operations of AMS. The Company plans to expand its indirect automobile finance business by adding additional branch offices and by increasing the dealer penetration of the Company's existing branch offices. The success of this strategy is dependent upon, among other factors, the Company's ability to hire and retain qualified branch managers and other personnel, to develop relationships with more dealers and to expand the Company's current relationships with existing dealer customers. The Company is faced with intense competition in attracting key personnel and establishing relationships with new dealers. Dealers often already have favorable non-prime financing sources, which may restrict the Company's ability to develop dealer relationships and delay the Company's growth. In addition, the competitive conditions in the Company's market may result in a reduction in the profitability of the 14 contracts that the Company purchases or a decrease in contract acquisition volume, which would adversely affect the Company's results of operations. The growth of the Company's servicing portfolio has resulted in increased need for additional personnel and expansion of systems capacity. The Company's ability to support, manage and control growth is dependent upon, among other things, the Company's ability to hire, train, supervise and manage its growing workforce. There can be no assurance that the Company will have trained personnel and systems adequate to support the Company's growth strategy. Credit-Impaired Borrowers. The Company specializes in purchasing, securitizing and servicing non-prime automobile receivables. Non-prime borrowers are associated with higher-than-average delinquency and default rates. While the Company believes that it effectively manages these risks with its proprietary credit scoring system, risk-based loan pricing and other underwriting policies and collection methods, no assurance can be given that these criteria or methods will be effective in the future. In the event that the Company underestimates the default risk or under-prices contracts that it purchases, the Company's financial position, liquidity and results of operations would be adversely affected, possibly to a material degree. Economic Conditions. Delinquencies, defaults, repossessions and losses generally increase during periods of economic recession. These periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, which weakens collateral coverage and increases the amount of a loss in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. Because the Company focuses on non-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on these loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an economic slow down or recession, the Company's servicing costs may increase without a corresponding increase in its servicing fee income. While the Company believes that the underwriting criteria and collection methods it employs enable it to manage the higher risk inherent in loans made to non- prime borrowers, no assurance can be given that such criteria or methods will afford adequate protection against such risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could also adversely affect the Company's ability to enter into future securitizations and correspondingly, its financial position, liquidity and results of operations. Interest Rates. The Company's profitability may be directly affected by the level of and fluctuations in interest rates, which affect the Company's ability to earn a gross interest rate spread. As the level of interest rates increase, the Company's gross interest rate spread will generally decline since the rates charged on the contracts purchased from dealers are limited by statutory maximums, affording the Company little opportunity to pass on increased interest costs. Furthermore, the Company's future gains recognized upon the securitization of automobile receivables will also be affected by interest rates. The Company recognizes a gain in connection with its securitizations based upon the estimated present value of projected future excess cash flows from the securitization Trusts, which is largely dependent upon the gross interest rate spread. The Company believes that its profitability and liquidity would be adversely affected during any period of higher interest rates, possibly to a material degree. The Company monitors the interest rate environment and employs pre-funding or other hedging strategies designed to mitigate the impact of changes in interest rates. There can be no assurance, however, that pre-funding or other hedging strategies will mitigate the impact of changes in interest rates. Labor Market Conditions. Low unemployment rates driven by economic growth and the continued expansion of consumer credit markets could contribute to an increase in the Company's employee turnover rate. High turnover or an inability to attract and retain qualified replacement personnel could have an adverse effect on the Company's delinquency, default and net loss rates and, ultimately, the Company's financial condition, results of operations and liquidity. Competition. Reference should be made to Item 1. "Business--Automobile Finance Operations--Competition" for a discussion of competitive risk factors. 15 Regulation. Reference should be made to Item 1. "Business--Automobile Finance Operations--Regulation" for a discussion of regulatory risk factors. Year 2000 Issue The year 2000 issue is the result of computer programs and embedded hardware systems having been developed using two digits rather than four to define the applicable year. These computer programs or hardware that have date-sensitive software or embedded chips may use a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations causing disruptions or failure to the Company's operations including, among other things, a temporary inability to transact new business or communicate with its customers. The Company has substantially completed its year 2000 compliance review, which included obtaining certifications from third party software vendors regarding the year 2000 compliance of their software applications, testing the Company's core operating systems and identifying and repairing any problems. The Company believes that it is year 2000 compliant. However, the Company may experience degradation in the performance of its systems or complete system failure if its assessment is erroneous or if the Company encounters unforeseen difficulties. Any of these events, whether occurring in the Company's systems or the systems of others, could have a material adverse effect on the Company's business, financial condition and results of operations. Employees At June 30, 1999, the Company employed 2,241 persons in 41 states and two Canadian provinces. None of the Company's employees are a part of a collective bargaining agreement and the Company's relationships with employees are satisfactory. Executive Officers The following sets forth certain data concerning the executive officers of the Company as of June 30, 1999.
Name Age Position ---- --- -------- Clifton H. Morris, Jr... 63 Chairman of the Board and Chief Executive Officer Michael R. Barrington... 40 Vice Chairman of the Board, President and Chief Operating Officer Daniel E. Berce......... 45 Vice Chairman of the Board and Chief Financial Officer Edward H. Esstman....... 58 Executive Vice President--Auto Finance Division; President and Chief Operating Officer of AmeriCredit Financial Services, Inc. and Director Chris A. Choate......... 36 Senior Vice President, General Counsel and Secretary Joseph E. McClure....... 51 Executive Vice President and Chief Information Officer Cheryl L. Miller........ 35 Executive Vice President, Director of Collections and Customer Service of AmeriCredit Financial Services, Inc. Michael T. Miller....... 37 Executive Vice President and Chief Credit Officer Preston A. Miller....... 35 Executive Vice President and Treasurer Cinde C. Perales........ 38 Executive Vice President and Director of Loan Services of AmeriCredit Financial Services, Inc.
CLIFTON H. MORRIS, JR. has been Chairman of the Board and Chief Executive Officer of the Company since May 1988, and was also President of the Company from such date until April 1991 and from April 1992 to November 1996. Mr. Morris is also a director of Service Corporation International, a publicly held company which owns and operates funeral homes and related businesses, and Cash America International Inc., a publicly held pawn brokerage company. MICHAEL R. BARRINGTON has been Vice Chairman, President and Chief Operating Officer of the Company since November 1996 and was Executive Vice President and Chief Operating Officer of the Company from November 1994 until November 1996. Mr. Barrington was a Vice President of the Company from May 16 1991 until November 1994. From its formation in July 1992 until November 1996, Mr. Barrington was also the President and Chief Operating Officer of AFSI. DANIEL E. BERCE has been Vice Chairman and Chief Financial Officer of the Company since November 1996 and was Executive Vice President, Chief Financial Officer and Treasurer for the Company from November 1994 until November 1996. Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the Company from May 1991 until November 1994. Mr. Berce is also a director of INSpire Insurance Solutions Inc., a publicly held company, which provides policy and claims administration services to the property and casualty insurance industry. EDWARD H. ESSTMAN has been President and Chief Operating Officer of AFSI since November 1996. Mr. Esstman was Executive Vice President, Director of Consumer Finance Operations of AFSI from November 1994 until November 1996 and was Senior Vice President, Director of Consumer Finance of AFSI from AFSI's formation in July 1992 until November 1994. Mr. Esstman has also been Executive Vice President--Auto Finance Division for the Company since November 1996 and Senior Vice President and Chief Credit Officer for the Company from November 1994 until November 1996. CHRIS A. CHOATE has been Senior Vice President, General Counsel and Secretary of the Company since November 1996 and was Vice President, General Counsel and Secretary of the Company from November 1994 until November 1996 and General Counsel and Secretary of the Company from January 1993 until November 1994. From July 1991 until January 1993, Mr. Choate was Assistant General Counsel. JOSEPH E. McCLURE has been Executive Vice President, Chief Information Officer of the Company since April 1999 and was Senior Vice President, Chief Information Officer from October 1998 until April 1999. Prior to that, Mr. McClure was Executive Vice President, Division Information Officer of Associates First Capital Corp. and was in that position for more than five years. CHERYL L. MILLER has been Executive Vice President, Director of Collections and Customer Service of AFSI since July 1998 and was Senior Vice President, Director of Collections and Customer Service of AFSI from March 1996 until July 1998 and Vice President, Director of Collections and Customer Service of AFSI from October 1994 until March 1996. From May 1994 until October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to that, Ms. Miller was with Ford Motor Credit Company, most recently as customer service supervisor of the Dallas branch. MICHAEL T. MILLER has been Executive Vice President and Chief Credit Officer since July 1998 and was Senior Vice President and Chief Credit Officer of the Company from November 1996 until July 1998. Mr. Miller was Senior Vice President, Risk Management, Credit Policy and Planning and Chief of Staff of AFSI from November 1994 until November 1996 and Vice President, Risk Management, Credit Policy and Planning of AFSI from AFSI's formation in July 1992 until November 1994. Michael T. Miller is the brother of Cheryl L. Miller. PRESTON A. MILLER has been Executive Vice President and Treasurer of the Company since July 1998 and was Senior Vice President and Treasurer of the Company from November 1996 until July 1998. Mr. Miller was Vice President and Controller of the Company from November 1994 until November 1996 and was Controller of the Company from September 1989 until November 1994. CINDE C. PERALES has been Executive Vice President, Director of Loan Services of AFSI since July 1998 and was Senior Vice President, Director of Loan Services of AFSI from March 1996 until July 1998 and Vice President, Director of Loan Services of AFSI from October 1992 until March 1996. ITEM 2. PROPERTIES The Company's executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, in a 113,000 square foot leased office space under a 12 year lease that commenced in July 1999. This building is 17 utilized by the Company for branch office support and administrative activities. The Company also leases 67,000 square feet of office space in Tempe, Arizona under a ten year agreement with renewal options, 56,000 square feet of office space in Charlotte, North Carolina under a ten year agreement with renewal options and 250,000 square feet of office space in Arlington, Texas under a five year agreement. These facilities are used primarily for loan servicing and collections activities. The Company's executive offices were formerly located in a 43,000 square foot building purchased in 1994. The Company intends to sell this building. The Company's branch office facilities are generally leased under agreements with original terms of three to five years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 2,000 square feet of space. ITEM 3. LEGAL PROCEEDINGS As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, fraud and discriminatory treatment of credit applicants, which could take the form of a plaintiffs' class action complaint. The Company, as the assignee of finance contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. One proceeding in which the Company is a defendant has been brought as a putative class action and is pending in the State of California. A class has yet to be certified in this case, in which the plaintiffs allege certain defects in post-repossession notice forms in the State of California and no court date has been set, nor are any hearings presently scheduled. Management believes that the Company has taken prudent steps to address the litigation risks associated with the Company's business activities. However, there can be no assurance that the Company will be able to successfully defend against all such claims or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's automobile finance business. On April 8, 1999, a putative class action complaint was filed against the Company and certain of the Company's officers and directors alleging violations of Section 10(b) of the Securities Exchange Act of 1934 arising from the Company's use of the cash-in method of measuring and accounting for credit enhancement assets in the financial statements for the second, third and fourth quarters of fiscal year 1997, fiscal year 1998 and the first quarter of fiscal year 1999. The Company believes that its previous use of the cash-in method of measuring and accounting for credit enhancement assets was consistent with then current generally accepted accounting principles and accounting practices of other finance companies. As required by the Financial Accounting Standards Board's Special Report, "A Guide to Implementation of Statement 125 on Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, Second Edition," dated December 1998 and related statements made by the staff of the Commission, the Company retroactively changed the method of measuring and accounting for credit enhancement assets to the cash-out method and restated the Company's financial statements for the three months ended September 30, 1998 and the fiscal years ended June 30, 1998, 1997 and 1996. In the opinion of management, this litigation is without merit and the Company intends to vigorously defend against the complaint. In the opinion of management, the resolution of the proceedings described in this section will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended June 30, 1999. 