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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, 1999
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10667
AmeriCredit Corp.
(Exact name of registrant as specified in its charter)
Texas 75-2291093
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 Cherry Street, Suite 3900, 76102
Fort Worth, Texas (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (817) 302-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
9 1/4 % Senior Notes due 2004/Guarantee of 9 1/4% Senior Notes due 2004
9.875% Senior Notes due 2006/Guarantee of 9.875% Senior Notes due 2006
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_] .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of 56,510,765 shares of the Registrant's Common
Stock held by non-affiliates based upon the closing price of the Registrant's
Common Stock on the New York Stock Exchange on September 10, 1999 was
approximately $734,639,945. For purposes of this computation, all executive
officers, directors and 5 percent beneficial owners of the Registrant are
deemed to be affiliates. Such determination should not be deemed an admission
that such executive officers, directors and beneficial owners are, in fact,
affiliates of the Registrant.
There were 72,062,181 shares of Common Stock, $.01 par value outstanding as
of September 10, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Shareholders for the year ended June 30,
1999 ("the Annual Report") furnished to the Commission pursuant to Rule 14a-
3(b) and the definitive Proxy Statement pertaining to the 1999 Annual Meeting
of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A
are incorporated herein by reference into Parts II and IV, and Part III,
respectively.
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AMERICREDIT CORP.
INDEX TO FORM 10-K
Item Page
No. No.
---- ----
PART I
1. Business.......................................................... 3
2. Properties........................................................ 17
3. Legal Proceedings................................................. 18
4. Submission of Matters to a Vote of Security Holders............... 18
PART II
5. Market for Registrant's Common Equity and Related Stockholder 19
Matters...........................................................
6. Selected Financial Data........................................... 19
7. Management's Discussion and Analysis of Financial Condition and 19
Results of Operations.............................................
7A. Quantitative and Qualitative Disclosures About Market Risk........ 19
8. Financial Statements and Supplementary Data....................... 19
9. Changes in and Disagreements with Accountants on Accounting and 29
Financial Disclosure..............................................
PART III
10. Directors and Executive Officers of the Registrant................ 29
11. Executive Compensation............................................ 29
12. Security Ownership of Certain Beneficial Owners and Management.... 29
13. Certain Relationships and Related Transactions.................... 29
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 30
SIGNATURES 31
2
PART I
ITEM 1. BUSINESS
General
AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to
the business, assets and liabilities of a predecessor corporation formed under
the laws of Texas on August 1, 1986. The Company's predecessor began the
Company's business in March 1987, and the business has been operated
continuously since that time. As used herein, the term "Company" refers to the
Company, its wholly owned subsidiaries and its predecessor corporation. The
Company's principal executive offices are located at 801 Cherry Street, Suite
3900, Fort Worth, Texas, 76102 and its telephone number is (817) 302-7000.
The Company and its subsidiaries, including AmeriCredit Financial Services,
Inc. ("AFSI"), a Delaware corporation, have been operating in the automobile
finance business since September 1992. Through its AFSI branch network, the
Company purchases loans made by franchised and select independent dealers to
consumers buying late model used and, to a lesser extent, new automobiles. The
Company targets consumers who are typically unable to obtain financing from
traditional sources. Funding for the Company's auto lending activities is
obtained primarily through the sale of loans in securitization transactions.
The Company services its automobile lending portfolio at regional centers
using automated loan servicing and collection systems.
In November 1996, the Company acquired Americredit Corporation of
California, a California corporation. This subsidiary, which operates as
AmeriCredit Mortgage Services ("AMS"), originates mortgage loans and sells the
loans and related servicing rights in the wholesale markets.
Automobile Finance Operations
Target Market. The Company's automobile lending programs are designed to
serve customers who have limited access to traditional automobile financing.
The Company's typical borrowers have experienced prior credit difficulties or
have limited credit histories. Because the Company serves customers who are
unable to meet the credit standards imposed by most traditional automobile
financing sources, the Company generally charges interest at rates higher than
those charged by traditional automobile financing sources. The Company also
expects to sustain a higher level of credit losses than traditional automobile
financing sources since the Company provides financing in a relatively high
risk market.
Dealership Marketing. Since the Company is primarily an indirect lender, the
Company focuses its marketing activities on automobile dealerships. The
Company is selective in choosing the dealers with whom it conducts business
and primarily pursues manufacturer franchised dealerships with used car
operations and select independent dealerships. The Company selects these
dealers because they sell the type of used cars the Company prefers to
finance, specifically later model, low mileage used cars. Of the contracts
purchased by the Company during the fiscal year ended June 30, 1999,
approximately 95% were originated by manufacturer franchised dealers with used
car operations and 5% by select independent dealers. The Company purchased
contracts from 12,590 dealers during the fiscal year ended June 30, 1999. No
dealer accounted for more than 1% of the total volume of contracts purchased
by the Company for that same period.
Prior to entering into a relationship with a dealer, the Company considers
the dealer's operating history and reputation in the marketplace. The Company
then maintains a non-exclusive relationship with the dealer. This relationship
is actively monitored with the objective of maximizing the volume of
applications received from the dealer that meet the Company's underwriting
standards and profitability objectives. Due to the non-exclusive nature of the
Company's relationships with dealerships, the dealerships retain discretion to
determine whether to obtain financing from the Company or from another source
for a customer seeking to finance a vehicle purchase. Branch managers and
other branch office personnel regularly telephone and visit dealers to solicit
new business and to answer any questions dealers may have regarding the
Company's financing programs and capabilities. These personnel explain the
Company's underwriting philosophy, including the preference for non-prime
quality
3
contracts secured by later model, lower mileage vehicles and the Company's
practice of underwriting in the local branch office. To increase the
effectiveness of these contacts, the branch managers and other branch office
personnel have access to the Company's management information systems which
detail current information regarding the number of applications submitted by a
dealership, the Company's response and the reasons why a particular
application was rejected.
Finance contracts are generally purchased by the Company without recourse to
the dealer, and accordingly, the dealer usually has no liability to the
Company if the consumer defaults on the contract. To mitigate the Company's
risk from potential credit losses, the Company typically charges dealers an
acquisition fee when purchasing finance contracts. Such acquisition fees are
negotiated with dealers on a contract-by-contract basis and are usually non-
refundable. Although finance contracts are purchased without recourse to the
dealer, the dealer typically makes certain representations as to the validity
of the contract and compliance with certain laws, and indemnifies the Company
against any claims, defenses and set-offs that may be asserted against the
Company because of assignment of the contract. Recourse based upon such
representations and indemnities would be limited in circumstances in which the
dealer has insufficient financial resources to perform upon such
representations and indemnities. The Company does not view recourse against
the dealer on these representations and indemnities to be of material
significance in its decision to purchase finance contracts from a dealer.
Branch Office Network. The Company uses a branch office network to market
its financing programs to selected dealers, develop relationships with these
dealers and underwrite contracts submitted by dealerships. Branch office
personnel are responsible for the solicitation, enrollment and education of
dealers regarding the Company's financing programs. The Company believes a
local presence enables the Company to more fully service dealers and be more
responsive to dealer concerns and local market conditions. The Company selects
markets for branch office locations based upon numerous factors, including
demographic trends and data, competitive conditions, the regulatory
environment and the availability of qualified personnel. Branch offices are
typically situated in suburban office buildings which are accessible to local
dealers.
Each branch office solicits dealers for contracts and maintains the
Company's relationship with the dealers in the geographic vicinity of that
branch office. Branch office locations are typically staffed by a branch
manager, an assistant manager and one or more dealer and customer service
representatives. Larger branch offices may also have additional assistant
managers and/or dealer marketing representatives. The Company believes that
the personal relationships its branch managers and other branch personnel
establish with the dealership staff are an important factor in creating and
maintaining productive relationships with the Company's dealer customer base.
Branch managers are compensated with base salaries and annual incentives based
on overall branch performance including factors such as branch credit quality,
loan pricing adequacy and loan volume objectives. The incentives are typically
paid in cash and stock option grants. The branch managers report to regional
vice presidents.
The Company's regional vice presidents monitor branch office compliance with
the Company's underwriting guidelines. The Company's management information
systems provide the regional vice presidents access to credit application
information enabling them to consult with the branch managers on daily credit
decisions and review exceptions to the Company's underwriting guidelines. The
regional vice presidents also make periodic visits to the branch offices to
conduct operating reviews.
The following table sets forth information with respect to the number of
branches, dollar volume of contracts purchased and number of producing
dealerships for the periods set forth below.
Year Ended June 30,
------------------------------
1999 1998 1997
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(dollars in thousands)
Number of branch offices........................ 176 129 85
Dollar volume of contracts purchased............ $2,879,796 $1,737,813 $906,794
Number of producing dealerships(1).............. 12,590 9,204 5,657
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(1) A producing dealership refers to a dealership from which the Company had
purchased contracts in the respective period.
4
Underwriting and Purchasing of Contracts
Proprietary Credit Scoring System and Risk-based Pricing. The Company has
implemented a proprietary credit scoring system throughout its branch office
network to support the branch level credit approval process. The credit
scoring system was developed with the assistance of Fair, Isaac and Co., Inc.
from the Company's consumer demographic and portfolio databases. Credit
scoring is used to differentiate credit applicants and to rank order credit
risk in terms of expected default rates, which enables the Company to tailor
loan pricing and structure according to this statistical assessment of credit
risk. For example, a consumer with a lower score would indicate a higher
probability of default and, therefore, the Company could compensate for this
higher default risk through the structuring and pricing of the transaction.
While the Company employs a credit scoring system in the credit approval
process, credit scoring does not eliminate credit risk. Adverse determinations
in evaluating contracts for purchase could adversely affect the credit quality
of the Company's receivables portfolio.
The credit scoring system considers data contained in the customer's credit
application and credit bureau report as well as the structure of the proposed
loan and produces a statistical assessment of these attributes. This
assessment is used to segregate applicant risk profiles and determine whether
risk is acceptable and the price the Company should charge for that risk. The
Company's credit scorecards are validated on a monthly basis through the
comparison of actual versus projected performance by score. The Company
endeavors to refine its proprietary scorecards based on new information and
identified correlations relating to receivables performance.
Through the use of the Company's proprietary credit scoring system, branch
office personnel with credit authority are able to more efficiently review and
prioritize loan applications. Applications which receive a high score can be
processed rapidly and credit decisions can be quickly faxed back to the
dealer. Applications receiving low scores can be quickly rejected without
further processing and review by the Company. This ability to prioritize
applications allows for a more effective allocation of resources to those
applications requiring more review.
