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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, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10667
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AmeriCredit Corp.
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(Exact name of registrant as specified in its charter)
Texas 75-2291093
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Bailey Avenue, Fort Worth, Texas 76107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 332-7000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.01 par value New York Stock Exchange
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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
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(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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of 24,587,483 shares of the Registrant's Common Stock
held by non-affiliates based upon the closing price of the Registrant's Common
Stock on the New York Stock Exchange on September 11, 1998 was approximately
$577,805,851. For purposes of this computation, all executive officers,
directors and 5 percent beneficial owners of the Registrant are deemed to be
affiliates. Such determination should not be deemed an admission that such
executive officers, directors and beneficial owners are, in fact, affiliates of
the Registrant.
There were 31,098,320 shares of Common Stock, $.01 par value outstanding as of
September 11, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Shareholders for the year ended June 30, 1998
("the Annual Report") furnished to the Commission pursuant to Rule 14a-3(b) and
the definitive Proxy Statement pertaining to the 1998 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.
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PART I
1. Business 4
2. Properties 26
3. Legal Proceedings 27
4. Submission of Matters to a Vote of Security Holders 27
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters 28
6. Selected Financial Data 28
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 28
7A. Quantitative and Qualitative Disclosures About
Market Risk 28
8. Financial Statements and Supplementary Data 28
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 39
PART III
10. Directors and Executive Officers of the Registrant 40
11. Executive Compensation 40
12. Security Ownership of Certain Beneficial Owners and
Management 40
13. Certain Relationships and Related Transactions 40
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 41
SIGNATURES 43
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PART I
Item 1. Business
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GENERAL
AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to the
business, assets and liabilities of a predecessor corporation formed under the
laws of Texas on August 1, 1986. The Company's predecessor began the Company's
business in March 1987, and the business has been operated continuously since
that time. As used herein, the term "Company" refers to the Company, its wholly
owned subsidiaries and its predecessor corporation. The Company's principal
executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, 76107 and
its telephone number is (817) 332-7000.
The Company and its subsidiaries, including AmeriCredit Financial Services, Inc.
("AFSI"), a Delaware corporation, have been operating in the indirect 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.
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INDIRECT AUTOMOBILE FINANCE OPERATIONS
Target Market. The Company's indirect automobile lending programs are designed
to serve consumers 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 consumers 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 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, 1998, approximately 90% were originated by
manufacturer franchised dealers with used car operations and 10% by select
independent dealers. The Company purchased contracts from 9,204 dealers during
the fiscal year ended June 30, 1998. No dealer accounted for more than 1% of
the total volume of contracts purchased by the Company for that same period.
The Company's financing programs are marketed to dealers through branch office
personnel, including branch managers, assistant managers and in some cases
marketing representatives. The Company believes that the personal relationships
its branch managers and other branch office personnel establish with the
dealership personnel are an important factor in creating and maintaining
productive relationships with its dealership customer base. Branch office
personnel are responsible for the solicitation, enrollment and education of new
dealers regarding the Company's financing programs. Branch office personnel
visit dealerships to present information regarding the Company's financing
programs and capabilities. These personnel explain the Company's underwriting
philosophy, including its preference for non-prime quality contracts secured by
later model, lower mileage used vehicles, and its practice of underwriting in
the local branch office.
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
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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. 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 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 and develop relationships with these
dealers. Additionally, the branch office network is used for the underwriting
of contracts submitted by dealerships. 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
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. Branch managers are compensated with base salaries
and annual incentives based on overall branch performance including
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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 manager reports to a regional vice president.
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.
Years Ended June 30,
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1998 1997 1996
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(dollars in thousands)
Number of branch offices 129 85 51
Dollar volume of contracts
purchased $1,737,813 $906,794 $432,442
Number of producing
dealerships(1) 9,204 5,657 3,262
(1) A producing dealership refers to a dealership from which the Company had
purchased contracts in the respective period.
The Company plans to expand its indirect automobile finance business by adding
additional branch offices and increasing dealer penetration at its 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 and to develop relationships with more dealers. The Company
confronts intense competition in attracting key personnel and establishing
relationships with 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 markets may result in a reduction in the
profitability of the contracts that the Company purchases or a decrease in
contract acquisition volume, which would adversely affect the Company's results
of operations.
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.
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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 contrasts the quality of credit applicant profiles
resulting in a statistical assessment of the most predictive characteristics.
Factors considered in any loan application include data presented on the
application, the credit bureau report and the terms of the loan the applicant
wishes to secure. Specifically, the credit scoring system considers the
applicant's residential and employment stability, financial history, current
financial capacity and integrity of meeting historical financial obligations, as
well as the loan structure and credit bureau information. The scorecards take
these factors into account and produce 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 strategies 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
in its databases 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 his experience and historical loan portfolio results as
well as established credit scoring parameters. In certain markets where a
branch office is not present and with respect to certain large dealership
groups, contracts are purchased through the Company's regional purchasing
offices. Although the credit approval process is decentralized, all credit
decisions are guided by the Company's credit scoring
8
strategies, overall credit and underwriting policies and procedures and daily
monitoring process.
Loan application packages completed by prospective obligors are received via
facsimile at the branch offices from dealers. Application data is entered into
the Company's automated application processing system. A credit bureau report
is automatically generated and a credit score is computed. 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 decline 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, character and intent to pay, 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 because their income levels are not sufficient to support the
proposed level of monthly payments. Dealers are contacted regarding credit
decisions by telefax and/or telephone. Declined and conditioned applicants are
also provided with appropriate notification of the decision.