18 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company has never paid cash dividends on its common stock. The Company's warehouse credit facilities and the Indentures pursuant to which the senior notes were issued contain certain restrictions on the payment of dividends. The Company presently intends to retain future earnings, if any, for use in the operation and expansion of the business and does not anticipate paying any cash dividends in the foreseeable future. Information contained under the caption "Common Stock Data" in the Annual Report is incorporated herein by reference in further response to this Item 5. ITEM 6. SELECTED FINANCIAL DATA Information contained under the caption "Summary Financial and Operating Information" in the Annual Report is incorporated herein by reference in response to this Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information contained under the caption "Financial Review" in the Annual Report is incorporated herein by reference in response to this Item 7. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information contained under the caption "Financial Review--Interest Rate Risk" in the Annual Report is incorporated herein by reference in response to this Item 7A. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of the Company included in the Annual Report and information contained under the caption "Quarterly Data" in the Annual Report are incorporated herein by reference in response to this Item 8. The payment of principal, premium, if any, and interest on the Company's senior notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly-owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the senior notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. 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, 1999 and 1998 and for each of the three years in the period ended June 30, 1999. 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. 19 AMERICREDIT CORP. SUPPLEMENTARY INFORMATION CONSOLIDATING BALANCE SHEET June 30, 1999 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents............ $ 20,246 $ 943 $ 21,189 Receivables held for sale, net.............. 256,771 199,238 456,009 Interest-only receivables from Trusts................. $ 1,337 190,528 191,865 Investments in Trust receivables............ 195,598 195,598 Restricted cash......... 107,399 107,399 Property and equipment, net.................... 349 40,796 41,145 Other assets............ 11,510 30,170 8,602 50,282 Due (to) from affiliates............. 567,368 (478,520) (88,848) Investment in affiliates............. 198,339 118,024 1,050 $(317,413) -------- --------- -------- --------- ---------- Total assets........ $778,903 $ (12,513) $614,510 $(317,413) $1,063,487 ======== ========= ======== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Warehouse credit facilities........... $ 20,290 $ 94,369 $ 114,659 Senior notes.......... $375,000 375,000 Other notes payable... 17,874 17,874 Accrued taxes and expenses............. 16,062 65,902 265 82,229 Deferred income taxes................ (29,763) (42,016) 145,774 73,995 -------- --------- -------- --------- ---------- Total liabilities... 379,173 44,176 240,408 663,757 -------- --------- -------- --------- ---------- Shareholders' equity: Common stock.......... 715 203 3 $ (206) 715 Additional paid-in capital.............. 252,194 108,475 118,840 (227,315) 252,194 Accumulated other comprehensive income............... 21,410 21,410 (21,410) 21,410 Retained earnings..... 147,610 (165,367) 233,849 (68,482) 147,610 -------- --------- -------- --------- ---------- 421,929 (56,689) 374,102 (317,413) 421,929 Treasury stock.......... (22,199) (22,199) -------- --------- -------- --------- ---------- Total shareholders' equity............. 399,730 (56,689) 374,102 (317,413) 399,730 -------- --------- -------- --------- ---------- Total liabilities and shareholders' equity............. $778,903 $ (12,513) $614,510 $(317,413) $1,063,487 ======== ========= ======== ========= ==========
20 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 Accumulated other comprehensive income............... 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 ======== ========= ======== ========= ========
21 AMERICREDIT CORP. SUPPLEMENTARY INFORMATION CONSOLIDATING STATEMENT OF INCOME Year Ended June 30, 1999 (Dollars in Thousands)
AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue Finance charge income............... $ 42,302 $ 32,986 $ 75,288 Gain on sale of receivables.......... $ (6,394) 2,400 173,886 169,892 Servicing fee income.. 120,044 8,539 $ (42,617) 85,966 Other income.......... 39,585 3,428 744 (39,447) 4,310 Equity in income of affiliates........... 73,633 (73,633) -------- -------- -------- --------- -------- 106,824 168,174 216,155 (155,697) 335,456 -------- -------- -------- --------- -------- Costs and expenses Operating expenses.... 6,900 201,004 58 (42,617) 165,345 Provision for losses.. 3,979 5,650 9,629 Interest expense...... 22,983 20,097 35,159 (39,447) 38,792 -------- -------- -------- --------- -------- 29,883 225,080 40,867 (82,064) 213,766 -------- -------- -------- --------- -------- Income before income taxes.................. 76,941 (56,906) 175,288 (73,633) 121,690 Income tax provision.... 2,101 (24,967) 69,716 46,850 -------- -------- -------- --------- -------- Net income.............. $ 74,840 $(31,939) $105,572 $ (73,633) $ 74,840 ======== ======== ======== ========= ========
22 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 ======= ======== ======== ========= ========
23 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 ======= ======== ======= ======== ========
24 AMERICREDIT CORP. SUPPLEMENTARY INFORMATION CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended June 30, 1999 (Dollars in Thousands)
AmeriCredit Non- Corp. Guarantors Guarantors Eliminations Consolidated ----------- ----------- ----------- ------------ ------------ Cash flows from operating activities Net income............. $ 74,840 $ (31,939) $ 105,572 $ (73,633) $ 74,840 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization.......... 41 12,604 12,645 Provision for losses... 3,979 5,650 9,629 Deferred income taxes.. (1,375) (25,379) 70,118 43,364 Non-cash servicing fee income................ (12,525) (12,525) Non-cash gain on sale of auto receivables... (157,757) (157,757) Distributions from Trusts................ 44,531 44,531 Equity in income of affiliates............ (73,633) 73,633 Changes in assets and liabilities Other assets........... 3,304 (11,950) 2,469 (6,177) Accrued taxes and expenses.............. 18,342 11,952 4,803 35,097 --------- ----------- ----------- ----------- ----------- Net cash provided by operating activities.. 21,519 (40,733) 62,861 43,647 --------- ----------- ----------- ----------- ----------- Cash flows from investing activities Purchases of auto receivables........... (2,868,633) (2,783,160) 2,783,160 (2,868,633) Originations of mortgage receivables.. (297,535) (297,535) Principal collections and recoveries on receivables........... 6,381 15,143 21,524 Net proceeds from sale of auto receivables... 2,783,160 2,727,763 (2,783,160) 2,727,763 Net proceeds from sale of mortgage receivables........... 294,096 294,096 Initial deposits to restricted cash (82,750) (82,750) Return of deposits from restricted cash....... 23,000 23,000 Purchases of property and equipment......... (215) (14,513) (14,728) Change in other assets................ (5,514) (4,948) (10,462) Net change in investment in affiliates............ 93 (104,103) (1,048) 105,058 --------- ----------- ----------- ----------- ----------- Net cash used by investing activities.. (122) (206,661) (106,000) 105,058 (207,725) --------- ----------- ----------- ----------- ----------- Cash flows from financing activities Net change in warehouse credit facilities..... (4,610) (46,339) (50,949) Proceeds from issuance of senior notes....... 194,097 194,097 Payments on other notes payable............... (3,890) (26) (3,916) Proceeds from issuance of common stock....... 12,948 139 104,919 (105,058) 12,948 Net change in due (to) from affiliates....... (224,552) 241,980 (17,428) --------- ----------- ----------- ----------- ----------- Net cash provided by financing activities.. (21,397) 237,483 41,152 (105,058) 152,180 --------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............ (9,911) (1,987) (11,898) Cash and cash equivalents at beginning of year...... 30,157 2,930 33,087 --------- ----------- ----------- ----------- ----------- Cash and cash equivalents at end of year................... $ 20,246 $ 943 $ 21,189 ========= =========== =========== =========== ===========
25 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........... (1,713,582) (1,777,748) 1,777,748 (1,713,582) Originations of mortgage receivables.. (137,169) (137,169) Principal collections and recoveries on receivables........... 8,560 28,787 37,347 Net proceeds from sale of auto receivables... 1,777,748 1,609,970 (1,777,748) 1,609,970 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) Change 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 investing 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 ======== =========== =========== =========== ===========
26 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........... (869,975) (814,107) 814,107 (869,975) Originations of mortgage receivables.. (53,770) (53,770) Principal collections and recoveries on receivables........... (4,064) 56,224 52,160 Net proceeds from sale of auto receivables... 814,107 799,600 (814,107) 799,600 Net proceeds from sale of mortgage receivables........... 52,489 52,489 Initial deposits to restricted cash....... (71,400) (71,400) Purchases of property and equipment......... (81) (4,430) (4,511) Change in other assets................ 58 2,402 2,460 Net change in investment in affiliates............ 25,605 (22,981) (2,624) --------- --------- --------- --------- --------- Net cash used by investing 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) Proceeds from issuance of common stock....... 6,293 6,293 Purchase of treasury stock................. (4,387) (4,387) 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 ========= ========= ========= ========= =========
27 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, 1999 and 1998 and for the three years ended June 30, 1999, 1998 and 1997 has been incorporated by reference in this Form 10-K from page 38 of the 1999 Annual Report to Shareholders of AmeriCredit Corp. These audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The related financial statement schedules are presented for purposes of additional analysis and are 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, in relation to the financial statements taken as a whole. PricewaterhouseCoopers LLP Fort Worth, Texas August 4, 1999 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company had no disagreements on accounting or financial disclosure matters with its independent accountants to report under this Item 9. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information contained under the caption "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 10. See Item 1. "Business--Executive Officers" for information concerning executive officers. ITEM 11. EXECUTIVE COMPENSATION Information contained under the captions "Executive Compensation" and "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information contained under the caption "Principal Shareholders and Stock Ownership of Management" in the Proxy Statement is incorporated herein by reference in response to this Item 12. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information contained under the caption "Related Party Transactions" in the Proxy Statement is incorporated herein by reference in response to this Item 13. 29 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (1) The following Consolidated Financial Statements of the Company and Report of Independent Accountants are contained in the Annual Report and are incorporated herein by reference. Consolidated Financial Statements: Consolidated Balance Sheets as of June 30, 1999 and 1998. Consolidated Statements of Income and Comprehensive Income for the years ended June 30, 1999, 1998 and 1997. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1999, 1998 and 1997. Consolidated Statements of Cash Flows for the years ended June 30, 1999, 1998 and 1997. Notes to Consolidated Financial Statements Report of Independent Accountants (2) 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 and incorporated herein by reference. (4) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Index to Exhibits. (5) A report on Form 8-K dated April 12, 1999 was filed with the Commission to report under Item 5, the offering of $125 million aggregate principal amount of senior notes to certain qualified institutional buyers. A report on Form 8-K dated April 21, 1999 was filed with the Commission to report under Item 5, the issuance of $200 million of 9.875% Senior Notes due 2006. Certain subsidiaries and affiliates of the Company filed reports on Form 8- K during the quarterly period ended June 30, 1999 reporting monthly information related to securitization trusts. 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 21, 1999. AmeriCredit Corp. /s/ Clifton H. Morris, Jr. By: _________________________________ 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 September 21, 1999 ______________________________________ Chief Executive Officer Clifton H. Morris, Jr. /s/ Daniel E. Berce Vice Chairman and Chief September 21, 1999 ______________________________________ Financial Officer Daniel E. Berce /s/ Michael R. Barrington Vice Chairman, President September 21, 1999 ______________________________________ and Chief Operating Michael R. Barrington Officer /s/ Edward H. Esstman Executive Vice President, September 21, 1999 ______________________________________ Auto Finance Division and Edward H. Esstman Director /s/ A. R. Dike Director September 21, 1999 ______________________________________ A. R. Dike /s/ James H. Greer Director September 21, 1999 ______________________________________ James H. Greer /s/ Douglas K. Higgins Director September 21, 1999 ______________________________________ Douglas K. Higgins /s/ Kenneth H. Jones, Jr. Director September 21, 1999 ______________________________________ Kenneth H. Jones, Jr.
31 INDEX TO EXHIBITS The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified by the numbers in parenthesis under the Exhibit Number column. Documents filed with this report are identified by the symbol "@" under the Exhibit Number column.