Decentralized Loan Approval Process. The Company purchases individual
contracts through its branch offices based on a decentralized credit approval
process tailored to local market conditions. Each branch manager has a
specific credit authority based upon their experience and historical loan
portfolio results as well as established credit scoring parameters. In certain
markets where a branch office is not present, contracts are purchased through
the Company's regional purchasing offices. Although the credit approval
process is decentralized, all credit decisions must comply with the Company's
credit scoring strategies and underwriting policies and procedures.
Loan application packages completed by prospective obligors are received via
facsimile or electronic interface at the branch offices from dealers.
Application data are entered into the Company's automated application
processing system. A credit bureau report is automatically generated and a
credit score is computed. Branch office personnel with credit authority review
the application package and determine whether to approve the application,
approve the application subject to conditions that must be met or deny the
application. These personnel consider many factors in arriving at a credit
decision, relying primarily on the applicant's credit score, but also taking
into account the applicant's capacity to pay, stability, credit history, the
contract terms and collateral value. The Company estimates that approximately
60% to 65% of applicants are denied credit by the Company typically because of
their credit histories or other factors. Dealers are contacted regarding
credit decisions by telefax, telephone or electronic interface. Declined and
conditioned applicants are also provided with appropriate notification of the
decision.
The Company's underwriting and collateral guidelines as well as credit
scoring parameters form the basis for the branch level credit decision;
however, the qualitative judgment of the branch office personnel with credit
authority with respect to the credit quality of an applicant is a significant
factor in the final credit decision. Exceptions to credit policies and
authorities must be approved by a regional vice president or other designated
credit officer.
5
The dealers send completed loan packages to the branch office. As part of
the credit decision process, a customer service representative investigates
the residence, employment and credit history of the applicant. Loan terms and
insurance coverages are generally reverified with the customer by branch
office personnel and the loan packages are forwarded to the Company's
centralized loan services department. All loan documentation is scanned to
create electronic images and key original documents are stored in a fire
resistant vault. The loans are reviewed for proper documentation and
regulatory compliance and are entered into the Company's loan accounting
system. Once cleared for funding, the loan services department issues a check
or electronically transfers funds to the dealer. Upon funding of the contract,
the Company acquires a perfected security interest in the automobile that was
financed. Daily loan reports are generated for review by senior operations
management. All of the Company's contracts are fully amortizing with
substantially equal monthly installments.
Servicing and Collections Procedures
General. The Company's servicing activities consist of collecting and
processing customer payments, responding to customer inquiries, initiating
contact with customers who are delinquent in payment of an installment,
maintaining the security interest in the financed vehicle, maintaining
physical damage insurance coverage of the financed vehicle and repossessing
and liquidating collateral when necessary. The Company utilizes various
automated systems to support its servicing and collections activities. The
Company uses monthly billing statements to serve as a reminder to customers as
well as an early warning mechanism in the event a customer has failed to
notify the Company of an address change. Approximately 20 days before a
customer's first payment due date and each month thereafter, the Company mails
the customer a billing statement directing the customer to mail payments to a
lockbox bank for deposit in a lockbox account. Payment receipt data is
electronically transferred from the Company's lockbox bank to the Company for
posting to the loan accounting system. Payments may also be received directly
by the Company from customers. All payment processing and customer account
maintenance is performed centrally in Fort Worth, Texas by the loan services
department. The Company receives servicing fees for servicing securitized
receivables equal to 2.25% per annum of the outstanding principal balance of
such receivables.
The Company's collections activities are performed at regional centers
located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. A
predictive dialing system is utilized to make phone calls to customers whose
payments are past due. The predictive dialer is a computer-controlled
telephone dialing system which dials phone numbers of customers from a file of
records extracted from the Company's database. Once a live voice responds to
the automated dialer's call, the system automatically transfers the call to a
collector and the relevant account information to the collector's computer
screen. The system also tracks and notifies collections management of phone
numbers that the system has been unable to reach within a specified number of
days, thereby promptly identifying for management all customers who cannot be
reached by telephone. By eliminating time wasted on attempting to reach
customers, the system gives a single collector the ability to speak with a
larger number of accounts daily.
Once an account becomes more than 30 days delinquent, the account moves to
the Company's mid-range collection unit. The objective of these collectors is
to prevent the account from becoming further delinquent. After a scheduled
payment on an account becomes approximately 60 to 90 days past due, the
Company typically initiates repossession of the financed vehicle. However, the
Company may repossess a financed vehicle without regard to the length of
payment delinquency if an account is deemed uncollectible, the financed
vehicle is deemed by collection personnel to be in danger of being damaged,
destroyed or hidden, the customer deals in bad faith or the customer
voluntarily surrenders the financed vehicle.
Payment deferrals are at times offered to customers who have encountered
temporary financial difficulty, hindering their ability to pay as contracted,
and when other methods of assisting the customer in meeting the contract terms
and conditions have been exhausted. A deferral allows the customer to move a
delinquent payment to the end of the loan by paying a fee (approximately the
interest portion of the payment deferred). The collector reviews the
customer's past payment history and statistically based behavioral score and
assesses the customer's desire and capacity to make future payments. Before
agreeing to a deferral, the collector must also ensure that
6
the deferment transaction complies with the Company's policies and guidelines.
Exceptions to the Company's policies and guidelines for deferrals must be
approved by a collections officer. The loan services department processes
deferment transactions. As of June 30, 1999, approximately 14% of the
Company's managed receivables had received a deferral.
Repossessions. Repossessions are subject to prescribed legal procedures,
which include peaceful repossession, one or more customer notifications, a
prescribed waiting period prior to disposition of the repossessed automobile
and return of personal items to the customer. Some jurisdictions provide the
customer with reinstatement or redemption rights. Legal requirements,
particularly in the event of bankruptcy, may restrict the Company's ability to
dispose of the repossessed vehicle. Repossessions are handled by independent
repossession firms engaged by the Company and must be approved by a
collections officer. Upon repossession and after any prescribed waiting
period, the repossessed automobile is sold at auction. The Company does not
sell any vehicles on a retail basis. The proceeds from the sale of the
automobile at auction, and any other recoveries, are credited against the
balance of the contract. Auction proceeds from sale of the repossessed vehicle
and other recoveries are usually not sufficient to cover the outstanding
balance of the contract, and the resulting deficiency is charged-off. The
Company may pursue collection of deficiencies when it deems such action to be
appropriate.
Charge-Off Policy. The Company's policy is to charge-off an account in the
month in which the account becomes 120 days contractually delinquent even if
the Company has not repossessed the related vehicle. On accounts less than 120
days delinquent, the Company charges-off the account when the vehicle securing
the delinquent contract is repossessed and disposed of. The charge-off
represents the difference between the actual net sales proceeds and the amount
of the delinquent contract, including accrued interest. Accrual of finance
charge income is suspended on accounts which are more than 60 days
contractually delinquent.
Risk Management
Overview. The Company has developed procedures to evaluate and supervise the
operations of each branch office on a centralized basis. The Company's risk
management department is responsible for monitoring the contract purchase
process and supporting the supervisory role of senior operations management.
This department tracks via databases key variables, such as loan applicant
data, credit bureau and credit score information, loan structures and terms
and payment histories. The risk management department also regularly reviews
the performance of the Company's credit scoring system and is involved with
third-party vendors in the development and enhancement of credit scorecards
for the Company.
The risk management department also prepares regular credit indicator
packages reviewing portfolio performance at various levels of detail including
total Company, branch office and dealer. Various daily reports and analytical
data are also generated by the Company's management information systems. This
information is used to monitor credit quality as well as to refine the
structure and mix of new contract purchases. Portfolio returns can be reviewed
on a consolidated basis, as well as at the branch office, dealer and contract
levels.
Behavioral Scoring. Statistically-based behavioral assessment models are
used to project the relative probability that an individual account will
default and to validate the credit scoring system after the receivable has
aged for a sufficient period of time, generally six to nine months. Default
probabilities are calculated for each account independent of the credit score.
Projected default rates from the behavioral assessment models and credit
scoring systems are compared and analyzed to monitor the effectiveness of the
Company's credit strategies.
Collateral Value Management. The value of the collateral underlying the
Company's receivables portfolio is updated monthly with a loan-by-loan link to
national wholesale auction values. This data, along with the Company's own
experience relative to mileage and vehicle condition, are used for evaluating
collateral disposition activities as well as for reserve analysis models.
Compliance Audits. The Company's internal audit department conducts regular
compliance audits of branch office operations, loan services, collections and
other functional areas. The primary objective of the audits
7
is to measure compliance with the Company's written policies and procedures as
well as regulatory matters. Branch office audits include a review of
compliance with underwriting policies, completeness of loan documentation,
collateral value assessment and extent of applicant data investigation.
Written audit reports are distributed to local branch office personnel and the
regional vice presidents for response and follow-up. Senior operations
management reviews copies of these reports. Audit results and responses are
also reviewed on a quarterly basis by an audit committee comprised of senior
executive management.
Securitization of Loans
Since December 1994, the Company has pursued a strategy of securitizing its
receivables to diversify its funding, improve liquidity and obtain a cost-
effective source of funds for the purchase of additional automobile finance
contracts. The Company applies the net proceeds from securitizations to pay
down borrowings under its warehouse credit facilities, thereby increasing
availability thereunder for further contract purchases. Through June 30, 1999,
the Company had securitized approximately $5.8 billion of automobile
receivables, including a $1.0 billion securitization completed in May 1999.
In its securitizations, the Company, through a wholly-owned subsidiary,
transfers automobile receivables to newly-formed securitization trusts, which
issue one or more classes of asset-backed securities. The asset-backed
securities are in turn sold to investors, except for certain subordinated
interests, which may be retained by the Company.
When receivables are transferred to securitization trusts, the Company
recognizes a gain on sale of receivables and continues to service such
receivables. The gain on sale of receivables primarily represents the present
value of estimated excess cash flows the Company expects to receive from the
pool of receivables sold. The estimated excess cash flows are the difference
between the cash collected from obligors on securitized receivables and the
sum of principal and interest paid to investors in the asset-backed
securities, contractual servicing fees, defaults, net of recoveries and other
expenses such as trustee fees and financial guarantee insurance premiums.
Concurrently with recognizing such gain on sale of receivables, the Company
records a corresponding asset, interest only receivables from trusts, which
includes the present value of estimated excess cash flows as described above.
The calculation of interest-only receivables from trusts includes estimates
of future losses and prepayment rates for the remaining term of the
receivables sold since these factors impact the amount and timing of future
cash collected on the receivables sold. The carrying value of interest-only
receivables is reviewed quarterly by the Company for each separate
securitization transaction. If future losses or prepayment rates exceed the
Company's original estimates, the asset will be adjusted through a charge to
operations. Favorable credit loss and prepayment experience compared to the
Company's original estimates would result in additional income when realized.