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 branch office personnel having 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.
Completed loan packages are sent by the dealers 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 consumer by branch office
personnel and the loan packages are forwarded to the Company's centralized loan
services department, where the packages are scanned to create electronic copies.
Key original documents are stored in a fire-proof vault and the loan packages
are further processed in an electronic environment. The loans are reviewed for
proper documentation and regulatory compliance and are entered into the
Company's loan accounting system. Daily loan reports are generated for final
review by senior operations management. 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. All of the Company's contracts
are fully amortizing with substantially equal monthly installments.
Servicing and Collections Procedures. The Company's servicing activities
consist of collecting and processing consumer payments, responding to consumer
inquiries, initiating contact with consumers who are delinquent in payment of
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a receivable installment, maintaining the security interest in the financed
vehicle, monitoring 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 consumers
as well as an early warning mechanism in the event a consumer has failed to
notify the Company of an address change. Approximately 15 days before an
obligor's first payment due date and each month thereafter, the Company mails
the consumer a billing statement directing the consumer 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 obligors. 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 consumers whose
payments are past due. The predictive dialer is a computer-controlled telephone
dialing system which dials phone numbers of consumers 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 obligors who cannot be
reached by telephone. By eliminating time wasted on attempting to reach
consumers, the system gives a single collector the ability to speak with a
larger number of accounts daily.
Once an account becomes more seriously 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 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
obligor deals in bad faith or the consumer voluntarily surrenders the financed
vehicle.
Payment deferrals are at times offered to consumers who have encountered
temporary financial difficulty, hindering their ability to pay as contracted,
and when other methods of assisting the consumer in meeting the contract terms
10
and conditions have been exhausted. A deferral allows the consumer to move a
delinquent payment to the end of the loan by paying a fee or an amount
approximating the interest portion of the payment deferred. The collector must
review the past payment history and assess the obligor's desire and capacity to
make future payments and, before agreeing to a deferral, must comply with the
Company's policies and guidelines for deferrals. Exceptions to the Company's
policies and guidelines for deferrals must be approved by a collections officer.
Deferment transactions are processed by the loan services department. As of
June 30, 1998, approximately 12% of the Company's managed receivables had
received a deferral.
Repossessions. The Company follows prescribed legal procedures for
repossessions, which include peaceful repossession, one or more consumer
notifications, a prescribed waiting period prior to disposition of the
repossessed automobile and return of personal items to the consumer. In some
jurisdictions, the Company must provide the consumer with reinstatement or
redemption rights. Legal requirements, particularly in the event of bankruptcy,
may restrict the Company's ability to dispose of the repossessed vehicle.
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 180 days contractually delinquent even if the
Company has not repossessed the related vehicle. On accounts less than 180 days
delinquent, the Company charges-off the account when the vehicle securing the
delinquent contract is repossessed and disposed. 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. 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
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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 are reviewed on a
consolidated basis, as well as at the branch office, dealer and contract levels.
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.
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.
The Company's risk management department conducts regular compliance audits of
branch office operations, loan services, collections and other functional areas.
The primary objective of the audits is to measure compliance with the Company's
written policies and procedures as well as regulatory matters. Audits of branch
office operations are conducted no less often than every six months and include
a review of compliance with underwriting policies, completeness of loan
documentation, assessment of collateral value 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 based 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
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purchases. Through June 30, 1998, the Company had securitized approximately
$2.9 billion of automobile receivables.
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 simultaneously sold to investors, except for certain subordinated
interests which may be retained by the Company.
When receivables are transferred to securitization trusts in securitization
transactions, the Company recognizes a gain on sale of receivables and continues
to service such receivables. The gain on sale of receivables represents the
difference between the sales proceeds, net of transaction costs, and the
Company's net carrying value of the receivables sold, plus the present value of
estimated excess cash flows. The estimated excess cash flows are the difference
between the cash collected from obligors on securitized receivables and the sum
of (i) principal and interest paid to investors in the asset-backed securities;
(ii) contractual servicing fees; (iii) defaults, net of recoveries; and (iv)
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
represents the present value of estimated excess cash flows as described above.
The calculation of interest-only receivables 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 on a disaggregated basis by trust. If future losses and prepayment
rates exceed the Company's original estimates, the asset will be adjusted
through a charge to income. 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
the trusts, provide a source of funds to cover shortfalls in collections (as
described below) and to reimburse FSA for any claims which may be made under the
policies issued with respect to the Company's securitizations.
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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 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.
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 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 consumers. 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. The
Company also seeks to offer rates that
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are competitive and that are consistent with its goal of balancing risk and
returns.
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 credit 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.
Management believes that the Company 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
15
assurance, however, that the Company will be able to maintain all requisite
licenses and permits and the failure to satisfy those and other regulatory
requirements could have a material adverse effect on the operations of the
Company. Further, the adoption of additional, or the revision of existing, rules
and regulations could have a material adverse effect on the Company's business.
As a consumer finance company, the Company is subject to various consumer claims
and litigation seeking damages and statutory penalties based upon, among other
theories of liability, usury, wrongful repossession, fraud and discriminatory
treatment of credit applicants, 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. Management believes that the Company
has taken prudent steps to address the litigation risks associated with its
business activities. However, there can be no assurance that the Company will be
able to successfully defend against all such consumer claims, or that the
determination of any such claim in a manner adverse to the Company would not
have a material adverse effect on the Company's indirect automobile finance
business.
