AmeriCredit Reports Second Quarter 2004 EPS of $0.30 and Increases Fiscal Year Guidance
FORT WORTH, Texas--Jan. 2, 20042, 2004--AmeriCredit Corp.-- Credit results improved -- New charge-off policy implemented -- Unrestricted cash balance grows to $524.8 million -- Measured, deliberate growth plan launched
AMERICREDIT CORP. today announced net income of $47.2 million, or $0.30 per share, for its second fiscal quarter ended December 31, 2003. AmeriCredit reported a net loss of $56.3 million, or $0.37 per share, for the same period a year earlier. For the six months ended December 31, 2003, AmeriCredit reported net income of $80.5 million, or $0.51 per share, versus earnings of $19.4 million, or $0.16 per share, for the six months ended December 31, 2002.
Automobile loan purchases were $700.0 million for the second quarter of fiscal year 2004, compared to $745.1 million in the September quarter. This sequential change in new loan volume was in-line with normal seasonal trends. Managed auto receivables totaled approximately $13.0 billion at December 31, 2003.
Managed auto receivables 31-to-60 days delinquent were 7.5% of the portfolio at December 31, 2003, compared to 9.2% at December 31, 2002, and 7.6% at September 30, 2003. Accounts more than 60 days delinquent were 2.9% of the portfolio at December 31, 2003, improved from 4.1% at December 31, 2002, and unchanged compared to September 30, 2003.
Effective for the quarter ended December 31, 2003, AmeriCredit has revised its repossession charge-off policy. The Company will now charge off accounts when the customers' redemption period to reclaim a repossessed auto has expired. Previously, the Company charged off accounts at the time that repossessed inventory was liquidated at auction.
To implement this new policy, AmeriCredit incurred additional charge-offs of $59.4 million at December 31, 2003, related to the acceleration of charge-off timing, raising managed portfolio credit losses to $308.3 million from $248.9 million. This one-time cumulative adjustment changes the annualized charge-off rate for the December 2003 quarter to 9.1%, from 7.3% of the managed portfolio under the old policy. The annualized charge-off rate was 7.6% for the September 2003 quarter.
Going forward, the Company forecasts that annualized charge-offs will decline to the 6.0% to 6.9% range during calendar year 2004.
AmeriCredit's unrestricted cash balance totaled $524.8 million at December 31, 2003, compared to $358.0 million at September 30, 2003. The unrestricted cash balance increased primarily from $168.0 million in net proceeds the Company received from its convertible senior note offering in November.
"The Company's credit results showed improvement during the December quarter. Furthermore, we strengthened our balance sheet, and our liquidity will only get stronger as we start receiving a significant amount of cash from our old-FSA portfolio beginning later this year," said Clifton Morris, chief executive officer of AmeriCredit. "So, with the economy improving and the successful execution of the Company's revised operating plan in 2003, AmeriCredit is now ready to move forward and begin to grow again."
The Company is adopting a flexible growth plan that will move its loan origination base to a target of $1 billion per quarter by the end of this fiscal year, with the goal of growing at a measured, deliberate pace averaging 10 to 15 percent annually thereafter.
"By slowing the decline in the portfolio balance in calendar year 2004, we can set the stage for portfolio and earnings growth in 2005," said AmeriCredit president Dan Berce. "We are targeting high risk-adjusted returns and will maintain a strong balance sheet with more liquidity than we have carried in the past."
Regulation FD -- Pursuant to Regulation FD, the Company provides its expectations regarding future business trends to the public via a press release or 8-K filing. The Company anticipates some risks and uncertainties with its business. The guidance below includes the Company's forecast for fiscal year 2004 and calendar year 2004.
Net income and EPS forecast 12 mos. ending 12 mos. ending 6/30/04 12/31/04 -------------------- --------------- Net income ($ millions) $145 - $165 $150 - $190 Earnings per share $0.91 - $1.03 $0.93 - $1.17
AmeriCredit will host a conference call for analysts and investors today at 5:30 P.M. Eastern Standard Time. For a live Internet broadcast of this conference call, please go to the Company's web site to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.
About AmeriCredit
AmeriCredit Corp. is a leading independent middle-market auto finance company. Using its branch network and strategic alliances with auto groups and banks, the Company purchases retail installment contracts entered into by auto dealers with consumers who are typically unable to obtain financing from traditional sources. AmeriCredit has more than one million customers and approximately $13 billion in managed auto receivables. The Company was founded in 1992 and is headquartered in Fort Worth, Texas. For more information, visit www.americredit.com.
Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that involve risks and uncertainties detailed from time to time in the Company's filings and reports with the Securities and Exchange Commission including the Company's annual report on Form 10-K for the period ended June 30, 2003. Such risks include - but are not limited to - variable economic conditions, adverse portfolio performance, volatile wholesale values, reliance on warehouse financing and capital markets, fluctuating interest rates, increased competition, regulatory changes and exposure to litigation. These forward-looking statements are based on the beliefs of the Company's management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially.
AmeriCredit Corp. Consolidated Income Statements (Unaudited, Dollars in Thousands, Except Per Share Amounts) Three Months Ended Six Months Ended December 31, December 31, ------------------------- ------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Revenue: Finance charge income $225,014 $133,943 $436,786 $224,572 Gain on sale of receivables - - - 132,084 Servicing income 47,959 4,910 116,951 121,844 Other income 8,511 5,613 15,992 10,633 ------------ ------------ ------------ ------------ 281,484 144,466 569,729 489,133 ------------ ------------ ------------ ------------ Costs and expenses: Operating expenses 88,340 102,343 169,324 218,169 Provision for loan losses 61,356 86,892 125,599 152,676 Interest expense 56,287 39,884 145,031 79,903 Restructuring charges (271) 6,899 468 6,899 ------------ ------------ ------------ ------------ 205,712 236,018 440,422 457,647 ------------ ------------ ------------ ------------ Income (loss) before income taxes 75,772 (91,552) 129,307 31,486 Income tax provision (benefit) 28,604 (35,248) 48,814 12,122 ------------ ------------ ------------ ------------ Net income (loss) $47,168 $(56,304) $80,493 $19,364 ============ ============ ============ ============ Earnings (loss) per share: Basic $0.30 $(0.37) $0.51 $0.16 ============ ============ ============ ============ Diluted $0.30 $(0.37) $0.51 $0.16 ============ ============ ============ ============ Weighted average shares 156,600,326 153,001,207 156,533,957 119,420,462 ============ ============ ============ ============ Weighted average shares and assumed incremental shares 158,735,017 153,001,207 157,789,512 120,032,197 ============ ============ ============ ============
Consolidated Balance Sheets (Unaudited, Dollars in Thousands) December 31, September 30, June 30, 2003 2003 2003 ------------ ------------- ----------- Cash and cash equivalents $524,765 $357,985 $316,921 Finance receivables, net 5,618,639 5,404,569 4,996,616 Interest-only receivables from Trusts 168,359 214,949 213,084 Investments in Trust receivables 644,979 684,144 760,528 Restricted cash - gain on sale Trusts 455,468 383,557 387,006 Restricted cash - securitization notes payable 338,982 272,468 229,917 Restricted cash - warehouse credit facilities 65,335 327,376 764,832 Property and equipment, net 112,366 117,681 123,713 Other assets 175,957 236,742 315,412 ------------ ------------- ----------- Total assets $8,104,850 $7,999,471 $8,108,029 ============ ============= =========== Warehouse credit facilities $705,235 $1,373,616 $1,272,438 Whole loan purchase facility - - 902,873 Securitization notes payable 4,556,267 3,848,446 3,281,370 Senior notes 358,611 370,634 378,432 Convertible debt 200,000 - - Other notes payable 28,212 31,941 34,599 Funding payable 25,857 122,053 25,562 Accrued taxes and expenses 125,249 158,371 162,433 Derivative financial instruments 40,060 58,091 66,531 Deferred income taxes 107,948 110,849 103,162 ------------ ------------- ----------- Total liabilities 6,147,439 6,074,001 6,227,400 Shareholders' equity 1,957,411 1,925,470 1,880,629 ------------ ------------- ----------- Total liabilities and shareholders' equity $8,104,850 $7,999,471 $8,108,029 ============ ============= ===========
Consolidated Statements of Cash Flows (Unaudited, Dollars in Thousands) Three Months Ended Six Months Ended December 31, December 31, --------------------- ---------------------- 2003 2002 2003 2002 --------- ----------- ---------- ----------- Cash flows from operating activities: Net income (loss) $47,168 $(56,304) $80,493 $19,364 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 11,956 11,383 54,275 22,536 Provision for loan losses 61,356 86,892 125,599 152,676 Deferred income taxes (3,633) (88,479) (3,232) (82,918) (Accretion) amortization of present value discount (16,805) 2,391 (41,511) (49,962) Impairment of credit enhancement assets 18,314 70,649 31,569 88,958 Non-cash gain on sale of receivables - - - (124,831) Non-cash restructuring charges and other (1,043) 79 907 6,108 Distributions from gain on sale Trusts - net of swap payments (4,223) 47,856 78,069 111,118 Initial deposits to credit enhancement