Exhibit No. Description - ----------- ----------- 3.1 (1) - Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of Incorporation, filed August 24, 1988 (Exhibit 3.1) 3.2 (1) - Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2) 3.3 (5) - Articles of Amendment to Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3) 3.4 (8) - Bylaws of the Company, as amended (Exhibit 3.4) 4.1 (4) - Specimen stock certificate evidencing the Common Stock (Exhibit 4.1) 4.2 (10) - Rights Agreement, dated August 28, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C. (Exhibit 1) 4.2.1 (17) - Amendment No. 1 to Rights Agreement, dated September 9, 1999, between the Company and ChaseMellon Shareholder Services, L.L.C. (Exhibit 4.1) 4.3 (16) - Indenture, dated as of April 20, 1999, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA, with form of 9.875% Senior Notes due 2006 (Exhibit 4.3) 10.1 (1) - 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5) 10.2 (2) - Amendment No. 1 to the 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 4.6) 10.3 (3) - 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14) 10.4 (4) - 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10) 10.5 (4) - 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11) 10.6 (4) - Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit 10.18) 10.6.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Clifton H. Morris, Jr. (Exhibit 10.7.1) 10.7 (4) - Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit 10.19) 10.7.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Michael R. Barrington (Exhibit 10.8.1) 10.8 (4) - Executive Employment Agreement, dated January 30, 1991 between the Company and Daniel E. Berce (Exhibit 10.20) 10.8.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Daniel E. Berce (Exhibit 10.9.1) 10.9 (8) - Amended and Restated Employment Agreement, dated October 15, 1996, between the Company and Edward H. Esstman (Exhibit 10.10) 10.9.1 (8) - Amendment No. 1 to Amended and Restated Employment Agreement, dated May 1, 1997, between the Company and Edward H. Esstman (Exhibit 10.10.1) 10.10 (8) - Amended and Restated Employment Agreement, dated July 1, 1997, between the Company and Michael T. Miller (Exhibit 10.11) 10.10.1(14) - Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 1, 1998, between the Company and Michael T. Miller
32 INDEX TO EXHIBITS (Continued) 10.11 (11) - Sale and Servicing Agreement, dated as of October 8, 1997, between CP Funding Corp., AmeriCredit Financial Services, Inc. and The Chase Manhattan Bank (Exhibit 10.2) 10.11.1(16) - Amendment No. 1 to Sale and Servicing Agreement, dated as of September 29, 1998, between CP Funding Corp., AmeriCredit Financial Services, Inc. and The Chase Manhattan Bank (Exhibit 10.11.1) 10.12 (11) - Funding Agreement, dated as of October 8, 1997, between CP Funding Corp., Park Avenue Receivables Corporation, The Chase Manhattan Bank and other financial institutions named therein (Exhibit 10.3) 10.12.1(16) - Extension, Consent and Amendment Agreement, dated as of September 29, 1998, between CP Funding Corp., Park Avenue Receivables Corporation, The Chase Manhattan Bank and other financial institutions named therein (Exhibit 10.12.1) 10.13 (11) - Restated Revolving Credit Agreement, dated October 3, 1997, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named therein (Exhibit 10.1) 10.13.1(14) - First Amendment to Restated Revolving Credit Agreement, dated January 21, 1998, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named therein (Exhibit 10.13.1) 10.13.2(14) - Second Amendment to Restated Revolving Credit Agreement, dated April 30, 1998, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named therein (Exhibit 10.13.2) 10.13.3(14) - Third Amendment to Restated Revolving Credit Agreement, dated August 31, 1998, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association and other banks named therein (Exhibit 10.13.3) 10.13.4(16) - Fourth Amendment to Restated Revolving Credit Agreement, dated April 1, 1999, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association and other banks named therein (Exhibit 10.13.4) 10.14 (12) - Indenture, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA, with respect to Series A and Series B 9 1/4 % Senior Notes due 2004 (Exhibit 10.2) 10.15 (12) - Purchase Agreement , dated January 30, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.3) 10.16 (12) - A/B Exchange Registration Rights Agreement, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc., and Wheat First Butcher Singer (Exhibit 10.4) 10.17 (6) - 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. 10.18 (9) - Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. 10.19 (7) - 1996 Limited Stock Option Plan for AmeriCredit Corp. 10.20 (13) - Indenture, dated January 29, 1998, between AmeriCredit Corp. and subsidiaries and Bank One, N.A., with respect to Series C and Series D 9 1/4 % Senior Notes due 2004 (Exhibit 10.24) 10.21 (13) - Purchase Agreement, dated January 26, 1998, between AmeriCredit Corp. and subsidiaries and Salomon Brothers, Inc. and Credit Suisse First Boston Corporation (Exhibit 10.25) 10.22 (13) - C/D Exchange Registration Rights Agreement, dated as of January 29, 1998, between AmeriCredit Corp. and subsidiaries and Salomon Brothers, Inc., and Credit Suisse First Boston Corporation (Exhibit 10.26) 10.23 (15) - 1998 Limited Stock Option Plan for AmeriCredit Corp.
33 INDEX TO EXHIBITS (Continued) 10.24 (16) - Receivables Financing Agreement, dated as of March 31, 1999, among AmeriCredit Warehouse Trust, AmeriCredit Financial Services, Inc., AmeriCredit Funding Corp., Americredit Corporation of California, Credit Suisse First Boston, New York Branch, and Bank One, N.A. (Exhibit 10.24) 10.25 (16) - Master Receivables Purchase Agreement, dated as of March 31, 1999, among AmeriCredit Financial Services, Inc., AmeriCredit Funding Corp., Americredit Corporation of California and Bank One, N.A. (Exhibit 10.25) 10.26 (16) - Security and Collateral Agent Agreement, dated as of March 31, 1999, among Credit Suisse First Boston, New York Branch, Bank One, N.A., AmeriCredit Financial Services, Inc. and AmeriCredit Warehouse Trust (Exhibit 10.26) 10.27 (16) - Purchase Agreement, dated as of April 15, 1999, between AmeriCredit Corp. and subsidiaries and Salomon Smith Barney Inc., Bear, Stearns & Co. Inc. and ING Baring Furman Selz LLC (Exhibit 10.27) 10.28 (16) - A/B Exchange Registration Rights Agreement, dated as of April 20, 1999, between AmeriCredit Corp. and subsidiaries and Salomon Smith Barney Inc., Bear, Stearns & Co. Inc., and ING Baring Furman Selz LLC (Exhibit 10.28) 11.1 (@) - Statement Re Computation of Per Share Earnings 12.1 (@) - Statement Re Computation of Ratios 13.1 (@) - 1999 Annual Report to Shareholders of the Company 21.1 (@) - Subsidiaries of the Company 23.1 (@) - Consent of PricewaterhouseCoopers LLP 27.1 (@) - Financial Data Schedule
(1) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-31220 on Form S-1 filed by the Company with the Securities and Exchange Commission. (2) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-41203 on Form S-8 filed by the Company with the Securities and Exchange Commission. (3) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1990 filed by the Company with the Securities and Exchange Commission. (4) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1991, filed by the Company with the Securities and Exchange Commission. (5) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1993, filed by the Company with the Securities and Exchange Commission. (6) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1995, filed by the Company with the Securities and Exchange Commission. (7) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1996, filed by the Company with the Securities and Exchange Commission. (8) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1997, filed by the Company with the Securities and Exchange Commission. (9) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1997, filed by the Company with the Securities and Exchange Commission. (10) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Report on Form 8-K, dated August 28, 1997, filed by the Company with the Securities and Exchange Commission. 34 INDEX TO EXHIBITS (Continued) (11) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1997 filed by the Company with the Securities and Exchange Commission. (12) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997 filed by the Company with the Securities and Exchange Commission. (13) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Registration Statement on Form S-4, dated March 26, 1998, filed by the Company with the Securities and Exchange Commission. (14) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report as Form 10-K for the year ended June 30, 1998, filed by the Company with the Securities and Exchange Commission. (15) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1998, filed by the Company with the Securities and Exchange Commission. (16) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Registration Statement on Form S-4, dated June 15, 1999, filed by the Company with the Securities and Exchange Commission. (17) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Report on Form 8-K, dated September 7, 1999, filed by the Company with the Securities and Exchange Commission. (@) Filed herewith. 35 EX-11.1 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts) Years Ended June 30, ------------------------------------------------- 1999 1998 1997 ---- ---- ---- Weighted average shares outstanding 63,005,746 60,188,788 57,774,724 Incremental shares resulting from assumed exercise of stock options 4,185,489 5,014,672 3,799,824 ----------- ----------- ----------- Weighted average shares and assumed incremental shares 67,191,235 65,203,460 61,574,548 =========== =========== =========== NET INCOME $ 74,840 $ 49,301 $ 29,849 =========== =========== =========== EARNINGS PER SHARE: Basic $ 1.19 $ 0.82 $ 0.52 =========== =========== =========== Diluted $ 1.11 $ 0.76 $ 0.48 =========== =========== =========== Basic earnings per share have been computed by dividing net income by weighted average shares outstanding. Diluted earnings per share has been computed by dividing net income by 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, -------------------------------------------- 1999 1998 1997 ---- ---- ---- COMPUTATION OF EARNINGS: Income before income taxes $121,690 $ 80,162 $48,534 Interest expense (none capitalized) 38,792 27,135 16,312 -------- -------- ------- $160,482 $107,297 $64,846 ======== ======== ======= COMPUTATION OF FIXED CHARGES: Interest expense $ 38,792 $ 27,135 $16,312 -------- -------- ------- $ 38,792 $ 27,135 $16,312 ======== ======== ======= RATIO OF EARNINGS TO FIXED CHARGES 4.1x 4.0x 4.0x ======== ======== ======= EX-13.1 4 1999 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13.1 Corporate Profile AmeriCredit is a national consumer finance company specializing in purchasing, securitizing and servicing automobile loans, and originating and selling mortgage loans. Through its branch network, the Company purchases loans made by franchised and select independent dealers to consumers buying late-model used and, to a lesser extent, new automobiles. AmeriCredit targets borrowers who are typically unable to obtain "traditional" financing, and uses advanced techniques to evaluate applicants' credit profiles and predict default risk. The Company funds its auto lending activities primarily through the sale of loans in securitization transactions. Its automobile loan portfolio is serviced at regional centers using automated servicing and collection systems. Letter to Shareholders Fiscal 1999 was a year of significant accomplishment for AmeriCredit. We aggressively expanded our market share while achieving record profitability, better asset quality and higher returns on managed assets. Through our proprietary processes and systems developed over the past seven years, we have attained the leadership position in non-prime auto finance. This success provides AmeriCredit the momentum to advance to the next level. Our focus for fiscal 2000 and beyond is to further capitalize on the growth opportunities in our markets and leverage our core competencies to raise profitability and return on assets even higher. Fiscal 1999 Results AmeriCredit reported record net income of $74.8 million for fiscal 1999, an increase of 52% over net income of $49.3 million in fiscal 1998. On a per-share basis, fiscal 1999 earnings grew 46% to $1.11 from $0.76 last year. The fourth quarter of fiscal 1999 marked our 21st consecutive quarter of increased earnings. As an alternative measure of our financial performance, we are now reporting pro forma "portfolio-based" earnings data. This data presents our operating results as if AmeriCredit were a portfolio lender, essentially excluding the effects of gain on sale accounting. Pro forma "portfolio-based" earnings, which are growing faster than our traditional earnings measure, were $53.8 million, or $0.80 per share for fiscal 1999, compared to $23.3 million, or $0.36 per share for the prior fiscal year. Return on managed assets, a key metric we use internally to assess our operating results, increased to 1.7% in fiscal 1999 from 1.4% in fiscal 1998. Strong asset growth, operating efficiency and effective risk management continue to be the primary drivers of our favorable performance trends. 