FORT WORTH, Texas — Sharing the company's results for the period, AmeriCredit executives described the fiscal-year third quarter as "productive and successful."

More specifically, the quarter included an amendment and extension to AmeriCredit's master warehouse credit facility, seasonal improvements in the company's portfolio credit performance and a strengthening in its balance sheet.

Addressing several performance metrics in the company's quarterly conference call, AmeriCredit president and chief executive officer Dan Berce said: "We had a productive and successful March quarter. In early March, we amended and extended our master warehouse credit facility, which allowed us to address our warehouse covenants and solidify our funding platform.

"With the warehouse amendments in place, we will not need to access the capital markets again until the first half of calendar year 2010, when conditions will hopefully be better," he continued. "On the credit side, despite ongoing economic weakness, we experienced notable seasonal improvement in our portfolio credit performance. We also continued to build our allowance for loan losses to further strengthen our balance sheet."

Specifically, the company recorded net income of $9.8 million, down from net earnings of $38.2 million in the same period a year ago.

For the nine-month period ending March 31, the company reported a net loss of $17.4 million, versus net income of $80.9 million the prior year.

In order to provide more specific data about the AmeriCredit's third-quarter performance, SubPrime Auto Finance News looked into the company's conference call in greater detail.

Beginning the company's credit results, Berce said the company saw seasonal improvement during the quarter, thanks largely to customers using their tax refunds to "catch up" on their loan payments.

In fact, 31-to-60 day delinquency rates dipped to 6 percent, compared to 7.8 percent at the end of the previous quarter.

Moreover, the greater-than-60-day delinquency rate fell from 4.2 percent to 3 percent over the same time period.

Berce also noted that annualized net credit losses for the third quarter were 7.8 percent, versus 9.5 percent as the end of December.

"Despite the seasonal improvement, overall credit performance continues to be pressured by the high level of unemployment and economic strain on our customer base and credit metrics remain elevated compared to the prior year," Berce shared.

"As we mentioned in our earnings conference call last quarter, we are continuing to utilize deferments to help our customers navigate this economic downturn and maximize the ultimate collections from our portfolio," he continued. "During the quarter we granted deferments to approximately 8.0 percent of accounts outstanding."

Moving on, Berce noted that the company's recovery rate on repossessed collateral was 39 percent for the quarter, versus 37.1 percent in the second quarter and 43.9 percent in the same period a year ago.

"Used-vehicle values have firmed over the last several months as the supply of used cars decreased due to fewer trade-ins related to lower levels of new car sales," he explained. "We expect that used-vehicle pricing will remain stable at its current level through calendar 2009, subject to historical seasonal patterns."

Looking forward, Berce expects that the AmeriCredit's portfolio credit metrics will continue to be pressured, due largely to an anticipated decrease in the portfolio size from $12 billion to $9 billion by the end of December.

"We expect credit performance to reflect historical seasonal trends with annualized losses improving in the June quarter before weakening in the September and December quarters," he pointed out.

Moving over to originations, the company generated $210 million worth of loans during period, compared to $321 million during the previous quarter.

On a positive note, however, Berce said that: "We expect current loan production to be some of the most profitable in our history, despite higher funding costs. The favorable competitive environment has allowed us to remain selective on the application we approve and more tightly manage loan structures."

He continued: "Early credit performance on our post March 2008 vintages continue to trend considerably better than our 2006 and 2007 vintages. We have also continued to increase loan pricing.

"Our originations for the March quarter carried an average APR of 17.3 percent, up from 17.1 percent for the December quarter," Berce shared. "Additionally, the fees we received from dealers increased to 2.1 percent for the March quarter up from 1.3 percent for the December quarter."

As the company goes forward, Berce said AmeriCredit will try to strike a balance between its need to conserve liquidity with its level of originations.

Specifically, the company is targeting roughly $200 million to $250 million in originations per quarter for "the foreseeable future."

"We believe that our current origination platform is scalable so that new loan production levels can be increased without incurring significant incremental cost when economic and capital conditions are more favorable," Berce commented.

Berce then turned things over to Chris Choate, AmeriCredit's chief financial officer, who talked more about the company's performance.

"First, we recorded a provision for loan losses of $235 million to increase our allowance for loan losses 60 basis points to 7.7 percent of ending finance receivables," Choate pointed out.

"As Dan noted earlier, although we did see seasonal improvements in credit performance this quarter, we expect economic weakness to continue to pressure our portfolio, especially in the seasonally weaker second half of the calendar year," he added.

Additionally, the company used about $10 million to retire $25 million of convertible notes and took a $14 million gain on the debt retirement, Choate shared.

"And … we recorded a restructuring charge of $8 million for the closing of certain credit centers and an associated reduction in staffing in our originations and support functions that we discussed during our January earnings conference call," he pointed out.

Next, Choate went into greater detail about funding and capital markets.

To begin, Choate discussed the company's master warehouse facility, which it amended and extended in early March.

"This amendment lifted the maximum rolling six-month annualized portfolio net loss ratio and removed the 364-day aging limitation on pledged receivables," he stated. "The amendment also reduced the size of the facility to $1.1 billion and increased our fully funded cost of funds by approximately 700 basis points."

Moreover, Choate said the advance rate saw an immediate drop to 80 percent and is slated to decline to the upper 60-percent range by February of next year.

Making one final point regarding funding, Choate said the company doesn't expect that it will directly benefit from the TALF program, in its current form. He explained that the program doesn't offer funding for double-A and single-A rated securitization bonds.

"In our typical securitization structure, approximately 25 percent of the bonds we issue would be double-A and single-A rated and would not qualify for TALF," he went on to share. "We are hopeful that TALF will ultimately be expanded to include eligible securities below triple-A at which point we may look to bring a securitization to market.'

Continuing on to talk about liquidity, Choate said the company had $409 million in liquidity, which includes $121 million in unrestricted cash and about $288 million in available borrowing capacity or unpledged eligible receivables.

During the third quarter, the company used roughly $71 million to pay off its Canadian warehouse facility.

"Looking ahead, we expect to maintain sufficient liquidity to support our current scale of operations. Embedded in our liquidity forecast is the expectation that we will fully pay off the $93 million outstanding balance of our leasing facility when it comes due in June," Choate noted.

"We also expect that as we head into the seasonally weaker second half of the calendar year, we will breach certain performance triggers in our 2006 and 2007 securitization trusts and trap cash to build to higher credit enhancement level," he continued.

"On a positive note, we have approximately $200 million, of recoverable income taxes which we expect to receive by mid fiscal year 2010 resulting mainly from federal net loss carrybacks," Choate added.

Finally, to wrap up the call, Berce stated: "Over the past year and a half, as the economy weakened and access to the capital markets became limited, we took timely steps to preserve liquidity, strengthen our balance sheet and adjust our operating model to weather the downturn.

"Our intense focus on maximizing the cash collected from our portfolio, along with improved wholesale recovery values, is reflected in our seasonally strong credit metrics for this quarter," he continued.

"While we do not anticipate economic conditions to improve in calendar 2009, we have positioned our business to withstand the economic cycle and take advantage of more favorable conditions in the future," Berce concluded.