MORTGAGE LOAN OPERATIONS
In November 1996, the Company acquired all of the issued and outstanding stock
of AMS in consideration for 400,000 shares of the Company's common stock. AMS
originates and acquires non-prime mortgage loans through a network of mortgage
brokers. AMS sells its mortgage loans and the related servicing rights in the
wholesale markets.
While not currently representing a material portion of the Company's assets or
revenues, management intends over time to devote substantial resources to pursue
growth of AMS's business of originating mortgage loans to non-prime borrowers.
There can be no assurance, however, that the Company will be able to
successfully expand such business or that the failure to effectively expand such
business will not have a material adverse effect on the Company's financial
position, liquidity or results of operations.
RISK FACTORS
Dependence on Credit Facilities. The Company depends on warehouse credit
facilities with financial institutions to finance its purchase of auto
receivables pending securitization. At June 30, 1998, the Company has two
warehouse credit facilities for its auto finance activities, providing for
borrowings of up to a total of $510 million. The Company's bank credit agreement
(the "Credit Agreement") with various banks provides for revolving credit
borrowings of up to $265 million, subject to a defined borrowing base.
16
The Credit Agreement matures in April 1999. In addition, the Company's
commercial paper facility (the "Commercial Paper Facility") provides for
borrowings of up to $245 million and matures in October 1998. As of September
11, 1998, the Company was negotiating to expand the Commercial Paper Facility
and extend the maturity date. The Company's ability to execute its business
strategy will require increases in the level of warehouse financing resources.
There can be no assurance that such financing resources will continue to be
available to the Company on reasonable terms or at all. To the extent that the
Company is unable to extend or replace the Credit Agreement and Commercial Paper
Facility or arrange new warehouse credit facilities, the Company would have to
curtail its auto finance contract purchasing activities, which would have a
material adverse effect on the Company's financial position, liquidity and
results of operations.
The Credit Agreement and Commercial Paper Facility contain certain restrictions
and covenants requiring the Company to maintain specified financial ratios and
satisfy certain financial tests. A breach of any of these convenants could
result in an event of default under the Credit Agreement and Commercial Paper
Facility. Upon the occurrence of an event of default under these agreements, the
lenders thereunder could elect to declare all amounts outstanding under these
facilities, including accrued interest or other obligations, to be immediately
due and payable and/or restrict the Company's ability to obtain additional
borrowings under the Credit Agreement and Commercial Paper Facility. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company 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 of receivables in the Company's securitizations
represent a significant portion 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 result in no gain on sale
in the given quarter and adversely affect the Company's reported earnings for
such quarter. Any such adverse changes or delays would have a material adverse
effect on the Company's financial position, liquidity and results of operations.
Dependence on Financial Guarantee Insurance Policies. To date, all of the
Company's securitizations have utilized financial guaranty insurance policies
issued by FSA in order to achieve high grade credit ratings on the asset-
17
backed securities issued by the securitization trusts. 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. A downgrading of FSA's
credit rating or FSA's withdrawal from the Company's securitization program
could result in higher interest costs for future Company-sponsored
securitizations. Such events could have a material adverse effect on the
Company's financial position, liquidity and results of operations.
Liquidity and Capital Needs. The Company requires substantial amounts of cash to
fund its automobile loan purchase and securitization activities. Although the
Company recognizes a gain on sale of receivables upon the closing of a
securitization, it typically receives the cash representing such gain over the
actual life of the receivables securitized. The Company also incurs significant
transaction costs in connection with a securitization and must deposit
substantial amounts of cash to fund credit enhancement requirements set by FSA
for Company-sponsored securitizations. 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 and other indebtedness; (iv) fees and expenses incurred in connection
with the securitization of receivables and the servicing of such receivables;
(v) ongoing operating expenses; and (vi) 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, borrowings under its Credit Agreement and Commercial Paper
Facility, the implementation of other warehouse credit facilities, sales of
automobile receivables through securitizations, servicing fees and excess cash
flow received from securitization trusts and collections on automobile
receivables prior to sale in securitization transactions.
The Company's primary sources of liquidity as described in the paragraph above
are expected to be sufficient to fund the Company's liquidity requirements for
the year ending June 30, 1999 if the Company's future operations are consistent
with management's current growth expectations. However, because the Company
expects to continue to require substantial amounts of cash for the foreseeable
future, it anticipates that it will need to effect debt or equity
18
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 the
favorableness of the terms on which such sources may be available.
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 effect 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. 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 more vulnerable to adverse general economic and industry
conditions; (ii) the Company may find it more difficult to obtain additional
financing for future working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes; and (iii) the Company will have to
dedicate a substantial portion of the Company's cash resources to the payment of
principal and interest on indebtedness outstanding thereby reducing the funds
available for operations and future business opportunities. In addition, the
Credit Agreement, the Commercial Paper Facility and the Indenture pursuant to
which the Company's 9 1/4% Senior Notes were issued contain certain convenants
which could limit the Company's operating and financial flexibility.
Default and Prepayment Risks. The Company's results of operations, financial
condition and liquidity depend, to a material extent, on the performance of
automobile finance 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. A portion of the loans purchased 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 may 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 expense the
losses in excess of such allowance and results of
19
operations could be adversely affected. In addition, under the terms of the
Credit Agreement and Commercial Paper Facility, 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 automobile receivables that it sells pursuant to
Company-sponsored securitizations. A large component of the gain recognized on
such sales and the corresponding asset recorded on the Company's balance sheet
represents interest-only receivables which are based on the present value of
estimated future excess cash flows from the securitized receivables to be
received by the Company. Accordingly, interest-only receivables 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. In addition, 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 any amounts which may
be paid out by FSA 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 interest-only receivables by making a charge to income and
writing down the carrying value of the asset 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 prepayments and
defaults 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 interest-only receivables
and the corresponding decreases in earnings and cash flow could limit the
Company's ability to service debt and to affect future securitizations and other
financings. Although the Company believes that it has made reasonable
assumptions as to the future estimated excess 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 the occurrence of future events.