1 Asset Growth AmeriCredit's managed auto receivables grew 78% during the year to $4.1 billion at June 30, 1999. We purchased $2.9 billion of receivables during fiscal 1999, compared to $1.7 billion last year, an increase of 71%. Loan volume benefited from new branch office openings as well as market share gains in existing locations. In fact, mature offices produced 17% more loan volume during fiscal 1999 than in fiscal 1998. We opened 47 offices during fiscal 1999, including our first two branches in Canada, bringing the total to 176 locations. Our branch network serviced 12,590 auto dealers in fiscal 1999, up from 9,204 dealers last year. As a result of the strong market share growth we are experiencing and the significant volume opportunities presented by our strategic alliances, we expect to open only 19 additional branches during fiscal 2000 in order to achieve our growth targets. AmeriCredit's Strategic Alliance Group added six new partners in the past 12 months, bringing the total to 10 at year end. Our alliance partners consist of six large auto dealer groups and four banks, including Chase Manhattan Bank. The alliance with Chase began this past March with the introduction of a pilot joint marketing program targeted to select auto dealers in Texas. Because of its success, Chase and AmeriCredit will soon expand the program to include pilots in Chase's five other regions across the country. We have also recently implemented an interface to receive credit applications electronically from Chase. As Chase's only non-prime auto lending partner, AmeriCredit stands to benefit from Chase's excellent reputation with auto dealers nationwide. In fiscal 2000, we will also launch a direct lending initiative soliciting existing AmeriCredit customers as well as other prescreened consumers to obtain their next car loan from us. This strategy not only represents a new growth opportunity, but will also help the auto dealers we service by directing preapproved customers to their retail sites. Operating Efficiency Our strategy of using technology throughout the business, coupled with our increased scale of operations, allowed us to once again lower our cost ratio. AmeriCredit's ratio of operating expenses to average managed auto receivables dropped to 5.0% for fiscal 1999 from 5.4% the previous year. We expect to see further improvements in fiscal 2000 as we continue to benefit from economies of scale and technology initiatives. We made investments in fiscal 1999 to speed the credit approval process with the installation of our new application processing system, reducing application 2 turn time by 50% to less than one hour on average. This system, coupled with additional technology installed in each branch location, also allowed us to decrease funding time to as little as one day in most cases. We deployed enhanced behavioral assessment models and a new state-of-the-art predictive dialing system in the collection process to increase collector efficiency and aid customer service efforts. Our technology initiatives for fiscal 2000 include greater use of the Internet to exchange information with auto dealers and consumers. We are also designing a strategy to accept and decision loan applications via the Internet. Risk Management AmeriCredit's key competitive strength remains our ability to effectively manage credit risk and price loans to achieve a consistent return. We again demonstrated our risk management competency by significantly growing loan volume in fiscal 1999 while at the same time lowering credit risk in the portfolio. Net charge-offs declined to 4.7% of average managed auto receivables for fiscal 1999 from 5.3% for fiscal 1998. Our annualized charge-off rate of 4.5% for the fourth quarter of fiscal 1999 was at its lowest level in four years. Accounts more than 60 days past due at June 30, 1999, also decreased to 1.8% from 2.6% at June 30, 1998. This improvement in credit quality is the result of further enhancements to our proprietary risk management tools as well as a greater concentration of lower- risk consumers in our portfolio. Through our data-mining initiatives, we created our third-generation family of scorecards and installed these new models in February 1999. This family of scorecards segments the application base into groups of accounts with similar profiles, thus increasing predictive capabilities. We will seek to refine our scoring models further next year through ongoing data collection and analysis. Financing Activities Fiscal 1999 was an active year for us in the capital markets. We increased our warehouse credit lines to over $1 billion at year end from $510 million at June 30, 1998, securing commitments from additional financial institutions and lowering our cost of funding by putting in place another commercial paper conduit facility. We again accessed the public asset-backed securities market on a quarterly basis, raising $2.9 billion in four transactions, including our first $1 billion transaction in May 1999. AmeriCredit's consistent asset performance was 3 a factor in enabling us to sell asset-backed securities last fall, a time when other independent finance companies were unable to raise new capital. In April 1999, AmeriCredit issued an additional $200 million of senior notes in a transaction which was expanded from the original intended size due to strong investor demand. Finally, we sold 8,000,000 common shares through a follow-on public offering in August 1999, raising $97 million in equity capital. The proceeds from the senior notes and equity offering provide us with sufficient long-term capital to fund our growth plans for the next several years. Outlook AmeriCredit has distanced itself from the competition over the past seven years and has solidified its position as the preferred non-prime lender for auto dealers across the country. Our proven ability to assess and price credit risk and deliver superior service to our dealer customers provides us with a sustainable competitive advantage. We believe our track record and capacity for future growth have created greater value than the equity capital markets have recognized heretofore. For our part, we remain committed to growing our market share and driving our profitability and return on managed assets higher. We will also strive to thoroughly communicate our performance to the investment community. While confident that we are building the foundation for long-term shareholder value, our challenge is to translate our operating successes into a higher stock price. I want to thank our employees, customers and shareholders for their loyalty and support. AmeriCredit's success is a direct result of their ongoing commitment. Sincerely, Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer September 8, 1999 4 Expanding Over $600 billion of auto loans and leases were originated in the U.S. in 1998, including almost $200 billion to consumers with less-than-perfect credit. This market continues to grow at a steady 6% to 7% rate, creating enormous opportunity for lenders who have the expertise and the resources to keep up the pace. Lenders like AmeriCredit. AmeriCredit's strategy for capturing more of this growing market is proving successful. We continue adding new branches to our network across the U.S. and in Canada. The branch network has grown from five offices in 1993 to 176 offices in 41 states and two provinces at June 30, 1999. AmeriCredit branch offices market our loan products and deliver distinctive services to auto dealers. Our local market presence enables our people to frequently visit dealers in order to solidify relationships and better understand dealers' needs. We strive to provide personalized responsive service that goes beyond the expectation of our dealer customers. New marketing opportunities have been created through strategic alliances with large dealer groups and banks, diversifying our sources for loan applications. Our Strategic Alliance group, formed in fiscal 1998, has already successfully developed 10 major alliances with notable partners, resulting in added loan volume for our branch network. Our biggest success in expanding market share has been growth in loan volume at our mature branches. Dealers have rewarded us for our innovative products and services by giving us a greater share of their business. In recent market research sponsored by AmeriCredit, a resounding 69% of dealers surveyed said AmeriCredit was their first choice among non-prime lenders. Evolving At our heart, we are a technology company - one that just happens to be in the finance business. Information technology is unquestionably the major element in reshaping the way business is done. Our commitment to provide superior service while managing credit risk is successful thanks to our use of advanced technology throughout the company. The resulting innovations deliver greater operational efficiencies, enabling us to be a low-cost provider. AmeriCredit's technology platform supports our strategies and is key to our leadership. Our market research has shown that speed -- for loan decisions and funding -- is a high priority for our dealer customers. With this feedback in mind, we recently installed an application processing system scaleable to accommodate future growth. This system allows AmeriCredit branches to receive, process, 5 evaluate and return decisions on loan applications in less than an hour on average. Optical-imaging technology deployed in the branch network and the use of electronic funds transfer complete the picture, reducing loan funding time to as little as one day. The new application processing system enables us to deploy our third generation of credit scorecards. Our credit scorecards are unique to the industry and give us unmatched ability to understand applicants' credit profiles and predict default risk. Our support operations also reap the benefits of advanced technology. Our customer service group utilizes voice-response technology and an automated dialer for greatly improved speed and efficiency, which translates into a higher level of customer care. Although we service loans through regional sites, our systems allow centralized control and provide backup capability. Refining We employ proprietary, empirically based scoring models in the loan approval process. The use of scoring, rather than a judgmental process, allows for systemwide consistency in underwriting, regardless of where the underwriter sits in the process. The credit score generated on a loan application corresponds to the risk of the loan, allowing us to price each loan to achieve profitability goals. AmeriCredit's wealth of information and proprietary credit scorecards help us predict risk -- and identify opportunity. With more than $6 billion in loan volume since our inception seven years ago, AmeriCredit has captured key characteristics - such as application data, credit bureau statistics, loan structure information and repayment performance - on every loan. Mining this proprietary data resource allows us to develop statistical models for more effective credit underwriting and portfolio management. We recently implemented our third generation of proprietary credit scoring models. These segmented scorecards enhance our ability to identify certain consumer profiles that, when isolated, exhibit more similar behavior than the entire population. For example, some models assess applicants who have filed bankruptcy in the past, while other models evaluate applicants with extensive credit history. After the loan is in place, we continue to use data mining to generate behavior scores, which equate to the likelihood of default at the individual loan level. These programs factor in consumer payment patterns and changes in the consumer credit bureau ratings. Behavior scores allow AmeriCredit to target higher-risk 6 accounts for more aggressive and frequent collection efforts, making the most efficient use of our collection resources. Data mining also gives us insight about new marketing opportunities that we can reach through broadened product offerings or targeted underwriting strategies. 7 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, 1999 1998(a) 1997(a) 1996 (a) 1995 (b) ---- ---- ---- ---- ---- Operating Data Auto loan originations $ 2,879,796 $ 1,737,813 $ 906,794 $ 432,442 $ 230,176 Finance charge income 75,288 55,837 44,910 51,706 30,249 Gain on sale of receivables 169,892 103,194 52,323 21,405 Servicing fee income 85,966 47,910 23,492 3,892 Income before income taxes 121,690 80,162 48,534 32,913 10,018 Net income 74,840 49,301 29,849 20,765 28,893 Diluted earnings per share 1.11 0.76 0.48 0.34 0.48 Weighted average shares and assumed incremental shares 67,191,235 65,203,460 61,574,548 60,406,596 60,761,498
June 30, June 30, June 30, June 30, June 30, 1999 1998(a) 1997(a) 1996(a) 1995 ---- ---- ---- ---- ---- Balance Sheet Data Cash and cash equivalents $ 21,189 $ 33,087 $ 6,027 $ 2,145 $ 18,314 Receivables held for sale, net 456,009 342,853 266,657 250,484 221,888 Credit enhancement assets 494,862 286,309 161,395 41,736 Total assets 1,063,487 713,671 475,493 329,333 285,725 Senior notes 375,000 175,000 125,000 Total liabilities 663,757 425,823 267,232 166,934 138,499 Shareholders' equity 399,730 287,848 208,261 162,399 147,226 Managed auto receivables 4,105,468 2,302,516 1,138,255 523,981 240,491
(a) The Company restated its financial statements for fiscal 1998, 1997 and 1996 as a result of a retroactive change in the method of measuring and accounting for credit enhancement assets. (b) The Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss. 8 FINANCIAL REVIEW 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. 9 RESULTS OF OPERATIONS Year Ended June 30, 1999 as compared to - --------------------------------------- Year Ended June 30, 1998 ------------------------ Revenue The Company's average managed receivables outstanding consisted of the following (in thousands): Years Ended --------------------------------- June 30, June 30, 1999 1998 ---- ---- Auto: Held for sale $ 320,962 $ 250,304 Serviced 2,808,501 1,399,112 ---------- ---------- 3,129,463 1,649,416 Mortgage 26,785 18,728 ---------- ---------- $3,156,248 $1,668,144 ========== ========== Average managed receivables outstanding increased by 89% as a result of higher loan purchase volume. The Company purchased $2,879.8 million of auto loans during fiscal 1999, compared to purchases of $1,737.8 million during fiscal 1998. This growth resulted from increased loan production at branches open during both periods as well as expansion of the Company's branch network. Loan production at branch offices opened prior to June 30, 1997, was 17% higher in fiscal 1999 versus fiscal 1998. The Company operated 176 auto lending branch offices as of June 30, 1999, compared to 129 as of June 30, 1998. The Company originated $297.5 million of mortgage loans during fiscal 1999, compared to $137.2 million during fiscal 1998. Finance charge income consisted of the following (in thousands): Years Ended ----------------------------- June 30, June 30, 1999 1998 ---- ---- Auto $ 72,749 $ 54,125 Mortgage 2,539 1,712 -------- -------- $ 75,288 $ 55,837 ======== ======== 10 The increase in finance charge income is primarily due to an increase of 28% in average auto receivables held for sale in fiscal 1999 versus fiscal 1998. In addition, the Company's effective yield on its auto receivables held for sale increased to 22.7% for fiscal 1999 from 21.6% for fiscal 1998. The effective yield is higher than the contractual rates of the Company's auto finance contracts primarily 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 effective yield rose for fiscal 1999 due to increased auto loan purchases and correspondingly higher levels of finance charges earned between the origination date and funding date. The gain on sale of receivables consisted of the following (in thousands): Years Ended ------------------------------- June 30, June 30, 1999 1998 ---- ---- Auto $162,353 $ 98,842 Mortgage 7,539 4,352 -------- -------- $169,892 $103,194 ======== ======== The increase in gain on sale of auto receivables resulted from the sale of $2,770.0 million of receivables in fiscal 1999, compared to $1,637.5 million of receivables sold in fiscal 1998. The gains amounted to 5.9% and 6.0% of the sales proceeds for fiscal 1999 and 1998, respectively. Significant assumptions used in determining the gain on sale of auto receivables were as follows: Years Ended ------------------------- June 30, June 30, 1999 1998 ---- ---- Cumulative credit losses (including 11.2% 11.3% deferred gains) 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% 11 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 interest-only receivables for credit enhancement purposes. The increase in gain on sale of mortgage receivables resulted from the sale of $294.1 million of receivables in fiscal 1999, compared to $119.7 million of receivables sold in fiscal 1998. The average net premium received on sales decreased to 2.6% for fiscal 1999 from 3.6% for fiscal 1998 because of lower prices for non-conforming mortgage loans in the secondary markets. Servicing fee income increased to $86.0 million for fiscal 1999, compared to $47.9 million for fiscal 1998. Servicing fee income decreased as a percentage of average serviced auto receivables to 3.1% in fiscal 1999 from 3.4% in fiscal 1998, as a result of charges to increase credit loss reserves. 