assets - - - (58,101) Change in assets and liabilities: Other assets 77,037 8,175 98,605 (16,549) Accrued taxes and expenses (30,076) (65,440) (32,558) (30,563) Purchases, principal collections and sales of receivables held for sale - - - 1,922,076 --------- ----------- ---------- ----------- Net cash provided by operating activities 160,051 17,202 392,216 1,959,912 --------- ----------- ---------- ----------- Cash flows from investing activities: Purchases and principal collections of receivables (383,007) (1,838,255) (750,633) (3,660,778) Purchases of property and equipment (683) 508 (2,137) (2,333) Net change in restricted cash and other 207,087 (263,962) 638,815 (429,739) --------- ----------- ---------- ----------- Net cash used by investing activities (176,603) (2,101,709) (113,955) (4,092,850) --------- ----------- ---------- ----------- Cash flows from financing activities: Net change in warehouse credit facilities (668,381) (70,797) (567,203) (1,465) Net change in whole loan purchase facility - - (905,000) - Net change in securitization notes 703,647 1,792,459 1,271,569 1,792,459 Net change in senior notes and other (27,591) (8,400) (45,435) (51,840) Proceeds from issuance of convertible debt 172,951 - 172,951 - Proceeds from issuance of common stock 2,331 480,945 2,640 481,317 --------- ----------- ---------- ----------- Net cash provided (used) by financing activities 182,957 2,194,207 (70,478) 2,220,471 --------- ----------- ---------- ----------- Net increase in cash and cash equivalents 166,405 109,700 207,783 87,533 Effect of Canadian exchange rate changes on cash and cash equivalents 375 (4) 61 (99) Cash and cash equivalents at beginning of period 357,985 70,087 316,921 92,349 --------- ----------- ---------- ----------- Cash and cash equivalents at end of period $524,765 $179,783 $524,765 $179,783 ========= =========== ========== ===========
Other Financial Data (Unaudited, Dollars in Thousands) Three Months Ended Six Months Ended December 31, December 31, -------------------------- ------------------------- 2003 2002 2003 2002 ------------ ------------- ------------ ------------ Loan originations $700,041 $1,887,003 $1,445,117 $4,306,087 Loans securitized 1,311,477 2,032,287 2,322,527 4,540,193 Average on-book receivables $5,870,265 $3,136,066 $5,678,328 $2,547,350 Average gain on sale receivables 7,622,491 12,930,404 8,284,781 13,134,949 ------------ ------------- ------------ ------------ Average managed receivables $13,492,756 $16,066,470 $13,963,109 $15,682,299 ============ ============= ============ ============ December 31, September 30, December 31, 2003 2003 2002 ------------ ------------- ------------ On-book receivables $5,972,437 $5,763,000 $3,998,081 Gain on sale receivables 7,015,902 8,174,857 12,210,492 ------------ ------------- ------------ Managed receivables $12,988,339 $13,937,857 $16,208,573 ============ ============= ============ December 31, September 30, December 31, 2003 2003 2002 ------------ ------------- ------------ On-book receivables: Principal $5,972,437 $5,763,000 $3,998,081 Allowance for loan losses and nonaccretable acquisition fees (353,798) (358,431) (218,433) ------------ ------------- ------------ $5,618,639 $5,404,569 $3,779,648 ============ ============= ============ 5.9% 6.2% 5.5% ============ ============= ============
(% of ending receivables) December 31, September 30, December 31, 2003 2003 2002 ------------ ------------- ------------- Loan delinquency: On-book: 31 - 60 days 5.0% 4.7% 3.7% Greater than 60 days 1.8 1.8 1.5 ------------ ------------- ------------- Total 6.8% 6.5% 5.2% ============ ============= ============= Gain on sale: 31 - 60 days 9.8% 9.5% 11.0% Greater than 60 days 3.7 3.8 4.9 ------------ ------------- ------------- Total 13.5% 13.3% 15.9% ============ ============= ============= Total portfolio: 31 - 60 days 7.5% 7.6% 9.2% Greater than 60 days 2.9 2.9 4.1 ------------ ------------- ------------- Total 10.4% 10.5% 13.3% ============ ============= =============
Change in repossession charge-off policy reconciliation Managed % of Portfolio Managed Location Description December 31, Portfolio 2003 December 31, 2003 ---------------------- -------------------- -------------- ---------- Repossession inventory Accounts in included in managed redemption period receivables carried at outstanding receivable balance $68,307 0.5% Repossession inventory Accounts after included in other redemption period assets carried at estimated residual value 13,267 0.1 Repossession inventory Accounts after included in credit redemption period enhancement assets carried at estimated residual value 29,767 0.2 Repossession inventory To comply with new charged off repossession charge-off policy 59,427 0.5 -------------- ---------- Gross repossession inventory under former charge-off policy $170,768 1.3% ============== ==========