Portfolio Performance; Negative Impact on Cash Flows; Right to Terminate Normal
Servicing. Generally, the Company's agreements with FSA to procure financial
guarantee insurance policies in connection with securitization transactions
contain specified limits on the delinquency, default and loss
20
rates on the receivables included in each 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 agreements would automatically increase
the level of credit enhancement requirements for that trust. During the period
in which the specified delinquency, default or loss rate was 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, such 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, thereby further restricting excess cash flow available to the
Company.
The Company's agreements with FSA 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 such trust, provisions of the
agreements permit FSA to terminate the Company's servicing rights with respect
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 such specified limits will not be
exceeded in the future and that the Company's servicing rights 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, 1998, no such termination events
have occurred with respect to any of the trusts formed by the Company.
Implementation of Business Strategy. The Company's financial position and
results of operations are a function of Company management's ability to execute
its business strategy. Key factors involved in execution of such business
strategy include the Company's ability to obtain substantial additional
financing, expand its automobile finance branch network, attract and retain
skilled employees and manage growth successfully. The failure or inability of
the Company to execute 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.
21
While not currently representing a material portion of the Company's assets or
revenues, management intends over time to devote substantial resources to pursue
growth of AMS's business of originating mortgage loans to sub-prime borrowers.
The conduct of a mortgage finance business requires a substantial amount of
cash. The Company has limited prior experience in the mortgage business. There
can be no assurance that the Company will be able to successfully implement its
non-prime mortgage business strategy. The failure to effectively implement such
strategy or to obtain adequate resources to fund AMS's growth may have material
adverse effects on the Company's financial position, liquidity and results of
operations.
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 such risks with its proprietary
credit scoring system, risk-based loan pricing and other underwriting policies
and collection methods, no assurance can be given that such 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. Such periods also may be
accompanied by decreased consumer demand for automobiles and declining values of
automobiles securing outstanding loans, thereby weakening collateral coverage
and increasing the possibility of a loss in the event of default. In addition,
during an economic slowdown 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 complete 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 between the rate charged consumers and the
rate paid on its indebtedness. As interest rates rise, the Company would have to
increase the rates charged on new contract purchases in order to preserve the
gross interest rate spread. However, the rates charged consumers are influenced
by various factors, including competitive conditions, and the Company may
experience a decline in contract purchase volume if it attempted to charge
consumers higher rates. In addition, state by state
22
regulations regarding maximum interest rates for consumers may limit the
Company's opportunity to pass on increased interest costs. Furthermore, the
Company's future gains recognized upon the securitization of automobile
receivables would also be affected by increased interest rates. The Company
recognizes a gain in connection with its securitizations based upon the present
value of estimated 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 and other strategies designed
to mitigate the impact of changes in interest rates. There can be no assurance,
however, that pre-funding or other strategies will be effective in mitigating
the impact of changes in interest rates.
Competition. Reference should be made to Item 1. "Business Indirect Automobile
Finance Operations Competition" for a discussion of competitive risk factors.
Regulation. Reference should be made to Item 1. "Business Indirect Automobile
Finance Operations Regulation" for a discussion of regulatory risk factors.
Year 2000 Issue
- ---------------
The Company places significant reliance on its computer systems to conduct its
automobile finance business. The Company's underwriting, servicing, collections
and administrative functions are each dependent upon certain critical
information technology components for daily operations. In addition, the Company
relies on the data processing capabilities of certain major suppliers and
business partners to support its operations.
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. The Company believes that with modifications to existing systems
and/or conversion to new systems, the year 2000 issue will not pose significant
operational problems for the Company. However, if such modifications and
conversions are not made, or are not completed in a timely manner, the year 2000
issue could have a material impact on the operations of the Company. In
addition, there can be no assurance that unforeseen problems in the Company's
computer systems, or the systems of third parties on which the Company's
computer systems rely, would not have an adverse effect on the Company's
operations.
23
EMPLOYEES
At June 30, 1998, the Company employed approximately 1,400
persons.
24
EXECUTIVE OFFICERS
The following sets forth certain data concerning the executive officers of the
Company.
Name Age Position
---- --- --------
Clifton H. Morris, Jr. 63 Chairman of the Board and Chief
Executive Officer
Michael R. Barrington 39 Vice Chairman, President and
Chief Operating Officer
Daniel E. Berce 44 Vice Chairman and Chief
Financial Officer
Edward H. Esstman 57 Executive Vice President - Auto
Finance Division; President and
Chief Operating Officer of AFSI
Chris A. Choate 35 Senior Vice President, General
Counsel and Secretary
Cheryl L. Miller 34 Executive Vice President, Director of
Collections and Customer
Service of AFSI
Michael T. Miller 37 Executive Vice President and Chief
Credit Officer
Preston A. Miller 34 Executive Vice President and
Treasurer
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, 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 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 of 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.
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
25
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 of the Company since November 1996 and
Senior Vice President and Chief Credit Officer of 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.
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.
PRESTON A. MILLER has been Executive Vice President and Treasurer 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.