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 1999 and 1998 also includes charges of $20.1 million and $8.9 million, respectively, 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 raised the assumptions for cumulative credit losses for securitization transactions completed during fiscal 1999 and 1998 compared to assumptions used for transactions completed in prior fiscal years. The growth in servicing fee income exclusive of the aforementioned charges is attributable to the increase in average serviced auto receivables outstanding for fiscal 1999 compared to fiscal 1998. Costs and Expenses Operating expenses as a percentage of average managed receivables outstanding decreased to 5.3% (5.0% excluding operating expenses of $9.3 million related to AMS) for fiscal 1999, compared to 5.7% (5.4% excluding operating expenses of $5.1 million related to AMS) for fiscal 1998. 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 $70.9 million, or 75%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. 12 The provision for losses increased to $9.6 million for fiscal 1999 from $7.6 million for fiscal 1998 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 1999 and 1998. Interest expense increased to $38.8 million for fiscal 1999 from $27.1 million for fiscal 1998 due to higher debt levels. Average debt outstanding was $443.3 million and $297.6 million for fiscal 1999 and 1998, respectively. The Company's effective rate of interest paid on its debt decreased to 8.8% from 9.1% as a result of greater use of commercial paper facilities, which have a lower cost than the Company's other forms of balance sheet debt. The Company's effective income tax rate was 38.5% for fiscal 1999 and 1998. 13 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, 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 increased loan production at branches open during both periods as well as expansion of the Company's branch network. Loan production at branch offices opened prior to June 30, 1996, was 22% higher in fiscal 1998 versus fiscal 1997. 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, June 30, 1998 1997 ---- ---- Auto $54,125 $44,417 Mortgage 1,712 493 ------- ------- $55,837 $44,910 ======= ======= 14 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 effective yield rose for fiscal 1998 due to increased auto loan purchases and correspondingly higher levels of finance charges earned between the origination date and funding date. The gain on sale of receivables consisted of the following (in thousands): Years Ended -------------------------------------------------- June 30, 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, June 30, 1998 1997 ---- ---- Cumulative credit losses (including 11.3% 9.8% deferred gains) 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 15 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 net 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, because of lower prices for non-conforming mortgage loans in the secondary markets. Servicing fee income increased to $47.9 million for fiscal 1998, compared to $23.5 million for fiscal 1997. Servicing fee income decreased as a percentage of average serviced auto receivables to 3.4% in fiscal 1998 from 4.1% in fiscal 1997, as a result of charges to increase credit loss reserves. 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 raised the assumptions for cumulative credit losses for securitization transactions completed during 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. 16 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, which have a higher cost than the Company's other forms of balance sheet debt. The Company's effective income tax rate was 38.5% for fiscal 1998 and 1997. PRO FORMA "PORTFOLIO-BASED" EARNINGS DATA In addition to reporting results of operations in accordance with generally accepted accounting principles ("GAAP"), the Company has elected to present pro forma results of operations which treat securitization transactions as financings rather than sales of receivables. The Company refers to this presentation as pro forma "portfolio-based" earnings data. In its consolidated financial statements prepared in accordance with GAAP, the Company records a gain on the sale of receivables in securitization transactions primarily representing the present value of estimated future excess cash flows related to the receivables sold. Future excess cash flows consist of finance charges and fees to be collected on the receivables less interest payable on the asset-backed securities, credit losses and expenses of the Trusts. The Company also earns servicing fees for managing the receivables sold. The pro forma "portfolio-based" earnings data presents the Company's operating results under the assumption that securitization transactions are financings and no gain on sale or servicing fee income is recognized. Instead, finance charges and fees are recognized over the life of the securitized receivables as accrued and interest and other costs related to the asset-backed securities are also recognized as accrued. Credit losses are recorded as incurred. While the pro forma "portfolio-based" earnings data does not purport to present the Company's operating results in accordance with GAAP, the Company believes such presentation provides another measure for assessing the Company's performance. 17 The pro forma "portfolio-based" earnings data were as follows (in thousands):
Years Ended --------------------------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Finance charge, fee and other income $ 621,048 $ 340,951 $167,413 Funding costs (220,958) (120,546) (52,639) --------- --------- -------- Net margin 400,090 220,405 114,774 Operating expenses (165,345) (94,484) (51,915) Credit losses (147,344) (88,002) (43,231) --------- --------- -------- Pre-tax "portfolio-based" income 87,401 37,919 19,628 Income taxes (33,649) (14,599) (7,557) --------- --------- -------- Net "portfolio-based" income $ 53,752 $ 23,320 $ 12,071 ========= ========= ======== Diluted "portfolio-based" earnings per share $ 0.80 $ 0.36 $ 0.20 ========= ========= ========
The pro forma return on managed assets for the Company's auto business was as follows:
Years Ended -------------------------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Finance charge, fee and other income 19.5% 20.3% 20.7% Funding costs (7.0) (7.2) (6.6) ---- ---- ---- Net margin 12.5 13.1 14.1 Operating expenses (5.0) (5.4) (6.2) Credit losses (4.7) (5.3) (5.5) ---- ---- ---- Pre-tax return on managed assets 2.8 2.4 2.4 Income taxes (1.1) (1.0) (1.0) ---- ---- ---- Return on managed assets 1.7% 1.4% 1.4% ==== ==== ====
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 18 consolidated balance sheets as a reserve against estimated losses which may occur in the receivables held for sale portfolio prior to the sale of such receivables in securitization transactions. The Company typically purchases individual finance contracts 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. 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. The following table presents certain data related to the receivables portfolio (dollars in thousands):
June 30, 1999 ----------------------------------------------------------------------------- Held For Sale ----------------------------------------- Auto Managed Auto Auto Mortgage Total Serviced Portfolio ---- -------- ----- -------- --------- Principal amount of receivables $ 444,128 $ 23,722 $ 467,850 $ 3,661,340 $ 4,105,468 ----------- ----------- Allowance for losses (11,841) (11,841) $ (354,338) (a) $ (366,179) --------- -------- --------- ----------- ----------- Receivables, net $ 432,287 $ 23,722 $ 456,009 ========= ======== ========= Number of outstanding contracts 33,815 310 332,447 366,262 ====== === ======= ======= Average principal amount of outstanding contract (in dollars) $ 13,134 $ 76,523 $ 11,013 $ 11,209 ======== ======== ======== ========= Allowance for losses as a percentage of receivables 2.7% 9.7% 8.9% ==== ==== ====
19
June 30, 1998 --------------------------------------------------------------------------- Held For Sale ----------------------------------------- Auto Managed Auto Auto Mortgage Total Serviced Portfolio ---- -------- ----- -------- --------- 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) (a) $ (192,115) --------- --------- --------- =========== =========== Receivables, net $ 321,354 $ 21,499 $ 342,853 ========= ========= ========= Number of outstanding contracts 26,035 187 187,514 213,549 ====== === ======= ======= Average principal amount of outstanding contract (in dollars) $ 12,833 $ 114,968 $ 10,497 $10,782 ========= ========= ======== ======= Allowance for losses as a percentage of receivables 3.8% 9.1% 8.3% ==== ==== ====
(a) The allowance for losses related to serviced auto receivables is factored into the valuation of interest-only receivables from Trusts in the Company's consolidated balance sheets. 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, 1999 1998 ----------------------------- ---------------------------- Amount Percent Amount Percent ------ ------- ------ ------- Delinquent contracts: 31-60 days $ 277,592 6.8% $ 126,012 5.5% Greater than 60 days 73,512 1.8 59,175 2.6 ------ --- ------- --- 351,104 8.6 185,187 8.1 In repossession 37,773 0.9 18,818 0.8 ------ --- ------- --- $ 388,877 9.5% $ 204,005 8.9% ========= ==== ========== ====
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 4.6%, 4.5% and 4.3% for the years ended June 30, 1999, 1998 and 1997, respectively. The Company believes that payment deferrals granted according to its policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio. 20 The following table presents charge-off data with respect to the Company's managed auto receivables portfolio (in thousands): Years Ended --------------------------------------- June 30, June 30, June 30, 1999 1998 1997 -------- ------- ------- Net charge-offs: Held for sale $ 8,046 $ 9,140 $16,965 Serviced 139,298 78,862 26,266 -------- ------- ------- $147,344 $88,002 $43,231 ======== ======= ======= Net charge-offs as a percentage of average managed auto receivables outstanding 4.7% 5.3% 5.5% ==== ==== ==== Net recoveries as a percentage of gross repossession charge- offs 52.2% 50.6% 50.5% ===== ===== ===== Delinquencies and charge-offs 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. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands): Years Ended -------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Operating activities $ 43,647 $ 37,813 $ 36,003 Investing activities (207,725) (144,868) (92,947) Financing activities 152,180 134,115 60,826 --------- -------- ------ Net increase (decrease) in cash and cash equivalents $ (11,898) $ 27,060 $ 3,882 ========== ======== ======== The Company's primary sources of cash 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 $2,879.8 million, $1,737.8 million and $906.8 million of auto finance contracts during the years ended June 30, 1999, 1998 and 1997, 21 requiring cash of $2,868.6, $1,713.6 million and $870.0 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 In September 1998, the Company renewed a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a group of banks and increased the amount of structured warehouse financing available under the agreement from $245 million to $505 million. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in September 1999. A total of $94.4 million was outstanding under this facility as of June 30, 1999. In March 1999, the Company entered into a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a bank under which up to $150 million of structured warehouse financing is available. During June 1999, this facility was increased to $375 million with the inclusion of two additional financial institutions. The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in March 2000. There were no outstanding balances under this facility as of June 30, 1999. In addition, in March 1999, the Company renewed a revolving credit agreement with a group of banks that provides for borrowings of up to $115 million, subject to a defined borrowing base. The Company utilizes the line of credit to fund its auto lending activities and daily operations. The facility matures in March 2000. There were no outstanding balances under this credit agreement as of June 30, 1999. The Company's Canadian subsidiary has a convertible revolving term credit agreement with a bank that provides for borrowings of up to $20.0 million Cdn., subject to a defined borrowing base. The Company utilizes this facility to fund Canadian auto lending activities. The facility matures in November 1999. A total of $1.3 million was outstanding under the Canadian facility as of June 30, 1999. In July 1999, the Company renewed a mortgage warehouse facility with a bank and decreased the amount that the Company may borrow from $75 million to $25 million, subject to a defined borrowing base. The Company utilizes this facility to fund mortgage loan originations. The facility expires in July 2000. A total of $19.0 million was outstanding under the mortgage facility as of June 30, 1999. As is customary in the Company's industry, the above warehouse credit facilities need to be renewed on an annual basis. The Company has historically been successful in renewing and expanding these facilities on an annual basis. If the Company was unable to renew these facilities on acceptable terms, there 22 could be a material adverse effect on the Company's financial position, results of operations and liquidity. The Company has completed seventeen auto receivables securitization transactions through June 30, 1999. 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, 1999 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 Paid in full 1996-A March 1996 89.4 Paid in full 1996-B May 1996 115.9 $ 14.6 1996-C August 1996 175.0 18.5 1996-D November 1996 200.0 44.7 1997-A March 1997 225.0 64.3 1997-B May 1997 250.0 84.3 1997-C August 1997 325.0 133.2 1997-D November 1997 400.0 193.5 1998-A February 1998 425.0 235.8 1998-B May 1998 525.0 329.6 1998-C August 1998 575.0 414.3 1998-D November 1998 625.0 501.2 1999-A February 1999 700.0 623.0 1999-B May 1999 1,000.0 970.7 ------- ----- $ 5,845.5 $3,627.7 ========= ======== In connection with securitization transactions, the Company is required to fund certain credit enhancement levels set by the insurer of the asset-backed securities issued by the Trusts. The Company typically makes an initial deposit to a restricted cash account and subsequently uses excess cash flows generated by the Trusts to either increase the restricted cash account or repay the outstanding asset-backed securities on an accelerated basis, thus creating additional credit enhancement through overcollateralization in the Trusts. When the credit enhancement levels reach specified percentages of the Trust's pool of receivables, excess cash flows are distributed to the Company. Although the aggregate amount of excess cash flow does not change, the timing of the Company's receipt of excess cash flow distributions is dependent on the type of structure used. Historically, the Company has used a structure that involved a higher initial cash deposit that resulted in receipt of excess cash flow distributions approximately seven to nine months after the receivables were securitized. Beginning in November 1997, the Company began to employ a structure that involved a lower initial cash deposit and the use of reinsurance and other alternative credit enhancements. Under this structure, the Company expects to begin to receive excess cash flow distributions approximately 16 to 22 months after receivables are securitized. 