Three Months Ended Six Months Ended December 31, December 31, ------------------- ------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Net charge-offs: On-book $65,087 $18,705 $121,507 $32,301 Gain on sale 183,787 217,897 405,200 409,582 --------- --------- --------- --------- 248,874 236,602 526,707 441,883 Timing adjustment for change in repossession charge-off policy 59,427 - 59,427 - --------- --------- --------- --------- $308,301 $236,602 $586,134 $441,883 ========= ========= ========= ========= Comparable net charge-offs as a percent of average managed receivables 7.3% 5.8% 7.5% 5.6% ========= ========= ========= ========= Net charge-offs including change in policy as a percent of average managed receivables 9.1% 8.3% ========= =========
The Company evaluates the profitability of its lending activities based partly upon the net margin related to its managed auto loan portfolio, including on-book and gain on sale receivables. The Company uses this information to analyze trends in the components of the profitability of its managed auto portfolio. Analysis of net margin on a managed basis allows the Company to determine which origination channels and loan products are most profitable, guides the Company in making pricing decisions for loan products and indicates if sufficient spread exists between the Company's revenues and cost of funds to cover operating expenses and achieve corporate profitability objectives. Additionally, net margin on a managed basis facilitates comparisons of results between the Company and other finance companies (i) that do not securitize their receivables or (ii) due to the structure of their securitization transactions, are not required to account for the securitization of their receivables as a sale. The Company routinely securitizes its receivables and prior to October 1, 2002, recorded a gain on the sale of such receivables. The net margin on a managed basis presented below assumes that all securitized receivables have not been sold and are still on the Company's consolidated balance sheet. Accordingly, no gain on sale or servicing income would have been recognized. Instead, finance charges would be recognized over the life of the securitized receivables as earned, and interest and other costs related to the asset-backed securities would be recognized as incurred.
Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 2003 2002 2003 2002 ------------- --------- ----------- ----------- Finance charge and other income $578,817 $704,516 $1,188,073 $1,391,244 Interest expense (149,497) (195,011) (348,331) (397,001) ------------- --------- ----------- ----------- Net margin $429,320 $509,505 $839,742 $994,243 ============= ========= =========== =========== Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 2003 2002 2003 2002 ------------- --------- ----------- ----------- Finance charge and other income 17.0% 17.4% 16.9% 17.6% Interest expense (4.4) (4.8) (5.0) (5.0) ------------- --------- ----------- ----------- Net margin as a percent of average managed receivables 12.6% 12.6% 11.9% 12.6% ============= ========= =========== =========== Three Months Ended Six Months Ended December 31, December 31, ----------------------- ----------------------- 2003 2002 2003 2002 ------------- --------- ----------- ----------- Operating expenses $88,340 $102,343 $169,324 $218,169 Operating expenses as a percent of average managed receivables 2.6% 2.5% 2.4% 2.8% Tax rate 37.75% 38.50% 37.75% 38.50%
The following is a reconciliation of finance charge and other income as reflected on the Company's consolidated income statements to the Company's managed basis finance charge and other income:
Three Months Ended Six Months Ended December 31, December 31, ------------------- ----------------------- 2003 2002 2003 2002 --------- --------- ----------- ----------- Finance charge and other income per consolidated income statements $233,525 $139,556 $452,778 $235,205 Adjustment to reflect income earned on receivables in gain on sale Trusts 345,292 564,960 735,295 1,156,039 --------- --------- ----------- ----------- Managed basis finance charge and other income $578,817 $704,516 $1,188,073 $1,391,244 ========= ========= =========== ===========
The following is a reconciliation of interest expense as reflected on the Company's consolidated income statements to the Company's managed basis interest expense:
Three Months Ended Six Months Ended December 31, December 31, ------------------- ------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Interest expense per consolidated income statements $56,287 $39,884 $145,031 $79,903 Adjustment to reflect interest expense incurred by gain on sale Trusts 93,210 155,127 203,300 317,098 --------- --------- --------- --------- Managed basis interest expense $149,497 $195,011 $348,331 $397,001 ========= ========= ========= =========