In connection with the Company's securitization program, the Company
arranges for a financial guaranty insurance policy to achieve a high grade
credit rating on the asset-backed securities issued. The policies for each of
the Company's securitizations have been provided by Financial Security
Assurance Inc. ("FSA"), a monoline insurer, which insures the timely payment
of principal and interest due on the asset-backed securities. The Company has
limited reimbursement obligations to FSA; however, credit enhancement
requirements, including FSA's encumbrance of certain restricted cash accounts
and subordinated interests in trusts, provide a source of funds to cover
shortfalls in collections and to reimburse FSA for any claims which may be
made under the policies issued with respect to the Company's securitizations.
The credit enhancement requirements for any securitization include
restricted cash accounts which are generally established with an initial
deposit and subsequently funded through excess cash flows from securitized
receivables. Funds would be withdrawn from the restricted cash accounts to
cover any shortfalls in amounts payable on the asset-backed securities. Funds
are also available to be withdrawn in an event of default to reimburse FSA for
draws on its financial guaranty insurance policy. In addition, the restricted
cash account for
8
each securitization trust is cross-collateralized to the restricted cash
accounts established in connection with the Company's other securitization
trusts, such that excess cash flow from a performing securitization trust
insured by FSA may be used to support cash flow shortfalls from a non-
performing securitization trust insured by FSA, thereby further restricting
excess cash flow available to the Company. The Company is entitled to receive
amounts from the restricted cash accounts to the extent the amounts deposited
exceed predetermined required minimum levels.
FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned
subsidiary of the Company that owns the restricted cash accounts, interest-
only receivables and any subordinated interests in the trusts, such that, if
the pledge is foreclosed upon in the event of a payment by FSA under one of
its insurance policies or certain material adverse changes in the business of
the Company, FSA would control all of the restricted cash accounts, interest-
only receivables and subordinated interests in the trusts. The terms of each
securitization also provide that, under certain tests relating to
delinquencies, defaults and losses, cash may be retained in the restricted
cash account and not released to the Company until increased minimum levels of
credit enhancement requirements have been reached and maintained.
Trade Names
The Company has obtained federal trademark protection for the "AmeriCredit"
name and the logo that incorporates the "AmeriCredit" name.
Regulation
The Company's operations are subject to regulation, supervision and
licensing under various federal, state and local statutes, ordinances and
regulations.
In most states in which the Company operates, a consumer credit regulatory
agency regulates and enforces laws relating to consumer lenders and sales
finance agencies such as the Company. Such rules and regulations generally
provide for licensing of sales finance agencies, limitations on the amount,
duration and charges, including interest rates, for various categories of
loans, requirements as to the form and content of finance contracts and other
documentation and restrictions on collection practices and creditors' rights.
In certain states, the Company's branch offices are subject to periodic
examination by state regulatory authorities. Some states in which the Company
operates do not require special licensing or provide extensive regulation of
the Company's business.
The Company is also subject to extensive federal regulation, including the
Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act. These laws require the Company to provide certain disclosures
to prospective borrowers and protect against discriminatory lending practices
and unfair credit practices. The principal disclosures required under the
Truth in Lending Act include the terms of repayment, the total finance charge
and the annual percentage rate charged on each loan. The Equal Credit
Opportunity Act prohibits creditors from discriminating against loan
applicants on the basis of race, color, sex, age or marital status. Pursuant
to Regulation B promulgated under the Equal Credit Opportunity Act, creditors
are required to make certain disclosures regarding consumer rights and advise
consumers whose credit applications are not approved of the reasons for the
rejection. In addition, the credit scoring system used by the Company must
comply with the requirements for such a system as set forth in the Equal
Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act
requires the Company to provide certain information to consumers whose credit
applications are not approved on the basis of a report obtained from a
consumer reporting agency.
The dealers who originate automobile loans purchased by the Company also
must comply with both state and federal credit and trade practice statutes and
regulations. Failure of the dealers to comply with such statutes and
regulations could result in consumers having rights of rescission and other
remedies that could have an adverse effect on the Company.
9
The Company believes that it maintains all material licenses and permits
required for its current operations and is in substantial compliance with all
applicable local, state and federal regulations. There can be no assurance,
however, that the Company will be able to maintain all requisite licenses and
permits and the failure to satisfy those and other regulatory requirements
could have a material adverse effect on its operations. Further, the adoption
of additional, or the revision of existing rules and regulations could have a
material adverse effect on the Company's business.
Competition
Competition in the field of non-prime automobile finance is intense. The
automobile finance market is highly fragmented and is served by a variety of
financial entities including the captive finance affiliates of major
automotive manufacturers, banks, thrifts, credit unions and independent
finance companies. Many of these competitors have substantially greater
financial resources and lower costs of funds than the Company. Many of these
competitors also have long standing relationships with automobile dealerships
and may offer dealerships or their customers other forms of financing,
including dealer floor plan financing and leasing, which are not provided by
the Company. Providers of automobile financing have traditionally competed on
the basis of interest rates charged, the quality of credit accepted, the
flexibility of loan terms offered and the quality of service provided to
dealers and customers. In seeking to establish itself as one of the principal
financing sources at the dealers it serves, the Company competes predominately
on the basis of its high level of dealer service and strong dealer
relationships and by offering flexible loan terms. There can be no assurance
that the Company will be able to compete successfully in this market or
against these competitors.
Mortgage Loan Operations
In November 1996, the Company acquired AMS. AMS originates and acquires
mortgage loans through a network of mortgage brokers. AMS sells its mortgage
loans and the related servicing rights in the wholesale markets. AMS does not
currently represent a material portion of the Company's assets or revenues.
Risk Factors
Dependence on Warehouse Credit Facilities. The Company depends on warehouse
credit facilities with financial institutions to finance its purchase of
contracts pending securitization. At June 30, 1999, the Company has five
warehouse credit facilities with various financial institutions providing for
revolving credit borrowings of up to a total of $1,070 million and $20 million
Cdn., subject to defined borrowing bases. The Company has a $505 million
warehouse facility which expires in September 1999 and a $375 million
warehouse facility which expires in March 2000. The Company's bank credit
agreement, which provides for up to $115 million of revolving borrowings
subject to a borrowing base, matures in March 2000 and the $20 million Cdn.
bank facility to fund Canadian auto receivables expires in November 1999. In
July 1999, the Company renewed the mortgage subsidiary credit agreement
reducing the amount the Company can borrow from $75 million to $25 million,
subject to a borrowing base, and extending the maturity date to July 2000. The
Company cannot guarantee that any of these financing resources will continue
to be available at reasonable terms or at all. The availability of these
financing sources depends on factors outside of the Company's control,
including regulatory capital treatment for unfunded bank lines of credit and
the availability of bank liquidity in general. If the Company is unable to
extend or replace any of these facilities and arrange new warehouse credit
facilities, it will have to curtail contract purchasing activities, which
would have a material adverse effect on the Company's financial position,
liquidity and results of operation.
The Company's warehouse credit facilities contain extensive restrictions and
covenants and require the Company to maintain specified financial ratios and
satisfy specified financial tests, including maintenance of asset quality and
portfolio performance tests. Failure to meet any of these convenants,
financial ratios or financial tests could result in an event of default under
these agreements. If an event of default occurs under these agreements, the
lenders could elect to declare all amounts outstanding under these agreements
to be immediately due and payable, enforce their interests against collateral
pledged under such agreements and restrict the Company's
10
ability to obtain additional borrowings under these agreements. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control and the Company cannot guarantee that it will meet those
financial ratios and tests.
Dependence on Securitization Program. Since December 1994, the Company has
relied upon its ability to aggregate and sell receivables in the asset-backed
securities market to generate cash proceeds for repayment of warehouse credit
facilities and to purchase additional contracts from automobile dealers.
Further, gains on sales generated by the Company's securitizations currently
represent the single largest component of the Company's revenues. The Company
endeavors to effect securitizations of its receivables on at least a quarterly
basis. Accordingly, adverse changes in the Company's asset-backed securities
program or in the asset-backed securities market for automobile receivables
generally could materially adversely affect the Company's ability to purchase
and resell loans on a timely basis and upon terms reasonably favorable to the
Company. Any delay in the sale of receivables beyond a quarter-end would
eliminate the gain on sale that quarter and adversely affect the Company's
reported earnings for that quarter. Any of these adverse changes or delays
would have a material adverse effect on the Company's financial position,
liquidity and results of operations.
Dependence on Credit Enhancement. To date, all of the Company's
securitizations have utilized credit enhancement in the form of financial
guaranty insurance policies issued by Financial Security Assurance, Inc.
("FSA") in order to achieve AAA/Aaa ratings which reduces the costs of
securitizations relative to alternative forms of financing available to the
Company. FSA is not required to insure Company-sponsored securitizations and
there can be no assurance that it will continue to do so or that future
Company-sponsored securitizations will be similarly rated. Likewise, the
Company is not required to utilize financial guaranty insurance policies
issued by FSA or any other form of credit enhancement in connection with its
securitizations. The Company recently began to utilize reinsurance and other
credit enhancement alternatives to reduce the initial cash deposit related to
securitization. A downgrading of FSA's credit rating or FSA's withdrawal of
credit enhancement or the lack of availability of reinsurance or other
alternative credit enhancements from the Company's securitization program
could result in higher interest costs for future Company-sponsored
securitizations and larger initial cash deposit requirements. These events
could have a material adverse effect on the Company's financial position,
liquidity and results of operations.
Liquidity and Capital Needs. The Company's ability to make payments on and
to refinance its indebtedness and to fund planned capital expenditures depends
on its ability to generate cash in the future. This, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond the Company's control.
The Company requires substantial amounts of cash to fund its contract
purchase and securitization activities. Although the Company recognizes a gain
on the sale of receivables upon the closing of a securitization, it typically
receives the cash representing that gain over the actual life of the
receivables securitized. The Company also incurs significant transaction costs
in connection with a securitization. Accordingly, the Company's strategy of
securitizing substantially all of its newly purchased receivables and
increasing the number of contracts purchased will require substantial amounts
of cash.
The Company expects to continue to require substantial amounts of cash as
the volume of the Company's contract purchases increases and its
securitization program grows. The Company's primary cash requirements include
the funding of: (i) contract purchases pending their securitization and sale;
(ii) credit enhancement requirements in connection with the securitization and
sale of the receivables; (iii) interest and principal payments under warehouse
credit facilities, the Company's senior notes and other indebtedness; (iv)
fees and expenses incurred in connection with the securitization and servicing
of receivables; (v) capital expenditures for technology; (vi) ongoing
operating expenses; and (vii) income tax payments due on receipt of excess
cash flows from securitization trusts.
The Company's primary sources of liquidity in the future are expected to be
existing cash, financings under its warehouse credit facilities, sales of
automobile receivables through securitizations, excess cash flow received from
securitization trusts and further issuances of debt or equity securities,
depending on capital market conditions.