23 Initial deposits to restricted cash accounts were $82.8 million, $56.7 million and $71.4 million for the years ended June 30, 1999, 1998 and 1997, respectively. Excess cash flows distributed to the Company were $44.5 million, $43.8 million and $19.3 million for the years ended June 30, 1999, 1998 and 1997, respectively. In addition, the Company received $23.0 million representing a return of deposits from restricted cash accounts during the year ended June 30, 1999. 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, 1999, none of the Company's securitizations had delinquency, default and net loss ratios in excess of the targeted levels. The Company has outstanding $175.0 million of 9.25% Senior Notes that are due in February 2004. Interest on the notes is payable semiannually in February and August. The notes, which are unsecured, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. During 1999, the Company issued $200.0 million of 9.875% Senior Notes that are due in April 2006. Interest on the notes is payable semiannually in April and October. The notes, which are unsecured, may be redeemed at the option of the Company after April 2003 at a premium declining to par in April 2005. The Company operated 176 auto lending branch offices as of June 30, 1999. The Company intends to open 19 additional branch offices in fiscal 2000 and expand loan production capacity at existing auto lending branch offices where appropriate. While the Company has been able to establish and grow its auto finance business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. As of June 30, 1999, the Company had $21.2 million in cash and cash equivalents. The Company also had available borrowing capacity of $276 million under its warehouse credit facilities pursuant to the borrowing base requirements of such agreements. In addition, the Company issued 8,000,000 shares of its common stock in a public offering in August 1999 for net proceeds of approximately $96.6 million. The Company anticipates it will require additional external capital for fiscal 2000 in order to fund expansion of its auto lending activities. The Company anticipates that such funding will be in the form of securitization transactions, renewal and expansion of its existing 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. 24 INTEREST RATE RISK The Company's earnings are affected by changes in interest rates as a result of its dependence upon the issuance of interest-bearing securities and the incurrence of debt to fund its lending activities. Several factors can influence the Company's ability to manage interest rate risk. First, auto finance contracts are purchased at fixed interest rates, while the amounts borrowed under warehouse credit facilities bear interest at variable rates that are subject to frequent adjustment to reflect prevailing market interest rates. Second, the interest rate demanded by investors in securitizations is a function of prevailing market rates for comparable transactions and the general interest rate environment. Because the auto finance contracts originated by the Company have fixed interest rates, the Company bears the risk of smaller gross interest rate spreads in the event interest rates increase during the period between the date receivables are purchased and the completion and pricing of securitization transactions. The Company uses several strategies to minimize interest rate risk, including the utilization of derivative financial instruments, the regular sale of auto receivables and pre-funding of securitization transactions. Pre-funding securitizations is the practice of issuing more asset-backed securities than the amount of receivables initially sold to the Trust. The proceeds from the pre- funded portion are held in an escrow account until additional receivables are sold to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, borrowing costs are locked in with respect to the loans subsequently delivered to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between the money market yields earned on the proceeds held in escrow prior to the 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 or various London Interbank Offered Rates ("LIBOR"). The Company has periodically used 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 LIBOR. The Company uses Interest Rate Swap agreements to convert the floating rate exposures on these securities to a fixed rate. The Company utilizes these derivative financial instruments to modify its net interest sensitivity to levels deemed appropriate based on the Company's risk tolerance. All transactions are entered into for purposes other than trading. The Company made cash payments of $5.8 million, $7.0 million and $0.9 million during the years ended June 30, 1999, 1998, and 1997, respectively, to settle Forward U.S. Treasury rate lock agreements. These amounts were included in the 25 gain on sale of receivables in securitization transactions and are recovered over time through a higher gross interest rate spread on the related securitization transaction. There were no outstanding Forward U.S. Treasury rate lock agreements as of June 30, 1999. The table below provides information about the Company's derivative financial instruments by expected maturity date as of June 30, 1999 (dollars in thousands). Notional amounts, which are used to calculate the contractual payments to be exchanged under the contracts, represent average amounts that will be outstanding for each of the years included in the table. Notional amounts do not represent amounts exchanged by parties and, thus, are not a measure of the Company's exposure to loss through its use of these agreements.
Years Ending ----------------------------------------------------------- June 30, June 30, June 30, June 30, June 30, 2000 2001 2002 2003 2004 Fair Value ---- ---- ---- ---- ---- ---------- Interest Rate Swaps: Notional amounts $ 860,835 $ 395,770 $ 203,094 $ 58,743 $ 557 $ 5,729 (a) Average pay rate 5.82% 5.80% 5.75% 5.76% 5.62% Average receive rate 5.60% 5.68% 5.73% 5.78% 5.92%
(a) The fair value of the swaps is taken into consideration in the valuation of the interest-only receivables from Trusts. 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. This project plan is composed of several phases: . Awareness and Inventory - 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. Follow-up inquiries to third-party vendors who have not provided specific compliance dates are ongoing. The awareness phase is also ongoing. 26 . Assessment - Using the results obtained from the inventory, a risk assessment has been made on all components and priority assigned to mission-critical systems. . Renovation and Testing - During this phase all systems were identified which had a risk to year 2000 readiness. The systems identified were corrected using a secured development environment. Testing was also performed during this phase. . Implementation - User-developed applications and macros were assessed and remediated. Any non-compliant applications were replaced with a year 2000-ready version. . Continued Due Diligence - The Company will continue its testing efforts until the year 2000. The Company will test the interfaces with financial applications using year 2000 dates and scenarios. At the conclusion of these tests, the systems will be "frozen" and no additional development will be implemented until the year 2000. All testing is estimated to be completed by September 1999. . Contingency Planning - Contingency planning is a key component of the Company's year 2000 readiness project. The Company has developed and is continuing to develop contingency plans, which document the processes necessary to maintain critical business functions should a significant third-party system or critical internal system fail. Through June 30, 1999, the Company has incurred approximately $1 million for incremental costs. Any future incremental costs are not expected to be material. There are many risks associated with the year 2000 compliance issue including, but not limited to, the possible failure of the Company's computer and information systems. Any such failure could have a material adverse effect on the Company including the inability to properly bill and collect payments from consumers and errors and omissions in accounting and financial data. In addition, the Company is exposed to the inability of third parties to perform as a result of year 2000 compliance. Any such failure by a third-party bank, software product or service provider, utility or other entity may have a material adverse financial or operational effect on the Company. 27 FORWARD-LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed above are forward-looking statements that involve risks and uncertainties 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, 1999. Such statements are only predictions and actual events or results may differ materially. 28 AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS June 30, June 30, 1999 1998 ---- ---- Cash and cash equivalents $ 21,189 $ 33,087 Receivables held for sale, net 456,009 342,853 Interest-only receivables from Trusts 191,865 131,694 Investments in Trust receivables 195,598 98,857 Restricted cash 107,399 55,758 Property and equipment,net 41,145 23,385 Other assets 50,282 28,037 ----------- ---------- Total assets $ 1,063,487 $ 713,671 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Warehouse credit facilities $ 114,659 $ 165,608 Senior notes 375,000 175,000 Other notes payable 17,874 6,410 Accrued taxes and expenses 82,229 47,132 Deferred income taxes 73,995 31,673 ----------- ---------- Total liabilities 663,757 425,823 ----------- ---------- 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; 71,498,474 and 69,272,948 shares issued 715 693 Additional paid-in capital 252,194 230,269 Accumulated other comprehensive income 21,410 7,234 Retained earnings 147,610 72,770 ----------- ---------- 421,929 310,966 Treasury stock, at cost (7,357,030 and 7,667,318 shares) (22,199) (23,118) ----------- ---------- Total shareholders' equity 399,730 287,848 ----------- ---------- Total liabilities and shareholders' equity $ 1,063,487 $ 713,671 =========== ========== The accompanying notes are an integral part of these consolidated financial statements 29 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (dollars in thousands, except per share data) Years Ended ------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Revenue Finance charge income $ 75,288 $ 55,837 $ 44,910 Gain on sale of receivables 169,892 103,194 52,323 Servicing fee income 85,966 47,910 23,492 Other income 4,310 2,395 2,631 ----------- ----------- ----------- 335,456 209,336 123,356 ----------- ----------- ----------- Costs and expenses Operating expenses 165,345 94,484 51,915 Provision for losses 9,629 7,555 6,595 Interest expense 38,792 27,135 16,312 ----------- ----------- ----------- 213,766 129,174 74,822 ----------- ----------- ----------- Income before income taxes 121,690 80,162 48,534 Income tax provision 46,850 30,861 18,685 ----------- ----------- ----------- Net income 74,840 49,301 29,849 ----------- ----------- ----------- Other comprehensive income Unrealized gain on credit enhancement assets 23,052 4,724 7,081 Less related income tax provision (8,876) (1,845) (2,726) ----------- ----------- ----------- Comprehensive income $ 89,016 $ 52,180 $ 34,204 =========== =========== =========== Earnings per share Basic $ 1.19 $ 0.82 $ 0.52 =========== =========== =========== Diluted $ 1.11 $ 0.76 $ 0.48 =========== =========== =========== Weighted average shares outstanding 63,005,746 60,188,788 57,774,724 =========== =========== =========== Weighted average shares and assumed incremental shares 67,191,235 65,203,460 61,574,548 =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements 30 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands)
Accumulated Common Stock Additional Other Treasury Stock ------------ Paid-in Comprehensive Retained -------------- Shares Amount Capital Income Earnings Shares Amount ------ ------ ------- ------ -------- ------ ------ 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) Common stock issued on exercise of options 2,225,526 22 9,919 Income tax benefit from exercise of options 9,918 Unrealized gain on credit enhancement assets, net of income taxes of $8,876 14,176 Common stock issued for employee benefit plans 2,088 (310,288) 919 Net income 74,840 ------------ ----------- ------------ ------------ ---------- ---------- --------- Balance at June 30, 1999 71,498,474 $ 715 $ 252,194 $ 21,410 $ 147,610 7,357,030 $(22,199) ============= =========== ============ ============ ========== =========== =========