Item 2. Properties
- -------------------
The Company's executive offices are located at 200 Bailey Avenue, Fort Worth,
Texas, in a 43,000 square foot building purchased by the Company in February
1994. This building is utilized by the Company for branch office support and
administrative activities. The Company 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 65,000 square feet of office space in Fort
Worth, Texas under four year agreements. These facilities are used for loan
servicing and collections activities. The Company also leases 32,000
square feet of office space in Fort Worth, Texas under a five year agreement
26
for various activities including its mortgage operations and regional automobile
contract purchasing office.
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
- --------------------------
In the normal course of its business, the Company is named as a defendant in
legal proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. In the opinion of
management, these proceedings will not have a material adverse effect on the
consolidated financial position, results of operations or liquidity of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter ended June 30, 1998.
27
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
Credit Agreement, Commercial Paper Facility and the Indenture pursuant to which
the 9 1/4% Senior Notes were issued contain certain restrictions on the payment
of dividends. The Company presently intends to retain future earnings, if any,
for purposes of funding operations.
Information contained under the caption "Common Stock Data" in the Annual Report
is incorporated herein by reference in further response to this Item 5.
Item 6. Selected Financial Data
- --------------------------------
Information contained under the caption "Summary Financial and Operating
Information" in the Annual Report is incorporated herein by reference in
response to this Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------
Results of Operations
---------------------
Information contained under the caption "Financial Review" in the Annual Report
is incorporated herein by reference in response to this Item 7.
Item 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 9 1/4%
Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are wholly-
owned consolidated subsidiaries of the Company and are jointly, severally and
unconditionally liable for the obligations represented by the 9 1/4% Senior
Notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the combined
Non-Guarantor Subsidiaries provide information that is more
28
meaningful in understanding the financial position of the Subsidiary Guarantors
than separate financial statements of the Subsidiary Guarantors. Therefore, the
separate financial statements of the Subsidiary Guarantors are not deemed
material.
The following supplementary information presents consolidating financial data
for (i) the Company (on a parent only basis), (ii) the combined Subsidiary
Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination
column for adjustments to arrive at the information for the Company and its
subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on
a consolidated basis as of June 30, 1998 and 1997 and for each of the three
years in the period ended June 30, 1998.
Investments in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment accounts
and earnings. The principal elimination entries set forth below eliminate
investments in subsidiaries and intercompany balances and transactions.
29
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) 4,253 135,701 137,803
Investments in Trust receivables 3,181 114,809 117,990
Restricted cash 68,258 68,258
Property and equipment, net 175 23,210 23,385
Other assets 8,911 13,003 3,271 25,185
Due (to) from affiliates 330,924 (227,835) (103,089)
Investment in affiliates 129,765 13,921 2 $(143,688)
--------- --------- --------- --------- ---------
Total assets $ 467,624 $ 38,109 $ 386,516 $(143,688) $ 748,561
========= ========= ========= ========= =========
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
Deferred income taxes (17,641) (19,961) 80,743 43,141
Accrued taxes and expenses (2,280) 53,950 571 52,241
--------- --------- --------- --------- ---------
Total liabilities 161,463 58,915 222,022 442,400
--------- --------- --------- --------- ---------
Shareholders' equity:
Common stock 346 203 3 $ (206) 346
Additional paid-in capital 230,295 108,336 13,921 (122,257) 230,295
Unrealized gain on interest-only
receivables 4,431 4,431 (4,431) 4,431
Retained earnings 94,207 (129,345) 146,139 (16,794) 94,207
--------- --------- --------- --------- ---------
329,279 (20,806) 164,494 (143,688) 329,279
Treasury stock (23,118) (23,118)
--------- --------- --------- --------- ---------
Total shareholders' equity 306,161 (20,806) 164,494 (143,688) 306,161
--------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity $ 467,624 $ 38,109 $ 386,516 $(143,688) $ 748,561
========= ========= ========= ========= =========
30
AmeriCredit Corp.