11
Because the Company's principal credit facilities are initially 364 days in
length, the Company must renew these facilities annually. In addition, because
the Company expects to continue to require substantial amounts of cash for the
foreseeable future, it anticipates that it will need to enter into debt or
equity financings regularly, in addition to quarterly securitizations. The
type, timing and terms of financing selected by the Company will be dependent
upon the Company's cash needs, the availability of various financing sources
and the prevailing conditions in the financial markets. There can be no
assurance that any such sources will be available to the Company at any given
time or as to whether the terms on which such sources may be available will be
acceptable.
Leverage. The Company currently has substantial outstanding indebtedness.
The Company's ability to make payments of principal or interest on, or to
refinance its indebtedness will depend on its future operating performance and
its ability to enter into additional securitizations and debt and/or equity
financings, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control.
If the Company is unable to generate sufficient cash flow in the future to
service its debt, it may be required to refinance all or a portion of its
existing debt, or to obtain additional financing. There can be no assurance
that any such refinancing would be possible or that any additional financing
could be obtained on acceptable terms. The inability to obtain additional
financing could have a material adverse effect on the Company.
The degree to which the Company is leveraged creates risks including: (i)
the Company may be unable to satisfy its obligations under its outstanding
senior notes; (ii) the Company may be more vulnerable to adverse general
economic and industry conditions; (iii) the Company may find it more difficult
to fund future working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes; and (iv) the Company will have to
dedicate a substantial portion of its cash resources to the payment of
principal and interest on indebtedness outstanding thereby reducing the funds
available for operations and future business opportunities. The Company's
warehouse credit facilities and its indentures restrict its ability to, among
other things: (i) sell or transfer assets; (ii) incur additional debt; (iii)
repay other debt; (iv) pay dividends; (v) make certain investments or
acquisitions; (vi) repurchase or redeem capital stock; (vii) engage in mergers
or consolidations; and (viii) engage in certain transactions with subsidiaries
and affiliates.
The warehouse credit facilities and the indentures also require the Company
to comply with certain financial ratios, covenants and asset quality
maintenance requirements. These restrictions may interfere with the Company's
ability to obtain financing or to engage in other necessary or desirable
business activities.
If the Company cannot comply with the requirements in its warehouse credit
facilities, then the lenders may require it to immediately repay all of the
outstanding debt under its facilities. If its debt payments were accelerated,
the Company's assets might not be sufficient to fully repay the debt. These
lenders may also require the Company to use all of its available cash to repay
its debt, they may foreclose upon their collateral or they may prevent the
Company from making payments to other creditors on certain portions of the
Company's outstanding debt.
The Company may not be able to obtain a waiver of these provisions or
refinance its debt, if needed. In such a case, the Company's business, results
of operations and financial condition would suffer.
Default and Prepayment Risks. The Company's results of operations, financial
condition and liquidity depend, to a material extent, on the performance of
contracts purchased and held by the Company prior to their sale in a
securitization transaction as well as the subsequent performance of
receivables sold to securitization trusts. Obligors under loans acquired by
the Company may default or prepay during the period prior to their sale in a
securitization transaction or if they remain owned by the Company. The Company
bears the full risk of losses resulting from payment defaults during such
period. In the event of a payment default, the collateral value of the
financed vehicle usually does not cover the outstanding loan balance and costs
of recovery. The Company maintains an allowance for losses on loans held for
sale by the Company, which reflects management's estimates of anticipated
losses for such loans. If the allowance is inadequate, then the Company would
recognize as an
12
expense the losses in excess of that allowance and results of operations could
be adversely affected. In addition, under the terms of the warehouse credit
facilities, the Company is not able to borrow against defaulted loans and
loans greater than 30 days delinquent held by the Company.
The Company also retains a substantial portion of the default and prepayment
risk associated with the receivables that it sells pursuant to Company-
sponsored securitizations. A large component of the gain recognized on these
sales and the corresponding assets recorded on the Company's balance sheet are
credit enhancement assets which are based on the present value of estimated
future excess cash flows from the securitized receivables which will be
received by the Company. Accordingly, credit enhancement assets are calculated
on the basis of management's assumptions concerning, among other things,
defaults and prepayments. Actual defaults and prepayments may vary from
management's assumptions, possibly to a material degree. As of June 30, 1999,
credit enhancement assets totaled $494.9 million. Depending on the Company's
growth, credit enhancement assets may become a larger share of the Company's
overall assets.
The Company is required to deposit substantial amounts of the cash flows
generated by its interests in Company sponsored securitizations ("restricted
cash") into spread accounts which are pledged to FSA as security for the
Company's obligation to reimburse FSA for any amounts which may be paid out on
financial guarantee insurance policies.
The Company regularly measures its default, prepayment and other assumptions
against the actual performance of securitized receivables. If the Company were
to determine, as a result of such regular review or otherwise, that it
underestimated defaults and/or prepayments, or that any other material
assumptions were inaccurate, the Company would be required to adjust the
carrying value of its credit enhancement assets, which consist of restricted
cash, investments in trust receivables and interest-only receivables, by
recording a charge to income and writing down the carrying value of these
assets on its balance sheet. Future cash flows from securitization trusts may
also be less than expected and the Company's results of operations and
liquidity would be adversely affected, possibly to a material degree. In
addition, an increase in defaults or prepayments would reduce the size of the
Company's servicing portfolio, which would reduce the Company's servicing fee
income, further adversely affecting results of operations and cash flow. A
material write-down of credit enhancement assets and the corresponding
decreases in earnings and cash flow could limit the Company's ability to
service debt and to enter into future securitizations and other financings.
Although the Company believes that it has made reasonable assumptions as to
the future cash flows of the various pools of receivables that have been sold
in securitization transactions, actual rates of default or prepayment may
differ from those assumed and other assumptions may be required to be revised
upon future events.
Portfolio Performance; Negative Impact on Cash Flows; Right to Terminate
Normal Servicing. Generally, the form of credit enhancement agreement the
Company enters into in connection with securitization transactions contains
specified limits on the delinquency, default and loss rates on the receivables
included in each securitization trust. If, at any measurement date, the
delinquency, default or loss rate with respect to any trust were to exceed the
specified limits, provisions of the credit enhancement agreement would
automatically increase the level of credit enhancement requirements for that
trust. During the period in which the specified delinquency, default and loss
rates were exceeded, excess cash flow, if any, from the trust would be used to
fund the increased credit enhancement levels instead of being distributed to
the Company, which would have an adverse effect on the Company's cash flow.
Further, the credit enhancement requirements for each securitization trust are
cross-collateralized to the credit enhancement requirements established in
connection with each of the Company's other securitization trusts, so that
excess cash flow from a performing securitization trust insured by FSA may be
used to support increased credit enhancement requirements for a non-performing
securitization trust insured by FSA, which would further restrict excess cash
flow available to the Company. The Company has on occasion exceeded these
specified limits, however, FSA has either waived each of these occurrences or
amended the agreements. The Company can give no assurance that FSA would waive
any such future occurrence or amend the agreements. Any refusal of FSA to
waive any such future occurrence or amend the agreements could have a material
adverse effect on the Company's financial position, liquidity and results of
operations.
13
The credit enhancement agreements entered into in connection with
securitization transactions contain additional specified limits on the
delinquency, default and loss rates on the receivables included in each trust
which are higher than the limits referred to in the preceding paragraph. If,
at any measurement date, the delinquency, default or loss rate with respect to
any trust were to exceed these additional specified limits applicable to that
trust, provisions of the credit enhancement agreements permit FSA to terminate
the Company's servicing rights to the receivables sold to that trust. In
addition, the servicing agreements are cross-defaulted so that a default under
one servicing agreement would allow FSA to terminate the Company's servicing
rights under all of its servicing agreements. Although the Company has never
exceeded such delinquency, default or loss rates, there can be no assurance
that the Company's servicing rights with respect to the automobile receivables
in such trusts or any other trust which exceeds the specified limits in future
periods will not be terminated. FSA has other rights to terminate the Company
as servicer if (i) the Company were to breach its obligations under the
servicing agreements, (ii) FSA was required to make payments under its
policies or (iii) certain bankruptcy or insolvency events were to occur. As of
June 30, 1999, no such termination events have occurred with respect to any of
the trusts formed by the Company.
Reliance on Revenue Generated from the Sale of Loans to Trusts. The Company
periodically sells auto receivables to certain special purpose financing
trusts and these trusts in turn issue asset-backed securities to investors.
The Company retains an interest in the receivables sold in the form of a
residual or interest-only strip and may also retain other subordinated
interests in the receivables sold to the trusts. The residual or interest-only
strips represent the present value of future excess cash flows resulting from
the difference between the finance charge income received from the obligors on
the receivables and the interest paid to the investors in the asset-backed
securities, net of credit losses, servicing fees and other expenses.
Upon the transfer of receivables to the trusts the Company removes the net
book value of the receivables sold from its consolidated balance sheets and
allocates the carrying value between the assets transferred and the interests
retained, based upon their relative fair values at the settlement date. The
difference between the sales proceeds, net of transaction costs and the
allocated basis of the assets transferred is recognized as a gain on sale of
receivables.
For the year ended June 30, 1999, the Company recognized a gain on sale of
auto receivables of $162.4 million or approximately 48% of revenue during that
period. If the Company is unable to originate new loans and sell them to the
trusts, the Company could experience a significant change in the timing of
revenue recognition and reported income. Further, there can be no assurance
that the Company will recognize gains on future sales of receivables to the
trusts consistent with the gains on previous sales.
Implementation of Business Strategy. The Company's financial position and
results of operations depend on Company management's ability to execute its
business strategy. Key factors involved in execution of such business strategy
include continued expansion of automobile contract purchase volume, continued
and successful use of proprietary scoring models for risk-based pricing, the
use of sophisticated risk management techniques, continued investment in
technology to support operating efficiency and growth and funding and
liquidity through securitizations. The failure or inability of the Company to
execute any element of its business strategy could materially adversely affect
its financial position, liquidity and results of operations.
The Company's business strategy also includes leveraging its expertise to
broaden its lending to non-prime borrowers through the operations of AMS.
The Company plans to expand its indirect automobile finance business by
adding additional branch offices and by increasing the dealer penetration of
the Company's existing branch offices. The success of this strategy is
dependent upon, among other factors, the Company's ability to hire and retain
qualified branch managers and other personnel, to develop relationships with
more dealers and to expand the Company's current relationships with existing
dealer customers. The Company is faced with intense competition in attracting
key personnel and establishing relationships with new dealers. Dealers often
already have favorable non-prime financing sources, which may restrict the
Company's ability to develop dealer relationships and delay the Company's
growth. In addition, the competitive conditions in the Company's market may
result in a reduction in the profitability of the
14
contracts that the Company purchases or a decrease in contract acquisition
volume, which would adversely affect the Company's results of operations.
