Auto Credit Express Blog
August 8, 2008
AmeriCredit Reports Net Loss of $150 Million
In its most recent report to stockholders, Fort Worth, Texas-based subprime auto lender AmeriCredit reported a fourth quarter net loss of $150 million. In addition, the lender announced a cessation of operations in Canada as well as an end to its leasing and direct lending operations.
Auto Credit Express continues to keep you informed
To those of us at Auto Credit Express, it seems as if the subprime auto lending business continues to change on almost a daily basis. Lenders are reducing their loan originations, raising their loan parameters and even, as in the case with HSBC, pulling out of the market altogether. In an effort to keep our dealers informed, here is the latest press release from AmeriCredit regarding their fourth quarter (ending 6-30-2008) and fiscal year 2008 (also ending 6-30-2008) earnings:
Synopsis:
• 4th quarter net loss of $150 million, $1.30 per share
• Quarterly pre-tax income of $13 million excluding goodwill impairment and restructuring charge
• Quarterly charge-offs declined sequentially to 5.9%
• Unrestricted cash balance of $433 million
FORT WORTH, Texas, August 6, 2008 – AMERICREDIT CORP. (NYSE: ACF) today announced a net loss of $150 million, or $1.30 per share, for its fiscal fourth quarter ended June 30, 2008. AmeriCredit reported net income of $87 million, or $0.66 per share, for the same period a year earlier. For the fiscal year ended June 30, 2008, AmeriCredit reported a net loss of $69 million, or $0.60 per share, compared to net income of $360 million, or $2.73 per share, for the fiscal year ended June 30, 2007.
Net loss for the quarter ended June 30, 2008, included a $135 million after-tax impairment charge ($213 million pre-tax), or $1.17 per share, related to the write-off of goodwill recorded in connection with the acquisitions of Long Beach Acceptance Corp. and Bay View Acceptance Corporation, and a $7 million after-tax restructuring charge ($11 million pre-tax), or $0.06 per share, related to changes in our lending programs and organizational structure.
“Excluding the goodwill impairment and restructuring charge, we earned $13 million pre-tax for the quarter even after significantly increasing loan loss provisions to build our allowance for loan losses,” said AmeriCredit Chief Financial Officer Chris Choate.
The allowance for loan losses as a percentage of receivables increased to 6.3% at June 30, 2008, from 5.7% at March 31, 2008.
Originations were $780 million for the quarter ended June 30, 2008, compared to $2.51 billion for the same quarter last year. Originations for the fiscal year ended June 30, 2008, were $6.29 billion, compared to $8.45 billion for the prior fiscal year. Managed receivables totaled $14.98 billion at June 30, 2008, compared to $15.95 billion at June 30, 2007.
Annualized net charge-offs totaled 5.9% of average managed receivables for the quarter ended June 30, 2008, compared to 3.3% for the quarter ended June 30, 2007. For the fiscal year ended June 30, 2008, net charge-offs were 6.2%, compared to 4.7% last year.
Managed auto receivables 31-to-60 days delinquent were 6.0% of the portfolio at June 30, 2008, compared to 4.7% at June 30, 2007. Accounts more than 60 days delinquent were 2.9% of the portfolio at June 30, 2008, compared to 2.1% a year ago.
“We have taken proactive steps to conserve liquidity and position the business to withstand the weak macroeconomic environment and the dislocation in the capital markets,” said AmeriCredit President and Chief Executive Officer Dan Berce. “Our goal as we manage through this challenging environment is to protect the value of our platform and position the franchise to provide shareholder value well into the future.”
Conference Call
As part of the earnings release, Dan Berce, president of AmeriCredit, participated in a conference call to go over the earnings statement. He had this to say about the general state of the lending climate in regards to AmeriCredit’s cutbacks in loan originations:
“During the June quarter, we purchased $780.0 million of new originations, which as planned, is a significant reduction in volume compared to $1.3 billion for the March quarter. Consumer demand for new and used vehicle purchases has softened considerably over the past several months. This softening demand, combined with the pullback by most of our major competitors, has allowed us to maintain a strong market presence with auto dealers even as we have decreased our originations volume by two-thirds from last year.
Given the weakened consumer demand for automobiles, which translates to less credit applications and financing opportunities, we currently expect our annualized origination volume to be somewhat less than a $3 billion run rate.”
He also addressed AmeriCredit’s withdrawal from the Canadian market as well as the leasing and direct lending channels:
“We have also been evaluating the profitability and capital intensity of all our lending products and channels. As a result of this process, we have discontinued originations in Canada and ceased leasing and direct lending activities. We have also suspended production on our prime platform and significantly pulled back near-prime originations to focus on our traditional sub-prime core.”
In closing, Dan Berce summed up the company’s position with regard to today’s market conditions:
“We have taken proactive steps to position the business to withstand weak economic conditions, such as raising cutoff scores, lowering loan-to-value ratios and selectively increasing rates and fees. We have also been aggressive in protecting liquidity by lowering originations levels by two-thirds, exiting loan products and markets that were not core to our long term franchise, and reducing expenses.”
Dan concluded his remarks by stating, “The environment we operate in continues to change rapidly and we will continue to be proactive in transitioning our operating strategy accordingly. We are confident in the viability of our business model. We provide a valuable service to our dealer customers and the marketplace.”