Supplementary Information
Consolidating Balance Sheet
June 30, 1997
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash equivalents $ 3,988 $ 2,039 $ 6,027
Receivables held for sale, net 240,912 25,745 266,657
Interest-only receivables
from Trusts $ (777) 5,883 54,827 59,933
Investments in Trust receivables 6,213 48,230 54,443
Restricted cash 67,895 67,895
Property and equipment, net 136 13,748 13,884
Other assets 10,947 12,564 1,103 24,614
Due (to) from affiliates 277,369 (197,656) (79,713)
Investment in affiliates 56,764 $ (56,764)
--------- --------- --------- --------- ---------
Total assets $ 344,439 $ 85,652 $ 120,126 $ (56,764) $ 493,453
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit facilities $ 72,045 $ 72,045
Senior notes $ 125,000 125,000
Other notes payable 3,484 33 $ 23,689 27,206
Deferred income taxes (8,669) (5,547) 27,520 13,304
Accrued taxes and expenses 8,088 27,987 3,287 39,362
--------- --------- --------- --------- ---------
Total liabilities 127,903 94,518 54,496 276,917
--------- --------- --------- --------- ---------
Shareholders' equity:
Common stock 333 203 3 $ (206) 333
Additional paid-in capital 203,544 98,336 (98,336) 203,544
Unrealized gain on interest-only
receivables 2,954 2,954 (2,954) 2,954
Retained earnings 33,466 (107,405) 62,673 44,732 33,466
--------- --------- --------- --------- ---------
240,297 (8,866) 65,630 (56,764) 240,297
Treasury stock (23,761) (23,761)
--------- --------- --------- --------- ---------
Total shareholders' equity 216,536 (8,866) 65,630 (56,764) 216,536
--------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity $ 344,439 $ 85,652 $ 120,126 $ (56,764) $ 493,453
========= ========= ========= ========= =========
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) 1,350 128,624 123,245
Servicing fee income 91,473 4,805 $ (53,594) 42,684
Investment income 31,029 539 4,129 (30,643) 5,054
Other income 868 252 1,120
Equity in income of affiliates 61,526 (61,526)
--------- --------- --------- --------- ---------
85,826 133,344 154,533 (145,763) 227,940
--------- --------- --------- --------- ---------
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 60,250 (35,676) 135,718 (61,526) 98,766
Income tax provision (491) (13,736) 52,252 38,025
--------- --------- --------- --------- ---------
Net income $ 60,741 $ (21,940) $ 83,466 $ (61,526) $ 60,741
========= ========= ========= ========= =========
32
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 65,172 67,256
Servicing fee income 55,994 4,111 $ (39,081) 21,024
Investment income 18,262 147 2,411 (17,911) 2,909
Other income 86 1,344 218 1,648
Equity in income of affiliates 33,374 (33,374)
--------- --------- --------- --------- ---------
50,867 97,057 80,189 (90,366) 137,747
--------- --------- --------- --------- ---------
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 40,469 (10,737) 66,567 (33,374) 62,925
Income tax provision 1,770 (3,217) 25,673 24,226
--------- --------- --------- --------- ---------
Net income $ 38,699 $ (7,520) $ 40,894 $ (33,374) $ 38,699
========= ========= ========= ========= =========
33
AmeriCredit Corp.
Supplementary Information
Consolidating Statement of Income
Year Ended June 30, 1996
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue:
Finance charge income $ 32,050 $ 19,656 $ 51,706
Gain on sale of receivables 12,449 10,424 22,873
Servicing fee income 26,329 50 $(22,667) 3,712
Investment income $ 11,395 337 643 (11,300) 1,075
Other income 104 1,489 19 1,612
Equity in income of affiliates 25,914 (25,914)
-------- -------- -------- -------- --------
37,413 72,654 30,792 (59,881) 80,978
-------- -------- -------- -------- --------
Costs and expenses:
Operating expenses 3,700 41,359 3,289 (22,667) 25,681
Provision for losses 7,912 7,912
Interest expense 371 15,212 8,846 (11,300) 13,129
-------- -------- -------- -------- --------
4,071 64,483 12,135 (33,967) 46,722
-------- -------- -------- -------- --------
Income before income taxes 33,342 8,171 18,657 (25,914) 34,256
Income tax provision 11,751 914 12,665
-------- -------- -------- -------- --------
Net income $ 21,591 $ 7,257 $ 18,657 $(25,914) $ 21,591
======== ======== ======== ======== ========
34
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 $ 60,741 $ (21,940) $ 83,466 $ (61,526) $ 60,741
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 297 (14,414) 52,256 38,139
Non-cash gain on sale of auto receivables (113,428) (113,428)
Equity in income of affiliates (61,526) 61,526
Changes in assets and liabilities
Interest-only receivables from Trusts (166) 38,168 38,002
Other assets (420) (739) (2,165) (3,324)
Accrued taxes and expenses (10,368) 25,963 (2,716) 12,879
----------- ----------- ----------- ---------- -----------
Net cash provided by operating activities (11,226) 707 55,581 45,062
----------- ----------- ----------- ---------- -----------
Cash flows from investing activities
Purchases of auto receivables (1,717,006) (1,777,748) 1,777,748 (1,717,006)
Originations of mortgage receivables (137,169) (137,169)
Principal collections and recoveries on
receivables 11,984 6,400 18,384
Net proceeds from sale of auto receivables 1,777,748 1,632,357 (1,777,748) 1,632,357
Net proceeds from sale of mortgage receivables 119,683 119,683
Increase in investments in Trust receivables 3,032 (66,579) (63,547)
Increase in restricted cash (363) (363)
Purchases of property and equipment 11 (9,467) (9,456)
Decrease in other assets 5,000 5,000
Net change in investment in affiliates (9,998) (3,921) (2) 13,921
----------- ----------- ----------- ---------- -----------
Net cash used by investment activities (4,987) 44,884 (205,935) 13,921 (152,117)
----------- ----------- ----------- ---------- -----------
Cash flows from financing activities
Net change in warehouse credtit 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) 27,730 20,305
----------- ----------- ----------- ---------- -----------
Net cash provided by financing activities 16,213 (19,422) 151,245 (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
=========== =========== =========== ========== ===========
35
AmeriCredit Corp.