The growth of the Company's servicing portfolio has resulted in increased
need for additional personnel and expansion of systems capacity. The Company's
ability to support, manage and control growth is dependent upon, among other
things, the Company's ability to hire, train, supervise and manage its growing
workforce. There can be no assurance that the Company will have trained
personnel and systems adequate to support the Company's growth strategy.
Credit-Impaired Borrowers. The Company specializes in purchasing,
securitizing and servicing non-prime automobile receivables. Non-prime
borrowers are associated with higher-than-average delinquency and default
rates. While the Company believes that it effectively manages these risks with
its proprietary credit scoring system, risk-based loan pricing and other
underwriting policies and collection methods, no assurance can be given that
these criteria or methods will be effective in the future. In the event that
the Company underestimates the default risk or under-prices contracts that it
purchases, the Company's financial position, liquidity and results of
operations would be adversely affected, possibly to a material degree.
Economic Conditions. Delinquencies, defaults, repossessions and losses
generally increase during periods of economic recession. These periods also
may be accompanied by decreased consumer demand for automobiles and declining
values of automobiles securing outstanding loans, which weakens collateral
coverage and increases the amount of a loss in the event of default.
Significant increases in the inventory of used automobiles during periods of
economic recession may also depress the prices at which repossessed
automobiles may be sold or delay the timing of these sales. Because the
Company focuses on non-prime borrowers, the actual rates of delinquencies,
defaults, repossessions and losses on these loans could be higher than those
experienced in the general automobile finance industry and could be more
dramatically affected by a general economic downturn. In addition, during an
economic slow down or recession, the Company's servicing costs may increase
without a corresponding increase in its servicing fee income. While the
Company believes that the underwriting criteria and collection methods it
employs enable it to manage the higher risk inherent in loans made to non-
prime borrowers, no assurance can be given that such criteria or methods will
afford adequate protection against such risks. Any sustained period of
increased delinquencies, defaults, repossessions or losses or increased
servicing costs could also adversely affect the Company's ability to enter
into future securitizations and correspondingly, its financial position,
liquidity and results of operations.
Interest Rates. The Company's profitability may be directly affected by the
level of and fluctuations in interest rates, which affect the Company's
ability to earn a gross interest rate spread. As the level of interest rates
increase, the Company's gross interest rate spread will generally decline
since the rates charged on the contracts purchased from dealers are limited by
statutory maximums, affording the Company little opportunity to pass on
increased interest costs. Furthermore, the Company's future gains recognized
upon the securitization of automobile receivables will also be affected by
interest rates. The Company recognizes a gain in connection with its
securitizations based upon the estimated present value of projected future
excess cash flows from the securitization Trusts, which is largely dependent
upon the gross interest rate spread. The Company believes that its
profitability and liquidity would be adversely affected during any period of
higher interest rates, possibly to a material degree. The Company monitors the
interest rate environment and employs pre-funding or other hedging strategies
designed to mitigate the impact of changes in interest rates. There can be no
assurance, however, that pre-funding or other hedging strategies will mitigate
the impact of changes in interest rates.
Labor Market Conditions. Low unemployment rates driven by economic growth
and the continued expansion of consumer credit markets could contribute to an
increase in the Company's employee turnover rate. High turnover or an
inability to attract and retain qualified replacement personnel could have an
adverse effect on the Company's delinquency, default and net loss rates and,
ultimately, the Company's financial condition, results of operations and
liquidity.
Competition. Reference should be made to Item 1. "Business--Automobile
Finance Operations--Competition" for a discussion of competitive risk factors.
15
Regulation. Reference should be made to Item 1. "Business--Automobile
Finance Operations--Regulation" for a discussion of regulatory risk factors.
Year 2000 Issue
The year 2000 issue is the result of computer programs and embedded hardware
systems having been developed using two digits rather than four to define the
applicable year. These computer programs or hardware that have date-sensitive
software or embedded chips may use a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions or failure to the Company's operations including, among
other things, a temporary inability to transact new business or communicate
with its customers. The Company has substantially completed its year 2000
compliance review, which included obtaining certifications from third party
software vendors regarding the year 2000 compliance of their software
applications, testing the Company's core operating systems and identifying and
repairing any problems. The Company believes that it is year 2000 compliant.
However, the Company may experience degradation in the performance of its
systems or complete system failure if its assessment is erroneous or if the
Company encounters unforeseen difficulties. Any of these events, whether
occurring in the Company's systems or the systems of others, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Employees
At June 30, 1999, the Company employed 2,241 persons in 41 states and two
Canadian provinces. None of the Company's employees are a part of a collective
bargaining agreement and the Company's relationships with employees are
satisfactory.
Executive Officers
The following sets forth certain data concerning the executive officers of
the Company as of June 30, 1999.
Name Age Position
---- --- --------
Clifton H. Morris, Jr... 63 Chairman of the Board and Chief Executive Officer
Michael R. Barrington... 40 Vice Chairman of the Board, President and Chief
Operating Officer
Daniel E. Berce......... 45 Vice Chairman of the Board and Chief Financial
Officer
Edward H. Esstman....... 58 Executive Vice President--Auto Finance Division;
President and Chief Operating Officer of
AmeriCredit Financial Services, Inc. and Director
Chris A. Choate......... 36 Senior Vice President, General Counsel and Secretary
Joseph E. McClure....... 51 Executive Vice President and Chief Information
Officer
Cheryl L. Miller........ 35 Executive Vice President, Director of Collections
and Customer Service of AmeriCredit Financial
Services, Inc.
Michael T. Miller....... 37 Executive Vice President and Chief Credit Officer
Preston A. Miller....... 35 Executive Vice President and Treasurer
Cinde C. Perales........ 38 Executive Vice President and Director of Loan
Services of AmeriCredit Financial Services, Inc.
CLIFTON H. MORRIS, JR. has been Chairman of the Board and Chief Executive
Officer of the Company since May 1988, and was also President of the Company
from such date until April 1991 and from April 1992 to November 1996. Mr.
Morris is also a director of Service Corporation International, a publicly
held company which owns and operates funeral homes and related businesses, and
Cash America International Inc., a publicly held pawn brokerage company.
MICHAEL R. BARRINGTON has been Vice Chairman, President and Chief Operating
Officer of the Company since November 1996 and was Executive Vice President
and Chief Operating Officer of the Company from November 1994 until November
1996. Mr. Barrington was a Vice President of the Company from May
16
1991 until November 1994. From its formation in July 1992 until November 1996,
Mr. Barrington was also the President and Chief Operating Officer of AFSI.
DANIEL E. BERCE has been Vice Chairman and Chief Financial Officer of the
Company since November 1996 and was Executive Vice President, Chief Financial
Officer and Treasurer for the Company from November 1994 until November 1996.
Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the
Company from May 1991 until November 1994. Mr. Berce is also a director of
INSpire Insurance Solutions Inc., a publicly held company, which provides
policy and claims administration services to the property and casualty
insurance industry.
EDWARD H. ESSTMAN has been President and Chief Operating Officer of AFSI
since November 1996. Mr. Esstman was Executive Vice President, Director of
Consumer Finance Operations of AFSI from November 1994 until November 1996 and
was Senior Vice President, Director of Consumer Finance of AFSI from AFSI's
formation in July 1992 until November 1994. Mr. Esstman has also been
Executive Vice President--Auto Finance Division for the Company since November
1996 and Senior Vice President and Chief Credit Officer for the Company from
November 1994 until November 1996.
CHRIS A. CHOATE has been Senior Vice President, General Counsel and
Secretary of the Company since November 1996 and was Vice President, General
Counsel and Secretary of the Company from November 1994 until November 1996
and General Counsel and Secretary of the Company from January 1993 until
November 1994. From July 1991 until January 1993, Mr. Choate was Assistant
General Counsel.
JOSEPH E. McCLURE has been Executive Vice President, Chief Information
Officer of the Company since April 1999 and was Senior Vice President, Chief
Information Officer from October 1998 until April 1999. Prior to that, Mr.
McClure was Executive Vice President, Division Information Officer of
Associates First Capital Corp. and was in that position for more than five
years.
CHERYL L. MILLER has been Executive Vice President, Director of Collections
and Customer Service of AFSI since July 1998 and was Senior Vice President,
Director of Collections and Customer Service of AFSI from March 1996 until
July 1998 and Vice President, Director of Collections and Customer Service of
AFSI from October 1994 until March 1996. From May 1994 until October 1994, Ms.
Miller acted in other management capacities for AFSI. Prior to that, Ms.
Miller was with Ford Motor Credit Company, most recently as customer service
supervisor of the Dallas branch.
MICHAEL T. MILLER has been Executive Vice President and Chief Credit Officer
since July 1998 and was Senior Vice President and Chief Credit Officer of the
Company from November 1996 until July 1998. Mr. Miller was Senior Vice
President, Risk Management, Credit Policy and Planning and Chief of Staff of
AFSI from November 1994 until November 1996 and Vice President, Risk
Management, Credit Policy and Planning of AFSI from AFSI's formation in July
1992 until November 1994. Michael T. Miller is the brother of
Cheryl L. Miller.
PRESTON A. MILLER has been Executive Vice President and Treasurer of the
Company since July 1998 and was Senior Vice President and Treasurer of the
Company from November 1996 until July 1998. Mr. Miller was Vice President and
Controller of the Company from November 1994 until November 1996 and was
Controller of the Company from September 1989 until November 1994.
CINDE C. PERALES has been Executive Vice President, Director of Loan
Services of AFSI since July 1998 and was Senior Vice President, Director of
Loan Services of AFSI from March 1996 until July 1998 and Vice President,
Director of Loan Services of AFSI from October 1992 until March 1996.
ITEM 2. PROPERTIES
The Company's executive offices are located at 801 Cherry Street, Suite
3900, Fort Worth, Texas, in a 113,000 square foot leased office space under a
12 year lease that commenced in July 1999. This building is
17
utilized by the Company for branch office support and administrative
activities. The Company also leases 67,000 square feet of office space in
Tempe, Arizona under a ten year agreement with renewal options, 56,000 square
feet of office space in Charlotte, North Carolina under a ten year agreement
with renewal options and 250,000 square feet of office space in Arlington,
Texas under a five year agreement. These facilities are used primarily for
loan servicing and collections activities.
The Company's executive offices were formerly located in a 43,000 square
foot building purchased in 1994. The Company intends to sell this building.
The Company's branch office facilities are generally leased under agreements
with original terms of three to five years. Such facilities are typically
located in a suburban office building and consist of between 1,000 and 2,000
square feet of space.