The accompanying notes are an integral part of these consolidated financial statements 31 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended ----------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Cash flows from operating activities: Net income $ 74,840 $ 49,301 $ 29,849 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,645 4,498 2,203 Provision for losses 9,629 7,555 6,595 Deferred income taxes 43,364 30,974 18,886 Non-cash servicing fee income (12,525) (10,867) (7,991) Non-cash gain on sale of auto receivables (157,757) (96,405) (52,534) Distributions from Trusts 44,531 43,807 19,347 Changes in assets and liabilities: Other assets (6,177) (3,324) (2,341) Accrued taxes and expenses 35,097 12,274 21,989 ----------- ----------- ----------- Net cash provided by operating activities 43,647 37,813 36,003 ----------- ----------- ----------- Cash flows from investing activities: Purchases of auto receivables (2,868,633) (1,713,582) (869,975) Originations of mortgage receivables (297,535) (137,169) (53,770) Principal collections and recoveries on receivables 21,524 37,347 52,160 Net proceeds from sale of auto receivables 2,727,763 1,609,970 799,600 Net proceeds from sale of mortgage receivables 294,096 119,683 52,489 Initial deposits to restricted cash (82,750) (56,725) (71,400) Return of deposits from restricted cash 23,000 Purchases of property and equipment (14,728) (9,456) (4,511) Change in other assets (10,462) 5,064 2,460 ----------- ----------- ----------- Net cash used by investing activities (207,725) (144,868) (92,947) ----------- ----------- ----------- Cash flows from financing activities: Net change in warehouse credit facilities (50,949) 93,563 (17,264) Net proceeds from issuance of senior notes 194,097 47,762 120,894 Payments on other notes payable (3,916) (25,042) (44,710) Proceeds from issuance of common stock 12,948 17,832 6,293 Purchase of treasury stock (4,387) ----------- ----------- ----------- Net cash provided by financing activities 152,180 134,115 60,826 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (11,898) 27,060 3,882 Cash and cash equivalents at beginning of year 33,087 6,027 2,145 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 21,189 $ 33,087 $ 6,027 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements 32 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 176 auto lending branch offices in 41 states and Canada as of June 30, 1999. 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. The Company's Board of Directors approved a two-for-one stock split on August 6, 1998, which was effected in the form of a 100% stock dividend for shareholders of record on September 11, 1998, and paid on September 30, 1998. In connection with the stock split, $347,000 was transferred from retained earnings to common stock representing the par value of the additional shares issued. All share data for the periods presented, except shares authorized, have been adjusted to reflect the stock split on a retroactive basis. Cash Equivalents - ---------------- Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. 33 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 which may occur in the receivables held for sale portfolio prior to the sale of such receivables in securitization transactions. 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 strip represents 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 sheet 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. 34 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Credit Enhancement Assets (cont.) - --------------------------------- 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 sheet depending upon the form of interest retained by the Company. These interests are collectively referred to as credit enhancement assets. 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 credit enhancement 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 sheet. 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 35 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Credit Enhancement Assets (cont.) - --------------------------------- 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 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 Interest Rate Swap Agreements. The Interest Rate Swap Agreements are used to convert the interest rates on floating rate securities issued by the Trusts to fixed rates. 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. The current credit exposure under these agreements is limited to the fair value of the agreements with a positive fair value at the reporting date. The Company minimizes its counterparty risk by entering into agreements only with highly rated counterparties. 36 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Recent Accounting Developments - ------------------------------ The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), effective July 1, 1998. 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 has reported comprehensive income in the accompanying Consolidated Statements of Income and Comprehensive Income. All prior periods have been restated to conform to the requirements of SFAS 130. In June 1998, the Financial Accounting Standards Board ("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 sheet 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. This statement, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. 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. 37 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Restatement - -------------- On January 13, 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 the 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 Trusts and (ii) initial deposits to 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 (in thousands, except per share data): 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 38 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Restatement (cont.) - ---------------------- Net income Previous $ 60,741 $ 38,699 $ 21,591 As restated 49,301 29,849 20,765 Diluted 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 3. Receivables Held for Sale - ---------------------------- Receivables held for sale consist of the following (in thousands): June 30, June 30, 1999 1998 ---- ---- Auto receivables $444,128 $334,110 Less allowance for losses (11,841) (12,756) -------- -------- Auto receivables, net 432,287 321,354 Mortgage receivables 23,722 21,499 -------- -------- $456,009 $342,853 ========= ======== 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. 39 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Receivables Held for Sale (cont.) - ------------------------------------ The accrual of finance charge income has been suspended on $7,657,000 and $8,729,000 of delinquent auto receivables as of June 30, 1999 and 1998, respectively. The Company has established an allowance for losses with respect to auto receivables held for sale to provide for potential credit losses on such receivables prior to their sale in a securitization transaction. A summary of the allowance for losses is as follows (in thousands): Years Ended --------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---------- ---------- ----------- Balance at beginning of year $12,756 $12,946 $13,602 Provision for losses 9,629 7,555 6,595 Acquisition fees 64,230 49,859 30,688 Allowance related to receivables sold to Trusts (66,728) (48,464) (20,974) Net charge-offs (8,046) (9,140) (16,965) ------- ------- -------- Balance at end of year $11,841 $12,756 $12,946 ======= ======= ======= 4. Credit Enhancement Assets - ---------------------------- As of June 30, 1999 and 1998, the Company was servicing $3,661.3 million and $1,968.4 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, 1999 1998 ------------ ------------ Interest-only receivables from Trusts $ 191,865 $ 131,694 Investments in Trust receivables 195,598 98,857 Restricted cash 107,399 55,758 ------------ ------------ $ 494,862 $ 286,309 ========= ========= 40 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Credit Enhancement Assets, (cont.) - ------------------------------------- A summary of activity in the credit enhancement assets is as follows (in thousands):
Years Ended ------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- Balance at beginning of year $ 286,309 $ 161,395 $ 41,736 Non-cash gain on sale of auto receivables 157,757 96,405 52,534 Accretion of present value discount 32,625 19,717 7,991 Initial deposits to restricted cash 82,750 56,725 71,400 Change in unrealized gain 23,052 4,724 7,081 Distributions from Trusts (44,531) (43,807) (19,347) Return of deposits from restricted cash (23,000) Permanent impairment write-down (20,100) (8,850) --------- --------- --------- Balance at end of year $ 494,862 $ 286,309 $ 161,395 ========= ========= =========
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, 1999 1998 1997 ---- ---- ---- Balance at beginning of year $ 179,359 $ 74,925 $ 25,616 Assumptions for cumulative credit losses 294,177 174,446 75,575 Permanent impairment write-down 20,100 8,850 Net charge-offs (139,298) (78,862) (26,266) --------- --------- --------- Balance at end of year $ 354,338 $ 179,359 $ 74,925 ========= ========= ========= 5. Warehouse Credit Facilities - ------------------------------ Warehouse credit facilities consist of the following (in thousands): June 30, June 30, 1999 1998 ---------- ----------- Commercial paper facilities $ 94,369 $140,708 Credit agreements 1,306 Mortgage facility 18,984 24,900 -------- -------- $114,659 $165,608 ======== ======== 41 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Warehouse Credit Facilities (cont.) - -------------------------------------- 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 $505 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 September 1999, contains various covenants requiring certain minimum financial ratios and results. The Company has a funding agreement with an administrative agent on behalf of an institutionally managed commercial paper conduit and a bank under which up to $375 million of structured warehouse financing is available. Advances under the agreement bear interest at commercial paper, LIBOR or prime rates plus specified fees depending upon the source of funds provided by the agent. The funding agreement, which expires in March 2000, 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 $115 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 (7.75% as of June 30, 1999) or LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee equal to 0.25% of the unused portion of the credit agreement. The credit agreement, which expires in March 2000, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the prepayment of senior notes, cash dividends and repurchase of common stock. 42 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Warehouse Credit Facilities (cont.) - -------------------------------------- The Company's Canadian subsidiary has a convertible revolving term credit agreement with a bank under which the subsidiary may borrow of up to $20 million Cdn., subject to a defined borrowing base. Borrowings under the credit agreement are collateralized by certain Canadian auto receivables and bear interest at the Canadian prime rate. The credit agreement, which expires in November 1999, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the prepayment of senior notes, cash dividends and repurchase of common stock. The Company has a mortgage warehouse facility with a bank under which the Company may borrow up to $25 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 plus 0.50% or LIBOR plus 1.5%. The Company is also required to pay an annual commitment fee equal to 0.125% of the unused portion of the facility. The facility expires in July 2000. 6. Senior Notes - --------------- The Company has outstanding $175 million of senior notes that are due in February 2004. Interest on the notes is payable semiannually at a rate of 9.25% 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. Additionally, the Company has outstanding $200 million of senior notes that are due in April 2006. Interest on the notes is payable semiannually at a rate of 9.875% per annum. The notes, which are uncollateralized, may be redeemed at the option of the Company after April 2003 at a premium declining to par in April 2005. The Indentures pursuant to which the senior notes were issued contain 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 $10,208,000 and $5,478,000 as of June 30, 1999 and 1998, respectively, are included in other assets in the consolidated balance sheets. 43 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 space for its administrative offices and loan servicing activities under leases with terms up to twelve years with renewal options. Lease expense was $8,105,000, $4,206,000 and $2,132,000 for the years ended June 30, 1999, 1998 and 1997, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 2000 $ 8,865 2001 8,351 2002 7,449 2003 6,224 2004 3,727 Thereafter 10,820 ------- $45,436 ======= 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 and, to a limited extent, in Canada, with borrowers located in California and Texas accounting for 14% and 10%, respectively, of the managed auto receivables portfolio as of June 30, 1999. 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 44 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Commitments and Contingencies (cont.) - ---------------------------------------- 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. On April 8, 1999, a putative class action complaint was filed against the Company and certain of its officers and directors alleging violations of Section 10(b) of the Securities Exchange Act of 1934 arising from the use of the cash-in method of measuring and accounting for credit enhancement assets in the Company's financial statements through the first quarter of fiscal 1999. In the opinion of management, the litigation is without merit and the Company intends to vigorously defend against the complaint. 8. Stock Options - ---------------- General - ------- The Company has certain stock-based compensation plans for employees, non-employee directors and key executive officers. A total of 14,000,000 shares have been authorized for grants of options under the employee plans, of which 1,981,920 shares remain available for future grants as of June 30, 1999. 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. A committee of the Company's Board of Directors determines option grants, vesting periods and the term of each option. A total of 2,445,000 shares have been authorized for grants of options under the non-employee director plans, of which 900,000 shares remain available for future grants as of June 30, 1999. 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 6,300,000 shares have been authorized for grants of options under the key executive officer plans, none of which remain available for future grants as of June 30, 1999. Option grants, vesting periods and the exercise price and term of each option are established by the terms of the plans. 45 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ 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 $65,544,000, $45,598,000 and $24,367,000 and pro forma diluted earnings per share would have been $0.98, $0.70 and $0.40 for the years ended June 30, 1999, 1998 and 1997, respectively. 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, 1999 1998 1997 ---- ---- ---- Expected dividends 0 0 0 Expected volatility 40% 32% 20% Risk-free interest rate 5.51% 5.68% 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, 1999 1998 1997 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ----------------------------- ----------------------------- ---------------------------- Outstanding at beginning of year 10,070 $ 7.51 8,752 $ 4.68 7,328 $ 3.61 Granted 2,841 15.42 3,640 13.14 2,502 7.74 Exercised (1,829) 4.13 (2,034) 5.29 (846) 3.96 Forfeited (226) 12.41 (288) 8.31 (232) 5.84 ------- --------- ------- --------- ------- -------- Outstanding at end of year 10,856 $ 9.92 10,070 $ 7.51 8,752 $ 4.68 ======= ========= ======= ========= ======= ======== Options exercisable at end of year 6,969 $ 8.18 6,030 $ 5.11 6,322 $ 3.89 ======= ========= ======= ========= ======= ======== Weighted average fair value of options granted during year $ 6.72 $ 5.06 $ 2.11 ========= ======= ========
46 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ A summary of options outstanding under employee plans as of June 30, 1999 is as follows (shares in thousands):
Options Outstanding Options Exercisable ----------------------------------------------------- --------------------------- 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 2.32 930 2.24 $1.81 930 $1.81 $2.75 to 4.57 1,848 5.44 3.80 1,848 3.80 $5.50 to 7.88 1,668 6.17 6.97 1,179 6.90 $8.19 to 9.19 437 7.51 8.41 216 8.38 $10.13 to 13.07 2,808 8.80 11.68 1,631 11.82 $13.38 to 16.38 1,288 8.74 15.68 645 15.68 $17.00 to 17.44 1,877 8.51 17.26 520 17.27 --------- --------- 10,856 6,969 ======== ========