Supplementary Information
Consolidating Statement of Cash Flows
Year Ended June 30, 1997
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ----------- ----------- ------------- ------------
Cash flows from operating activities
Net income $ 38,699 $ (7,520) $ 40,894 $ (33,374) $ 38,699
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 (1,180) (1,912) 27,520 24,428
Non-cash gain on sale of auto receivables (66,203) (66,203)
Equity in income of affiliates (33,374) 33,374
Changes in assets and liabilities
Interest-only receivables from Trusts 1,236 21,655 22,891
Other assets 917 (3,083) (175) (2,341)
Accrued taxes and expenses 4,835 18,278 3,380 26,493
--------- ---------- ---------- --------- ---------
Net cash provided by operating activities 9,925 15,769 27,071 52,765
--------- ---------- ---------- --------- ---------
Cash flows from investing activities
Purchases of auto receivables (896,711) (814,107) 814,107 (896,711)
Originations of mortgage receivables (53,770) (53,770)
Principal collections and recoveries on
receivables 22,672 41,717 64,389
Net proceeds from sale of auto receivables 814,107 814,107 (814,107) 814,107
Net proceeds from sale of mortgage receivables 52,489 52,489
Increase in investments in Trust receivables (5,169) (28,000) (33,169)
Increase in restricted cash (52,591) (52,591)
Decrease in other assets 58 58
Purchases of property and equipment (81) (4,430) (4,511)
Net change in investment in affiliates 25,605 (22,981) (2,624)
--------- ---------- ---------- --------- ---------
Net cash used by investment activities 25,582 (93,793) (41,498) (109,709)
--------- ---------- ---------- --------- ---------
Cash flows from financing activities
Net change in warehouse credit facilities (17,264) (17,264)
Proceeds from issuance of senior notes 120,894 120,894
Payments on other notes payable (552) (44,158) (44,710)
Purchase of treasury stock (4,387) (4,387)
Proceeds from issuance of common stock 6,293 6,293
Net change in due (to) from affiliates (152,842) 99,363 53,479
--------- ---------- ---------- --------- ---------
Net cash provided by financing activities (30,594) 82,099 9,321 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
========= ========== ========== ========= =========
36
AmeriCredit Corp.
Supplementary Information
Consolidating Statement of Cash Flows
Year Ended June 30, 1996
(Dollars in Thousands)
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ---------- ---------- ------------ ------------
Cash flows from operating activities
Net income $ 21,591 $ 7,257 $ 18,657 $ (25,914) $ 21,591
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 49 1,479 1,528
Provision for losses 7,912 7,912
Deferred income taxes 14,113 (2,432) 11,681
Non-cash gain on sale of auto receivables (9,538) (6,809) (16,347)
Equity in income of affiliates (25,914) 25,914
Changes in assets and liabilities
Interest-only receivables from Trusts 3,773 755 4,528
Other assets 362 (1,857) 511 (984)
Accrued taxes and expenses 1,273 8,606 (473) 9,406
--------- --------- --------- --------- ---------
Net cash provided by operating activities 11,474 15,200 12,641 39,315
--------- --------- --------- --------- ---------
Cash flows from investing activities
Purchases of auto receivables (417,235) (115,646) 115,646 (417,235)
Principal collections and recoveries on
receivables 37,894 57,054 94,948
Net proceeds from sale of auto receivables 285,779 115,646 (115,646) 285,779
Increase in investments in Trust receivables (11,382) (9,892) (21,274)
Increase in restricted cash (10,297) (10,297)
Purchases of property and equipment 2,536 (5,698) (3,162)
Decrease in other assets 3,707 3,707
Net change in investment in affiliates (2,746) 2,743 3
--------- --------- --------- --------- ---------
Net cash used by investment activities 3,497 (107,899) 36,868 (67,534)
--------- --------- --------- --------- ---------
Cash flows from financing activities
Net change in warehouse credit facilities 86,000 86,000
Payments on other notes payable (298) (66,673) (66,971)
Proceeds from issuance of common stock 3,731 3,731
Purchase of treasury stock (10,710) (10,710)
Net change in due (to) from affiliates (29,794) 13,006 16,788
--------- --------- --------- --------- ---------
Net cash provided by financing activities (37,071) 99,006 (49,885) 12,050
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents (22,100) 6,307 (376) (16,169)
Cash and cash equivalents at beginning of year 17,187 (6,394) 7,521 18,314
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year $ (4,913) $ (87) $ 7,145 $ 2,145
========= ========= ========= ========= =========
37
REPORT ON INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION
Board of Directors and Shareholders
AmeriCredit Corp.
Our report on the audits of the consolidated financial statements of AmeriCredit
Corp. as of June 30, 1998 and 1997 and for the three years ended June 30, 1998,
1997 and 1996 have been incorporated by reference in this Form 10-K from page 31
of the 1998 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 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, 1998
38
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.
39
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.
40
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, 1998 and 1997.
Consolidated Statements of Income for the years ended June 30, 1998, 1997
and 1996.
Consolidated Statements of Shareholders' Equity for the years ended June
30, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended June 30, 1998,
1997 and 1996.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
(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.
41
(5) The Company did not file any reports on Form 8-K during the quarterly
period ended June 30, 1998. Certain subsidiaries and affiliates of the
Company filed reports on Form 8-K during the quarterly period ended June
30, 1998 reporting monthly information related to securitization trusts.
42
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 24, 1998
AMERICREDIT CORP.
BY: /s/Clifton H. Morris, Jr.
-------------------------
Clifton H. Morris, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Clifton H. Morris, Jr. Chairman of the Board and September 24, 1998
- --------------------------- Chief Executive Officer
CLIFTON H. MORRIS, JR.
/s/Daniel E. Berce Vice Chairman and September 24, 1998
- --------------------------- Chief Financial Officer
DANIEL E. BERCE
/s/Michael R. Barrington Vice Chairman, President September 24, 1998
- --------------------------- and Chief Operating Officer
MICHAEL R. BARRINGTON
/s/Edward H. Esstman Executive Vice President, September 24, 1998
- --------------------------- Auto Finance Division and
EDWARD H. ESSTMAN Director
/s/James H. Greer Director September 24, 1998
- ---------------------------
JAMES H. GREER
Director
- --------------------------- -------------------
GERALD W. HADDOCK
/s/Douglas K. Higgins Director September 24, 1998
- ---------------------------
DOUGLAS K. HIGGINS
Director
- --------------------------- -------------------
KENNETH H. JONES, JR.