ITEM 3. LEGAL PROCEEDINGS
As a consumer finance company, the Company is subject to various consumer
claims and litigation seeking damages and statutory penalties based upon,
among other things, usury, disclosure inaccuracies, wrongful repossession,
fraud and discriminatory treatment of credit applicants, which could take the
form of a plaintiffs' class action complaint. The Company, as the assignee of
finance contracts originated by dealers, may also be named as a co-defendant
in lawsuits filed by consumers principally against dealers. The damages and
penalties claimed by consumers in these types of matters can be substantial.
The relief requested by the plaintiffs varies but includes requests for
compensatory, statutory and punitive damages. One proceeding in which the
Company is a defendant has been brought as a putative class action and is
pending in the State of California. A class has yet to be certified in this
case, in which the plaintiffs allege certain defects in post-repossession
notice forms in the State of California and no court date has been set, nor
are any hearings presently scheduled.
Management believes that the Company has taken prudent steps to address the
litigation risks associated with the Company's business activities. However,
there can be no assurance that the Company will be able to successfully defend
against all such claims or that the determination of any such claim in a
manner adverse to the Company would not have a material adverse effect on the
Company's automobile finance business.
On April 8, 1999, a putative class action complaint was filed against the
Company and certain of the Company's officers and directors alleging
violations of Section 10(b) of the Securities Exchange Act of 1934 arising
from the Company's use of the cash-in method of measuring and accounting for
credit enhancement assets in the financial statements for the second, third
and fourth quarters of fiscal year 1997, fiscal year 1998 and the first
quarter of fiscal year 1999. The Company believes that its previous use of the
cash-in method of measuring and accounting for credit enhancement assets was
consistent with then current generally accepted accounting principles and
accounting practices of other finance companies. As required by the Financial
Accounting Standards Board's Special Report, "A Guide to Implementation of
Statement 125 on Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities, Second Edition," dated December 1998 and
related statements made by the staff of the Commission, the Company
retroactively changed the method of measuring and accounting for credit
enhancement assets to the cash-out method and restated the Company's financial
statements for the three months ended September 30, 1998 and the fiscal years
ended June 30, 1998, 1997 and 1996. In the opinion of management, this
litigation is without merit and the Company intends to vigorously defend
against the complaint.
In the opinion of management, the resolution of the proceedings described in
this section will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter ended June 30, 1999.
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company has never paid cash dividends on its common stock. The Company's
warehouse credit facilities and the Indentures pursuant to which the senior
notes were issued contain certain restrictions on the payment of dividends.
The Company presently intends to retain future earnings, if any, for use in
the operation and expansion of the business and does not anticipate paying any
cash dividends in the foreseeable future.
Information contained under the caption "Common Stock Data" in the Annual
Report is incorporated herein by reference in further response to this Item 5.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Summary Financial and Operating
Information" in the Annual Report is incorporated herein by reference in
response to this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information contained under the caption "Financial Review" in the Annual
Report is incorporated herein by reference in response to this Item 7.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information contained under the caption "Financial Review--Interest Rate
Risk" in the Annual Report is incorporated herein by reference in response to
this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company included in the Annual
Report and information contained under the caption "Quarterly Data" in the
Annual Report are incorporated herein by reference in response to this Item 8.
The payment of principal, premium, if any, and interest on the Company's
senior notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are
wholly-owned consolidated subsidiaries of the Company and are jointly,
severally and unconditionally liable for the obligations represented by the
senior notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the
combined Non-Guarantor Subsidiaries provide information that is more
meaningful in understanding the financial position of the Subsidiary
Guarantors than separate financial statements of the Subsidiary Guarantors.
Therefore, the separate financial statements of the Subsidiary Guarantors are
not deemed material.
The following supplementary information presents consolidating financial
data for (i) the Company (on a parent only basis), (ii) the combined
Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an
elimination column for adjustments to arrive at the information for the
Company and its subsidiaries on a consolidated basis and (v) the Company and
its subsidiaries on a consolidated basis as of June 30, 1999 and 1998 and for
each of the three years in the period ended June 30, 1999.
Investments in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment
accounts and earnings. The principal elimination entries set forth below
eliminate investments in subsidiaries and intercompany balances and
transactions.
19
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
June 30, 1999
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash
equivalents............ $ 20,246 $ 943 $ 21,189
Receivables held for
sale, net.............. 256,771 199,238 456,009
Interest-only
receivables from
Trusts................. $ 1,337 190,528 191,865
Investments in Trust
receivables............ 195,598 195,598
Restricted cash......... 107,399 107,399
Property and equipment,
net.................... 349 40,796 41,145
Other assets............ 11,510 30,170 8,602 50,282
Due (to) from
affiliates............. 567,368 (478,520) (88,848)
Investment in
affiliates............. 198,339 118,024 1,050 $(317,413)
-------- --------- -------- --------- ----------
Total assets........ $778,903 $ (12,513) $614,510 $(317,413) $1,063,487
======== ========= ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit
facilities........... $ 20,290 $ 94,369 $ 114,659
Senior notes.......... $375,000 375,000
Other notes payable... 17,874 17,874
Accrued taxes and
expenses............. 16,062 65,902 265 82,229
Deferred income
taxes................ (29,763) (42,016) 145,774 73,995
-------- --------- -------- --------- ----------
Total liabilities... 379,173 44,176 240,408 663,757
-------- --------- -------- --------- ----------
Shareholders' equity:
Common stock.......... 715 203 3 $ (206) 715
Additional paid-in
capital.............. 252,194 108,475 118,840 (227,315) 252,194
Accumulated other
comprehensive
income............... 21,410 21,410 (21,410) 21,410
Retained earnings..... 147,610 (165,367) 233,849 (68,482) 147,610
-------- --------- -------- --------- ----------
421,929 (56,689) 374,102 (317,413) 421,929
Treasury stock.......... (22,199) (22,199)
-------- --------- -------- --------- ----------
Total shareholders'
equity............. 399,730 (56,689) 374,102 (317,413) 399,730
-------- --------- -------- --------- ----------
Total liabilities
and shareholders'
equity............. $778,903 $ (12,513) $614,510 $(317,413) $1,063,487
======== ========= ======== ========= ==========
20
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
June 30, 1998
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
ASSETS
Cash and cash
equivalents............ $ 30,157 $ 2,930 $ 33,087
Receivables held for
sale, net.............. 178,219 164,634 342,853
Interest-only
receivables from
Trusts................. $ (2,151) 3,623 130,222 131,694
Investments in Trust
receivables............ 2,109 96,748 98,857
Restricted cash......... 55,758 55,758
Property and equipment,
net.................... 175 23,210 23,385
Other assets............ 8,911 13,003 6,123 28,037
Due (to) from
affiliates............. 330,924 (226,892) (104,032)
Investment in
affiliates............. 110,623 13,921 2 $(124,546)
-------- --------- -------- --------- --------
Total assets........ $448,482 $ 37,350 $352,385 $(124,546) $713,671
======== ========= ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Warehouse credit
facilities........... $ 24,900 $140,708 $165,608
Senior notes.......... $175,000 175,000
Other notes payable... 6,384 26 6,410
Accrued taxes and
expenses............. (2,280) 53,950 (4,538) 47,132
Deferred income
taxes................ (18,470) (16,637) 66,780 31,673
-------- --------- -------- --------- --------
Total liabilities... 160,634 62,239 202,950 425,823
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock.......... 693 203 3 $ (206) 693
Additional paid-in
capital.............. 230,269 108,336 13,921 (122,257) 230,269
Accumulated other
comprehensive
income............... 7,234 7,234 (7,234) 7,234
Retained earnings..... 72,770 (133,428) 128,277 5,151 72,770
-------- --------- -------- --------- --------
310,966 (24,889) 149,435 (124,546) 310,966
Treasury stock.......... (23,118) (23,118)
-------- --------- -------- --------- --------
Total shareholders'
equity............. 287,848 (24,889) 149,435 (124,546) 287,848
-------- --------- -------- --------- --------
Total liabilities
and shareholders'
equity............. $448,482 $ 37,350 $352,385 $(124,546) $713,671
======== ========= ======== ========= ========
21
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1999
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue
Finance charge
income............... $ 42,302 $ 32,986 $ 75,288
Gain on sale of
receivables.......... $ (6,394) 2,400 173,886 169,892
Servicing fee income.. 120,044 8,539 $ (42,617) 85,966
Other income.......... 39,585 3,428 744 (39,447) 4,310
Equity in income of
affiliates........... 73,633 (73,633)
-------- -------- -------- --------- --------
106,824 168,174 216,155 (155,697) 335,456
-------- -------- -------- --------- --------
Costs and expenses
Operating expenses.... 6,900 201,004 58 (42,617) 165,345
Provision for losses.. 3,979 5,650 9,629
Interest expense...... 22,983 20,097 35,159 (39,447) 38,792
-------- -------- -------- --------- --------
29,883 225,080 40,867 (82,064) 213,766
-------- -------- -------- --------- --------
Income before income
taxes.................. 76,941 (56,906) 175,288 (73,633) 121,690
Income tax provision.... 2,101 (24,967) 69,716 46,850
-------- -------- -------- --------- --------
Net income.............. $ 74,840 $(31,939) $105,572 $ (73,633) $ 74,840
======== ======== ======== ========= ========
22
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1998
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue
Finance charge
income............... $ 39,114 $ 16,723 $ 55,837
Gain on sale of
receivables.......... $(6,729) 1,350 108,573 103,194
Servicing fee income.. 91,682 9,822 $ (53,594) 47,910
Other income.......... 31,029 1,268 741 (30,643) 2,395
Equity in income of
affiliates........... 50,179 (50,179)
------- -------- -------- --------- --------
74,479 133,414 135,859 (134,416) 209,336
------- -------- -------- --------- --------
Costs and expenses
Operating expenses.... 10,800 137,273 5 (53,594) 94,484
Provision for losses.. 7,555 7,555
Interest expense...... 14,776 24,192 18,810 (30,643) 27,135
------- -------- -------- --------- --------
25,576 169,020 18,815 (84,237) 129,174
------- -------- -------- --------- --------
Income before income
taxes.................. 48,903 (35,606) 117,044 (50,179) 80,162
Income tax provision.... (398) (11,148) 42,407 30,861
------- -------- -------- --------- --------
Net income.............. $49,301 $(24,458) $ 74,637 $ (50,179) $ 49,301
======= ======== ======== ========= ========
23
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1997
(Dollars in Thousands)
AmeriCredit
Corp. Guarantors Non-Guarantors Eliminations Consolidated