Non-Employee Director Plans - --------------------------- 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, 1999 1998 1997 ---- ---- ---- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ----------------------------- ----------------------------- ---------------------------- Outstanding at beginning of year 1,526 $ 2.87 1,708 $ 2.21 1,826 $ 1.80 Granted 80 14.88 80 14.63 80 9.38 Exercised (201) 3.00 (262) 2.17 (198) 1.40 Forfeited (20) 14.63 ---------- ---------- ---------- ---------- ---------- ---------- Outstanding at end of year 1,385 $ 3.37 1,526 $ 2.87 1,708 $ 2.21 ========== ========== ========== ========== ========== ========== Options exercisable at end of year 1,385 $ 3.37 1,526 $ 2.87 1,708 $ 2.21 ========== ========== ========== ========== ========== ========== Weighted average fair value of options granted during year $ 6.49 $ 5.66 $ 2.57 ========== ========== ==========
47 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ A summary of options outstanding under non-employee director plans as of June 30, 1999, is as follows (shares in thousands): Options Outstanding and Exercisable ---------------------------------------------- Weighted Weighted Average Years Average Range of Number of Remaining Exercise Exercise Prices Outstanding Contractual Life Price --------------- ----------- ---------------- ----- $1.40 to 3.75 1,145 2.09 $ 1.60 $6.44 to 9.38 100 6.97 7.64 $14.63 to 14.88 140 8.93 14.77 --------- 1,385 ========= Key Executive Officer Plans - --------------------------- A summary of stock option activity under the Company's key executive officer plans is as follows (shares in thousands):
Years Ended ------------------------------------------------------------------------------------------ June 30, June 30, June 30, 1999 1998 1997 ---- ---- ---- 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 1,700 $ 8.00 Granted 4,600 12.00 ------- --------- -------- -------- ------- -------- Outstanding at end of year 6,300 $ 10.92 1,700 $ 8.00 1,700 $ 8.00 ======= ========= ======== ======== ======= ======== Options exercisable at end of year 1,700 $ 8.00 1,700 $ 8.00 ======= ========= ======== ======== Weighted average fair value of options granted during year $ 5.25 =========
48 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options (cont.) - ------------------------ A summary of options outstanding under key executive officer plans as of June 30, 1999, is as follows (shares in thousands):
Options Outstanding Options Exercisable ----------------------------------------------------- --------------------------- Weighted Weighted Weighted Average Years Average Average Range of Number of Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Outstanding Price - --------------- ----------- ---------------- ----- ----------- ----- $8.00 1,700 3.82 $8.00 1,700 $ 8.00 $12.00 4,600 3.58 12.00 ---------- ---------- 6,300 1,700 ========== ==========
9. Employee Benefit Plans - ------------------------- The Company has a defined contribution retirement plan covering substantially all employees. The Company's contributions to the plan were $1,026,000, $358,000 and $201,000 for the years ended June 30, 1999, 1998 and 1997, respectively. The Company also has an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the market value at specified dates. A total of 2,000,000 shares have been reserved for issuance under the plan. Shares purchased under the plan were 251,038, 260,892 and 208,430 for the years ended June 30, 1999, 1998 and 1997, respectively. 10. Income Taxes - ---------------- The income tax provision consists of the following (in thousands): Years Ended --------------------------------------------- June 30, June 30, June 30, 1999 1998 1997 ---------- ---------- ---------- Current $ 3,486 $ (113) $ (201) Deferred 43,364 30,974 18,886 -------- -------- -------- $ 46,850 $ 30,861 $ 18,685 ======== ======== ======== 49 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Income Taxes (cont.) - ------------------------ 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, 1999 1998 1997 ------------ ------------ ------------ U.S. statutory tax rate 35.0% 35.0% 35.0% Other 3.5 3.5 3.5 ------ ------ ------ 38.5% 38.5% 38.5% ====== ====== ====== The deferred income tax provision consists of the following (in thousands):
Years Ended ------------------------------------------------ June 30, June 30, June 30, 1999 1998 1997 ------------ ------------ ------------ Net operating loss carryforward $ 10,093 $ (9,051) $ 5,501 Allowance for losses 1,553 993 (1,046) Gain on sale of receivables 23,784 32,606 9,282 Income tax benefit from exercise of options 9,918 9,575 2,652 Other (1,984) (3,149) 2,497 -------- -------- -------- $ 43,364 $ 30,974 $ 18,886 ======== ======== ========
The tax effects of temporary differences that give rise to deferred tax liabilities and assets are as follows (in thousands): June 30, June 30, 1999 1998 ---- ---- Deferred tax liabilities: Gain on sale of receivables $(65,156) $(41,372) Unrealized gain on credit enhancement assets (13,447) (4,571) Other (2,650) (2,340) -------- -------- (81,253) (48,283) -------- -------- Deferred tax assets: Net operating loss carryforward 2,426 12,519 Alternative minimum tax credits 561 1,567 Other 4,271 2,524 -------- -------- 7,258 16,610 -------- -------- Net deferred tax liability $(73,995) $(31,673) ======== ======== As of June 30, 1999, the Company has an alternative minimum tax credit carryforward of $561,000 with no expiration date. 50 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1999 1998 1997 ---- ---- ---- Weighted average shares outstanding 63,005,746 60,188,788 57,774,724 Incremental shares resulting from assumed exercise of stock options 4,185,489 5,014,672 3,799,824 ---------- ---------- ---------- Weighted average shares and assumed incremental shares 67,191,235 65,203,460 61,574,548 ========== ========== ========== Basic earnings per share have been computed by dividing net income by weighted average shares outstanding. Diluted earnings per share have been computed by dividing net income by weighted average shares and assumed incremental shares. 12. Supplemental Information - ---------------------------- Cash payments (receipts) for interest costs and income taxes consist of the following (in thousands): Years Ended ------------------------------------------ June 30, June 30, June 30, 1999 1998 1997 ------------ ------------ ------------ Interest costs (none capitalized) $ 39,930 $ 26,369 $ 15,196 Income taxes (13,947) 14,804 599 During the years ended June 30, 1999, 1998 and 1997, the Company entered into capital lease agreements for property and equipment of $15,380,000, $4,246,000 and $3,651,000, respectively. 51 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 recognized or not 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 that 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. 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, 1999 June 30, 1998 ------------------------------------------------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value ----- ---------- ----- ---------- Financial assets: Cash and cash equivalents (a) $ 21,189 $ 21,189 $ 33,087 $ 33,087 Receivables held for sale, net (b) 456,009 482,706 342,853 367,613 Interest-only receivables from Trusts (c) 191,865 191,865 131,694 131,694 Investments in Trust receivables (c) 195,598 195,598 98,857 98,857 Restricted cash (c) 107,399 107,399 55,758 55,758 Financial liabilities: Warehouse credit facilities (d) 114,659 114,659 165,608 165,608 Senior notes (e) 375,000 381,750 175,000 177,625 Other notes payable (f) 17,874 17,874 6,410 6,410 Interest rate swaps (g) 5,729 5,729 (269) 170
(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 discount rate, prepayment and credit loss assumptions similar to the Company's historical experience. 52 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Fair Value of Financial Instruments (cont.) - ----------------------------------------------- (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. (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 and is taken into consideration in the valuation of the interest-only receivables from Trusts. 53 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, 1999 and 1998, and the related consolidated statements of income and comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1999. 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, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1999, in conformity with generally accepted accounting principles. 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, 1999 54 AMERICREDIT CORP. Common Stock Data Common Stock Data The Company's common stock trades on the New York Stock Exchange under the symbol ACF. There were 64,141,444 shares of common stock outstanding as of June 30, 1999. The following table sets forth the range of the high, low and closing sale prices for the Company's common stock as reported on the Composite Tape of the New York Stock Exchange Listed Issues. High Low Close Fiscal year ended June 30, 1999 - ------------------------------- First Quarter $18.66 $10.38 $12.19 Second Quarter 16.06 6.63 13.81 Third Quarter 15.25 9.81 13.13 Fourth Quarter 17.50 12.94 16.00 Fiscal year ended June 30, 1998 - ------------------------------- First Quarter $14.97 $10.03 $14.25 Second Quarter 17.22 11.31 13.84 Third Quarter 15.38 10.47 13.75 Fourth Quarter 18.28 13.75 17.84 The table above has been adjusted to reflect the two-for-one stock split effected in the form of a 100% stock dividend paid on September 30, 1998. As of June 30, 1999, there were approximately 300 shareholders of record of the Company's common stock. 55 AMERICREDIT CORP. Quarterly Data (Unaudited) (dollars in thousands, except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Fiscal year ended June 30, 1999 Finance charge income $ 16,917 $ 16,260 $ 18,361 $ 23,750 Gain on sale of receivables 35,120 38,900 42,531 53,341 Servicing fee income 16,865 21,146 23,691 24,264 Income before income taxes 25,174 28,254 31,715 36,547 Net income 15,482 17,376 19,505 22,477 Diluted earnings per share 0.23 0.26 0.29 0.33 Weighted average shares and assumed incremental shares 66,968,691 66,750,045 66,514,367 68,695,877 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
56 AMERICREDIT CORP. SHAREHOLDER INFORMATION Corporate Headquarters - ---------------------- 801 Cherry Street Suite 3900 Fort Worth, Texas 76102 817-302-7000 Annual Meeting - -------------- The annual meeting of the Company will be held on November 3, 1999, at 10 a.m. at the Fort Worth Club, 306 West Seventh Street, Fort Worth, Texas. All shareholders are cordially invited to attend. Investor Relations Information - ------------------------------ For financial/investment data and general information about AmeriCredit Corp., write the Investor Relations Department at the above address or telephone 817-302-7009. Information about the Company may also be found at www.americredit.com. Individual investors can invest in AmeriCredit for significantly reduced fees through the NAIC Stock Service. For more information call 888-780-8400 or visit www.naicstockservice.com. Transfer Agent and Registrar - ---------------------------- ChaseMellon Shareholder Services 85 Challenger Rd., Overpeck Centre Ridgefield Park, NJ 07660-2104 800-635-9270 www.chasemellon.com Independent Accountants - ----------------------- PricewaterhouseCoopers LLP 301 Commerce Street, Suite 1900 Fort Worth, Texas 76102-4183 Form 10-K - --------- Shareholders may obtain without charge a copy of the Company's annual report on Form 10-K, as filed with the Securities and Exchange Commission, by writing the Investor Relations Department at the corporate headquarters address or by accessing Investor Information on the Company's Web site at www.americredit.com. 57 Directors - --------- Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer AmeriCredit Corp. Michael R. Barrington Vice Chairman, President and Chief Operating Officer AmeriCredit Corp. Daniel E. Berce Vice Chairman and Chief Financial Officer AmeriCredit Corp. A.R. Dike President and Chief Executive Officer The Dike Company, Inc. Edward H. Esstman President and Chief Operating Officer AmeriCredit Financial Services, Inc. James H. Greer Chairman of the Board Shelton W. Greer Co., Inc. Douglas K. Higgins Owner Higgins & Associates Kenneth H. Jones, Jr. Vice Chairman KBK Capital Corporation Officers - -------- AmeriCredit Corp. Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Michael R. Barrington Vice Chairman, President and Chief Operating Officer Daniel E. Berce Vice Chairman and Chief Financial Officer 58 Officers (cont.) - ---------------- Joseph E. McClure Executive Vice President and Chief Information Officer Michael T. Miller Executive Vice President and Chief Credit Officer Preston A. Miller Executive Vice President and Treasurer James M. Adelt Senior Vice President, Software Solutions Randall K. Benefield Senior Vice President, Strategy and Architecture Steven P. Bowman Senior Vice President, Director of Risk Management Chris A. Choate Senior Vice President, General Counsel and Secretary Gregory K. Ellis Senior Vice President and Controller Patricia A. Jones Senior Vice President, Director of Human Resources Russell L. Massey Senior Vice President, Finance AmeriCredit Financial Services, Inc. Edward H. Esstman President and Chief Operating Officer Philip A. Alberti Executive Vice President, Director of Consumer Finance S. Mark Floyd Executive Vice President, Director of Strategic Alliances Peter M. Kidd Executive Vice President, Director of Consumer Finance 59 Officers (cont.) - ---------------- Cheryl L. Miller Executive Vice President, Director of Collections and Customer Service Todd M. Patin Executive Vice President, Director of Consumer Finance Cinde C. Perales Executive Vice President, Director of Loan Services AmeriCredit Mortgage Services Robert J. Frye President and Chief Operating Officer Denny P. Hanysak Executive Vice President, Mortgage Services Michael G. Hughes Executive Vice President, Mortgage Services 60 EX-21.1 5 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE REGISTRANT State or Province of Subsidiary Ownership % Incorporation - ---------- ----------- ------------- AmeriCredit Financial Services, Inc. 100% Delaware ACF Investments Corp. 100% Delaware AFS Funding Corp. 100% Nevada AmeriCredit Corporation of California 100% California CP Funding Corp. 100% Nevada AmeriCredit Funding Corp. 100% Delaware AmeriCredit Warehouse Trust 100% Delaware AmeriCredit Management Company 100% Delaware AmeriCredit Financial Services of Canada, Ltd. 100% Ontario EX-23.1 6 CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-39883, 33-39881, 33-56501, 33-48162, 33-41203, 333-01111, 333-73113, 333-73115, and 333-73117) and Form S-3 (Nos. 333-52283, 33-57517, 33-52679 and 333-82999) of AmeriCredit Corp. of our report dated August 4, 1999, relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. Fort Worth, Texas September 28, 1999 EX-27.1 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the consolidated financial statements of AmeriCredit Corp. included in its annual report on Form 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000804269 AMERICREDIT CORP. 1,000 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1999 141,902 0 467,850 (11,841) 0 0 54,511 (13,366) 1,063,487 0 507,533 0 0 715 399,015 1,063,487 0 335,456 0 165,345 0 9,629 38,792 121,690 46,850 74,840 0 0 0 74,840 1.19 1.11
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