43
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
letters in parenthesis under the Exhibit Number column. Documents filed with
this report are identified by the symbol "@" under the Exhibit Number column.
Exhibit
Number Description
- ------- -----------
3.1(a) -- 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(a) -- Amendment to Articles of Incorporation, filed October 18, 1989
(Exhibit 3.2)
3.3(e) -- Articles of Amendment to Articles of Incorporation of the
Company, filed November 12, 1992 (Exhibit 3.3)
3.4(o) -- Bylaws of the Company, as amended (Exhibit 3.4)
4.1(d) -- Specimen stock certificate evidencing the Common Stock (Exhibit
4.1)
4.2(n) -- Rights Agreement, dated August 28, 1997, between the Company and
ChaseMellon Shareholder Services, L.L.C. (Exhibit 1)
10.1(a) -- 1989 Stock Option Plan (with Stock Appreciation Rights) for the
Company (Exhibit 10.5)
10.2(b) -- Amendment No. 1 to the 1989 Stock Option Plan (with Stock
Appreciation Rights) for the Company (Exhibit 4.6)
10.3(c) -- 1990 Stock Option Plan for Non-Employee Directors of the Company
(Exhibit 10.14)
10.4(d) -- 1991 Key Employee Stock Option Plan of the Company (Exhibit
10.10)
10.5(d) -- 1991 Non-employee Director Stock Option Plan of the Company
(Exhibit 10.11)
10.6(d) -- Executive Employment Agreement, dated January 30, 1991, between
the Company and Clifton H. Morris, Jr. (Exhibit 10.18)
10.6.1(o) -- 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(d) -- Executive Employment Agreement, dated January 30, 1991, between
the Company and Michael R. Barrington (Exhibit 10.19)
10.7.1(o) -- Amendment No. 1 to Executive Employment Agreement, dated May 1,
1997, between the Company and Michael R. Barrington (Exhibit
10.8.1)
10.8(d) -- Executive Employment Agreement, dated January 30, 1991 between
the Company and Daniel E. Berce (Exhibit 10.20)
INDEX TO EXHIBITS
(Continued)
10.8.1(o) -- Amendment No. 1 to Executive Employment Agreement, dated May 1,
1997, between the Company and Daniel E. Berce (Exhibit 10.9.1)
10.9(o) -- Amended and Restated Employment Agreement, dated October 15,
1996, between the Company and Edward H. Esstman (Exhibit 10.10)
10.9.1(o) -- 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(o) -- Amended and Restated Employment Agreement, dated July 1, 1997,
between the Company and Michael T. Miller (Exhibit 10.11)
10.10.1@ -- Amendment No. 1 to Amended and Restated Employment Agreement,
dated as of August 1, 1998, between the Company and Michael T.
Miller
10.11 (p) -- 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)
10.12(p) -- 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)
10.13 (p) -- 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@ -- 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
10.13.2@ -- 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
10.13.3@ -- 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
INDEX TO EXHIBITS
(Continued)
10.14(l) -- 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(l) -- 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(l) -- 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(g) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp.
10.18(m) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for
AmeriCredit Corp
10.19(h) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1995-B, dated November 20, 1995,
among AmeriCredit Financial Services, Inc., AmeriCredit
Receivables Corp. and LaSalle National Bank (Exhibit 10.1)
10.20(i) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-A, dated February 12, 1996,
among AmeriCredit Financial Services, Inc., AmeriCredit
Receivables Corp. and LaSalle National Bank (Exhibit 10.1)
10.21(j) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-B, dated April 30, 1996, among
AmeriCredit Financial Services, Inc., AFS Funding Corp. and
LaSalle National Bank (Exhibit 4.1)
10.22(k) -- 1996 Limited Stock Option Plan for AmeriCredit Corp.
10.23(q) -- 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)
10.24(q) -- Purchase Agreement, dated January 26, 1998, between AmeriCredit
Corp. and subsidiaries and Salomon Brothers, Inc. and Credit
Suisse First Boston Corporation (Exhibit 10.25)
10.25(q) -- 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)
10.26(f) -- 1998 Limited Stock Option Plan for AmeriCredit
11.1@ -- Statement Re Computation of Per Share Earnings
12.1@ -- Statement Re Computation of Ratios
INDEX TO EXHIBITS
(Continued)
13.1@ -- 1998 Annual Report to Shareholders of the Company
21.1@ -- Subsidiaries of the Registrant
23.1@ -- Consent of PricewaterhouseCoopers LLP
27.1@ -- Financial Data Schedule
_____________________________________________________________________
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) Incorporated by reference to the exhibit shown in parenthesis included
in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1995 filed by the Company with the
Securities and Exchange Commission.
(i) Incorporated by reference to the exhibit shown in parenthesis included
in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1996 filed by Company with the Securities and
Exchange Commission.
(j) Incorporated by reference to the exhibit shown in parenthesis included
in a Report on Form 8-K, dated May 16, 1996, filed by the AmeriCredit
Automobile Receivables Trust 1996-B with the Securities and Exchange
Commission.
INDEX TO EXHIBITS
(Continued)
(k) 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.
(l) 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, 1996 filed by the Company with the
Securities and Exchange Commission.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
(q) Incorporated by reference to the exhibit shown in parenthesis included
in Registration Statement No. 333-46993 on Form S-4 filed by the
Company with the Securities and Exchange Commission.
@ Filed herewith