----------- ---------- -------------- ------------ ------------
Revenue
Finance charge
income............... $ 36,633 $ 8,277 $ 44,910
Gain on sale of
receivables.......... $ (855) 2,939 50,239 52,323
Servicing fee income.. 56,343 6,230 $(39,081) 23,492
Other income.......... 18,348 1,280 914 (17,911) 2,631
Equity in income of
affiliates........... 24,119 (24,119)
------- -------- ------- -------- --------
41,612 97,195 65,660 (81,111) 123,356
------- -------- ------- -------- --------
Costs and expenses
Operating expenses.... 5,282 83,997 1,717 (39,081) 51,915
Provision for losses.. 6,595 6,595
Interest expense...... 5,116 17,202 11,905 (17,911) 16,312
------- -------- ------- -------- --------
10,398 107,794 13,622 (56,992) 74,822
------- -------- ------- -------- --------
Income before income
taxes.................. 31,214 (10,599) 52,038 (24,119) 48,534
Income tax provision.... 1,365 (2,481) 19,801 18,685
------- -------- ------- -------- --------
Net income.............. $29,849 $ (8,118) $32,237 $(24,119) $ 29,849
======= ======== ======= ======== ========
24
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1999
(Dollars in Thousands)
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ----------- ----------- ------------ ------------
Cash flows from
operating activities
Net income............. $ 74,840 $ (31,939) $ 105,572 $ (73,633) $ 74,840
Adjustments to
reconcile net income
to net cash provided
by operating
activities
Depreciation and
amortization.......... 41 12,604 12,645
Provision for losses... 3,979 5,650 9,629
Deferred income taxes.. (1,375) (25,379) 70,118 43,364
Non-cash servicing fee
income................ (12,525) (12,525)
Non-cash gain on sale
of auto receivables... (157,757) (157,757)
Distributions from
Trusts................ 44,531 44,531
Equity in income of
affiliates............ (73,633) 73,633
Changes in assets and
liabilities
Other assets........... 3,304 (11,950) 2,469 (6,177)
Accrued taxes and
expenses.............. 18,342 11,952 4,803 35,097
--------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities.. 21,519 (40,733) 62,861 43,647
--------- ----------- ----------- ----------- -----------
Cash flows from
investing activities
Purchases of auto
receivables........... (2,868,633) (2,783,160) 2,783,160 (2,868,633)
Originations of
mortgage receivables.. (297,535) (297,535)
Principal collections
and recoveries on
receivables........... 6,381 15,143 21,524
Net proceeds from sale
of auto receivables... 2,783,160 2,727,763 (2,783,160) 2,727,763
Net proceeds from sale
of mortgage
receivables........... 294,096 294,096
Initial deposits to
restricted cash (82,750) (82,750)
Return of deposits from
restricted cash....... 23,000 23,000
Purchases of property
and equipment......... (215) (14,513) (14,728)
Change in other
assets................ (5,514) (4,948) (10,462)
Net change in
investment in
affiliates............ 93 (104,103) (1,048) 105,058
--------- ----------- ----------- ----------- -----------
Net cash used by
investing activities.. (122) (206,661) (106,000) 105,058 (207,725)
--------- ----------- ----------- ----------- -----------
Cash flows from
financing activities
Net change in warehouse
credit facilities..... (4,610) (46,339) (50,949)
Proceeds from issuance
of senior notes....... 194,097 194,097
Payments on other notes
payable............... (3,890) (26) (3,916)
Proceeds from issuance
of common stock....... 12,948 139 104,919 (105,058) 12,948
Net change in due (to)
from affiliates....... (224,552) 241,980 (17,428)
--------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities.. (21,397) 237,483 41,152 (105,058) 152,180
--------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ (9,911) (1,987) (11,898)
Cash and cash
equivalents at
beginning of year...... 30,157 2,930 33,087
--------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
year................... $ 20,246 $ 943 $ 21,189
========= =========== =========== =========== ===========
25
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1998
(Dollars in Thousands)
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ----------- ----------- ------------ ------------
Cash flows from
operating activities
Net income............. $ 49,301 $ (24,458) $ 74,637 $ (50,179) $ 49,301
Adjustments to
reconcile net income
to net cash provided
by operating
activities
Depreciation and
amortization.......... 50 4,448 4,498
Provision for losses... 7,555 7,555
Deferred income taxes.. 390 (11,826) 42,410 30,974
Non-cash servicing fee
income................ (10,867) (10,867)
Non-cash gain on sale
of auto receivables... (96,405) (96,405)
Distributions from
Trusts................ 43,807 43,807
Equity in income of
affiliates............ (50,179) 50,179
Changes in assets and
liabilities
Other assets........... (420) (739) (2,165) (3,324)
Accrued taxes and
expenses.............. (10,368) 25,963 (3,321) 12,274
-------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities.. (11,226) 943 48,096 37,813
-------- ----------- ----------- ----------- -----------
Cash flows from
investing activities
Purchases of auto
receivables........... (1,713,582) (1,777,748) 1,777,748 (1,713,582)
Originations of
mortgage receivables.. (137,169) (137,169)
Principal collections
and recoveries on
receivables........... 8,560 28,787 37,347
Net proceeds from sale
of auto receivables... 1,777,748 1,609,970 (1,777,748) 1,609,970
Net proceeds from sale
of mortgage
receivables........... 119,683 119,683
Initial deposits to
restricted cash....... (56,725) (56,725)
Purchases of property
and equipment......... 11 (9,467) (9,456)
Change in other
assets................ 5,000 64 5,064
Net change in
investment in
affiliates............ (9,998) (3,921) (2) 13,921
-------- ----------- ----------- ----------- -----------
Net cash used by
investing activities.. (4,987) 41,852 (195,654) 13,921 (144,868)
-------- ----------- ----------- ----------- -----------
Cash flows from
financing activities
Net change in warehouse
credit facilities..... (47,145) 140,708 93,563
Proceeds from issuance
of senior notes....... 47,762 47,762
Payments on other notes
payable............... (1,346) (7) (23,689) (25,042)
Proceeds from issuance
of common stock....... 17,832 13,921 (13,921) 17,832
Net change in due (to)
from affiliates....... (48,035) 30,526 17,509
-------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities.. 16,213 (16,626) 148,449 (13,921) 134,115
-------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 26,169 891 27,060
Cash and cash
equivalents at
beginning of year...... 3,988 2,039 6,027
-------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
year................... $ 30,157 $ 2,930 $ 33,087
======== =========== =========== =========== ===========
26
AMERICREDIT CORP.
SUPPLEMENTARY INFORMATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1997
(Dollars in Thousands)
AmeriCredit Non-
Corp. Guarantors Guarantors Eliminations Consolidated
----------- ---------- ---------- ------------ ------------
Cash flows from
operating activities
Net income............. $ 29,849 $ (8,118) $ 32,237 $ (24,119) $ 29,849
Adjustments to
reconcile net income
to net cash provided
by operating
activities............
Depreciation and
amortization.......... 28 2,175 2,203
Provision for losses... 6,595 6,595
Deferred income taxes.. 135 (1,048) 19,799 18,886
Non-cash servicing fee
income................ (7,991) (7,991)
Non-cash gain on sale
of auto receivables... (52,534) (52,534)
Distributions from
Trusts................ 19,347 19,347
Equity in income of
affiliates............ (24,119) 24,119
Changes in assets and
liabilities
Other assets........... 917 (3,083) (175) (2,341)
Accrued taxes and
expenses.............. 4,835 18,278 (1,124) 21,989
--------- --------- --------- --------- ---------
Net cash provided by
operating activities.. 11,645 (37,735) 62,093 36,003
--------- --------- --------- --------- ---------
Cash flows from
investing activities
Purchases of auto
receivables........... (869,975) (814,107) 814,107 (869,975)
Originations of
mortgage receivables.. (53,770) (53,770)
Principal collections
and recoveries on
receivables........... (4,064) 56,224 52,160
Net proceeds from sale
of auto receivables... 814,107 799,600 (814,107) 799,600
Net proceeds from sale
of mortgage
receivables........... 52,489 52,489
Initial deposits to
restricted cash....... (71,400) (71,400)
Purchases of property
and equipment......... (81) (4,430) (4,511)
Change in other
assets................ 58 2,402 2,460
Net change in
investment in
affiliates............ 25,605 (22,981) (2,624)
--------- --------- --------- --------- ---------
Net cash used by
investing activities.. 25,582 (88,624) (29,905) (92,947)
--------- --------- --------- --------- ---------
Cash flows from
financing activities
Net change in warehouse
credit facilities..... (17,264) (17,264)
Proceeds from issuance
of senior notes....... 120,894 120,894
Payments on other notes
payable............... (552) (44,158) (44,710)
Proceeds from issuance
of common stock....... 6,293 6,293
Purchase of treasury
stock................. (4,387) (4,387)
Net change in due (to)
from affiliates....... (154,562) 147,698 6,864
--------- --------- --------- --------- ---------
Net cash provided by
financing activities.. (32,314) 130,434 (37,294) 60,826
--------- --------- --------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents............ 4,913 4,075 (5,106) 3,882
Cash and cash
equivalents at
beginning of year...... (4,913) (87) 7,145 2,145
--------- --------- --------- --------- ---------
Cash and cash
equivalents at end of
year................... $ 3,988 $ 2,039 $ 6,027
========= ========= ========= ========= =========
27
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION
Board of Directors and Shareholders
AmeriCredit Corp.
Our report on the audits of the consolidated financial statements of
AmeriCredit Corp. as of June 30, 1999 and 1998 and for the three years ended
June 30, 1999, 1998 and 1997 has been incorporated by reference in this Form
10-K from page 38 of the 1999 Annual Report to Shareholders of AmeriCredit
Corp. These audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The related financial statement
schedules are presented for purposes of additional analysis and are not a
required part of the basic financial statements. Such supplementary
information has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the financial statements
taken as a whole.
PricewaterhouseCoopers LLP
Fort Worth, Texas
August 4, 1999
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company had no disagreements on accounting or financial disclosure
matters with its independent accountants to report under this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Election of Directors" in the Proxy
Statement is incorporated herein by reference in response to this Item 10. See
Item 1. "Business--Executive Officers" for information concerning executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the captions "Executive Compensation" and
"Election of Directors" in the Proxy Statement is incorporated herein by
reference in response to this Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the caption "Principal Shareholders and Stock
Ownership of Management" in the Proxy Statement is incorporated herein by
reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Related Party Transactions" in the
Proxy Statement is incorporated herein by reference in response to this Item
13.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(1) The following Consolidated Financial Statements of the Company and Report
of Independent Accountants are contained in the Annual Report and are
incorporated herein by reference.
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1999 and 1998.
Consolidated Statements of Income and Comprehensive Income for the years
ended June 30, 1999, 1998 and 1997.
Consolidated Statements of Shareholders' Equity for the years ended June
30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended June 30, 1999,
1998 and 1997.
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) Consolidating financial information for AmeriCredit Corp. (on a parent
only basis), the combined Subsidiary Guarantors and the combined Non-
Guarantor Subsidiaries is included herein under Item 8.
(3) All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are either not
required under the related instructions, are inapplicable, or the required
information is included elsewhere in the Consolidated Financial Statements
and incorporated herein by reference.
(4) The exhibits filed in response to Item 601 of Regulation S-K are listed in
the Index to Exhibits.
(5) A report on Form 8-K dated April 12, 1999 was filed with the Commission to
report under Item 5, the offering of $125 million aggregate principal
amount of senior notes to certain qualified institutional buyers.
A report on Form 8-K dated April 21, 1999 was filed with the Commission to
report under Item 5, the issuance of $200 million of 9.875% Senior Notes
due 2006.
Certain subsidiaries and affiliates of the Company filed reports on Form 8-
K during the quarterly period ended June 30, 1999 reporting monthly
information related to securitization trusts.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on September 21,
1999.
AmeriCredit Corp.
/s/ Clifton H. Morris, Jr.
By: _________________________________
Clifton H. Morris, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Clifton H. Morris, Jr. Chairman of the Board and September 21, 1999
______________________________________ Chief Executive Officer
Clifton H. Morris, Jr.
/s/ Daniel E. Berce Vice Chairman and Chief September 21, 1999
______________________________________ Financial Officer
Daniel E. Berce
/s/ Michael R. Barrington Vice Chairman, President September 21, 1999
______________________________________ and Chief Operating
Michael R. Barrington Officer
/s/ Edward H. Esstman Executive Vice President, September 21, 1999
______________________________________ Auto Finance Division and
Edward H. Esstman Director
/s/ A. R. Dike Director September 21, 1999
______________________________________
A. R. Dike
/s/ James H. Greer Director September 21, 1999
______________________________________
James H. Greer
/s/ Douglas K. Higgins Director September 21, 1999
______________________________________
Douglas K. Higgins
/s/ Kenneth H. Jones, Jr. Director September 21, 1999
______________________________________
Kenneth H. Jones, Jr.
31
INDEX TO EXHIBITS
The following documents are filed as a part of this report. Those exhibits
previously filed and incorporated herein by reference are identified by the
numbers in parenthesis under the Exhibit Number column. Documents filed with
this report are identified by the symbol "@" under the Exhibit Number column.
Exhibit No. Description
- ----------- -----------
3.1 (1) - Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of
Incorporation, filed August 24, 1988 (Exhibit 3.1)
3.2 (1) - Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2)
3.3 (5) - Articles of Amendment to Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3)
3.4 (8) - Bylaws of the Company, as amended (Exhibit 3.4)
4.1 (4) - Specimen stock certificate evidencing the Common Stock (Exhibit 4.1)
4.2 (10) - Rights Agreement, dated August 28, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C.
(Exhibit 1)
4.2.1 (17) - Amendment No. 1 to Rights Agreement, dated September 9, 1999, between the Company and ChaseMellon Shareholder
Services, L.L.C. (Exhibit 4.1)
4.3 (16) - Indenture, dated as of April 20, 1999, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA,
with form of 9.875% Senior Notes due 2006 (Exhibit 4.3)
10.1 (1) - 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5)
10.2 (2) - Amendment No. 1 to the 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 4.6)
10.3 (3) - 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14)
10.4 (4) - 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10)
10.5 (4) - 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11)
10.6 (4) - Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit
10.18)
10.6.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Clifton H. Morris,
Jr. (Exhibit 10.7.1)
10.7 (4) - Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit
10.19)
10.7.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Michael R.
Barrington (Exhibit 10.8.1)
10.8 (4) - Executive Employment Agreement, dated January 30, 1991 between the Company and Daniel E. Berce (Exhibit 10.20)
10.8.1 (8) - Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Daniel E. Berce
(Exhibit 10.9.1)
10.9 (8) - Amended and Restated Employment Agreement, dated October 15, 1996, between the Company and Edward H. Esstman
(Exhibit 10.10)
10.9.1 (8) - Amendment No. 1 to Amended and Restated Employment Agreement, dated May 1, 1997, between the Company and Edward
H. Esstman (Exhibit 10.10.1)
10.10 (8) - Amended and Restated Employment Agreement, dated July 1, 1997, between the Company and Michael T. Miller (Exhibit
10.11)
10.10.1(14) - Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 1, 1998, between the Company and
Michael T. Miller
32
INDEX TO EXHIBITS
(Continued)
10.11 (11) - Sale and Servicing Agreement, dated as of October 8, 1997, between CP Funding Corp., AmeriCredit Financial
Services, Inc. and The Chase Manhattan Bank (Exhibit 10.2)
10.11.1(16) - Amendment No. 1 to Sale and Servicing Agreement, dated as of September 29, 1998, between CP Funding Corp.,
AmeriCredit Financial Services, Inc. and The Chase Manhattan Bank (Exhibit 10.11.1)
10.12 (11) - Funding Agreement, dated as of October 8, 1997, between CP Funding Corp., Park Avenue Receivables Corporation,
The Chase Manhattan Bank and other financial institutions named therein (Exhibit 10.3)
10.12.1(16) - Extension, Consent and Amendment Agreement, dated as of September 29, 1998, between CP Funding Corp., Park Avenue
Receivables Corporation, The Chase Manhattan Bank and other financial institutions named therein (Exhibit
10.12.1)
10.13 (11) - Restated Revolving Credit Agreement, dated October 3, 1997, between AmeriCredit Corp. and subsidiaries and Wells
Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named therein (Exhibit 10.1)
10.13.1(14) - First Amendment to Restated Revolving Credit Agreement, dated January 21, 1998, between AmeriCredit Corp. and
subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named
therein (Exhibit 10.13.1)
10.13.2(14) - Second Amendment to Restated Revolving Credit Agreement, dated April 30, 1998, between AmeriCredit Corp. and
subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A. and other banks named
therein (Exhibit 10.13.2)
10.13.3(14) - Third Amendment to Restated Revolving Credit Agreement, dated August 31, 1998, between AmeriCredit Corp. and
subsidiaries and Wells Fargo Bank (Texas), National Association and other banks named therein (Exhibit 10.13.3)
10.13.4(16) - Fourth Amendment to Restated Revolving Credit Agreement, dated April 1, 1999, between AmeriCredit Corp. and
subsidiaries and Wells Fargo Bank (Texas), National Association and other banks named therein (Exhibit 10.13.4)
10.14 (12) - Indenture, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA, with
respect to Series A and Series B 9 1/4 % Senior Notes due 2004 (Exhibit 10.2)
10.15 (12) - Purchase Agreement , dated January 30, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc.,
Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.3)
10.16 (12) - A/B Exchange Registration Rights Agreement, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries
and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc., and Wheat First Butcher Singer (Exhibit 10.4)
10.17 (6) - 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp.
10.18 (9) - Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp.
10.19 (7) - 1996 Limited Stock Option Plan for AmeriCredit Corp.
10.20 (13) - Indenture, dated January 29, 1998, between AmeriCredit Corp. and subsidiaries and Bank One, N.A., with respect to
Series C and Series D 9 1/4 % Senior Notes due 2004 (Exhibit 10.24)
10.21 (13) - Purchase Agreement, dated January 26, 1998, between AmeriCredit Corp. and subsidiaries and Salomon Brothers, Inc.
and Credit Suisse First Boston Corporation (Exhibit 10.25)
10.22 (13) - C/D Exchange Registration Rights Agreement, dated as of January 29, 1998, between AmeriCredit Corp. and
subsidiaries and Salomon Brothers, Inc., and Credit Suisse First Boston Corporation (Exhibit 10.26)
10.23 (15) - 1998 Limited Stock Option Plan for AmeriCredit Corp.
33
INDEX TO EXHIBITS
(Continued)
10.24 (16) - Receivables Financing Agreement, dated as of March 31, 1999, among AmeriCredit Warehouse Trust, AmeriCredit
Financial Services, Inc., AmeriCredit Funding Corp., Americredit Corporation of California, Credit Suisse First
Boston, New York Branch, and Bank One, N.A. (Exhibit 10.24)
10.25 (16) - Master Receivables Purchase Agreement, dated as of March 31, 1999, among AmeriCredit Financial Services, Inc.,
AmeriCredit Funding Corp., Americredit Corporation of California and Bank One, N.A. (Exhibit 10.25)
10.26 (16) - Security and Collateral Agent Agreement, dated as of March 31, 1999, among Credit Suisse First Boston, New York
Branch, Bank One, N.A., AmeriCredit Financial Services, Inc. and AmeriCredit Warehouse Trust (Exhibit 10.26)
10.27 (16) - Purchase Agreement, dated as of April 15, 1999, between AmeriCredit Corp. and subsidiaries and Salomon Smith
Barney Inc., Bear, Stearns & Co. Inc. and ING Baring Furman Selz LLC (Exhibit 10.27)
10.28 (16) - A/B Exchange Registration Rights Agreement, dated as of April 20, 1999, between AmeriCredit Corp. and
subsidiaries and Salomon Smith Barney Inc., Bear, Stearns & Co. Inc., and ING Baring Furman Selz LLC (Exhibit
10.28)
11.1 (@) - Statement Re Computation of Per Share Earnings
12.1 (@) - Statement Re Computation of Ratios
13.1 (@) - 1999 Annual Report to Shareholders of the Company
21.1 (@) - Subsidiaries of the Company
23.1 (@) - Consent of PricewaterhouseCoopers LLP
27.1 (@) - Financial Data Schedule
(1) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-31220 on Form S-1 filed by the Company with
the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-41203 on Form S-8 filed by the Company with
the Securities and Exchange Commission.
(3) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1990
filed by the Company with the Securities and Exchange Commission.
(4) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1991,
filed by the Company with the Securities and Exchange Commission.
(5) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1993,
filed by the Company with the Securities and Exchange Commission.
(6) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1995, filed by the Company with the Securities and Exchange
Commission.
(7) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1996, filed by the Company with the Securities and Exchange
Commission.
(8) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1997,
filed by the Company with the Securities and Exchange Commission.
(9) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1997, filed by the Company with the Securities and Exchange
Commission.
(10) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Report on Form 8-K, dated August 28, 1997, filed by the
Company with the Securities and Exchange Commission.
34
INDEX TO EXHIBITS
(Continued)
(11) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1997 filed by the Company with the Securities and Exchange
Commission.
(12) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997 filed by the Company with the Securities and Exchange
Commission.
(13) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Registration Statement on Form S-4, dated March 26, 1998,
filed by the Company with the Securities and Exchange Commission.
(14) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report as Form 10-K for the year ended June 30, 1998,
filed by the Company with the Securities and Exchange Commission.
(15) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1998, filed by the Company with the Securities and Exchange
Commission.
(16) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Registration Statement on Form S-4, dated June 15, 1999,
filed by the Company with the Securities and Exchange Commission.
(17) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Report on Form 8-K, dated September 7, 1999, filed by the
Company with the Securities and Exchange Commission.
(@) Filed herewith.
35