UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
FORM 10-Q
(Mark One)
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| | |
ý | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017March 31, 2018
OR
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| | |
o | | 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
______________________________________________
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
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| | |
State of Texas | | 75-2291093 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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 Q No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Q No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| | | | | | | | | |
Large accelerated filer | o | Accelerated filer | o | Non-accelerated filer (Do not check if a smaller reporting company) | ý | Smaller reporting company | o | Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No Q
As of October 23, 2017,April 25, 2018, there were 5,050,000 shares of the registrant’s common stock, par value $0.0001 per share, outstanding. All of the registrant’s common stock is owned by General Motors Holdings LLC.
LLC, a wholly-owned subsidiary of General Motors Company.
INDEX
GENERAL MOTORS FINANCIAL COMPANY, INC.
PART I
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars inIn millions, except per share amounts) (Unaudited)
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
ASSETS | | | |
Cash and cash equivalents | $ | 3,976 |
| | $ | 2,815 |
|
| 40,864 |
| | 33,475 |
|
| 41,775 |
| | 34,342 |
|
Goodwill | 1,201 |
| | 1,196 |
|
Equity in net assets of non-consolidated affiliate (Note 6) | 1,119 |
| | 944 |
|
Related party receivables (Note 3) | 339 |
| | 347 |
|
| 4,767 |
| | 3,695 |
|
| 12,094 |
| | 10,951 |
|
Total assets | $ | 106,135 |
| | $ | 87,765 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Liabilities | | | |
| $ | 40,775 |
| | $ | 35,087 |
|
| 38,263 |
| | 29,476 |
|
Deferred income | 3,066 |
| | 2,355 |
|
Related party payables (Note 3) | 253 |
| | 320 |
|
Other liabilities | 2,449 |
| | 2,141 |
|
Liabilities held for sale (Note 2) | 10,858 |
| | 9,693 |
|
Total liabilities | 95,664 |
| | 79,072 |
|
Commitments and contingencies (Note 10) |
| |
|
Shareholders' equity | | | |
Common stock, $0.0001 par value per share, 10,000,000 shares authorized and 5,050,000 shares issued (Note 11) | — |
| | — |
|
Preferred stock, $0.01 par value per share, 250,000,000 shares authorized and 1,000,000 shares issued (Note 11) | — |
| | — |
|
Additional paid-in capital | 7,514 |
| | 6,505 |
|
Accumulated other comprehensive loss (Note 14) | (935 | ) | | (1,238 | ) |
Retained earnings | 3,892 |
| | 3,426 |
|
Total shareholders' equity | 10,471 |
| | 8,693 |
|
Total liabilities and shareholders' equity | $ | 106,135 |
| | $ | 87,765 |
|
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
ASSETS | | | |
Cash and cash equivalents | $ | 4,178 |
| | $ | 4,265 |
|
| 43,773 |
| | 42,172 |
|
| 43,444 |
| | 42,882 |
|
Goodwill | 1,198 |
| | 1,197 |
|
Equity in net assets of non-consolidated affiliate (Note 5) | 1,281 |
| | 1,187 |
|
Related party receivables (Note 2) | 659 |
| | 309 |
|
| 6,489 |
| | 5,003 |
|
Total assets | $ | 101,022 |
| | $ | 97,015 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Liabilities | | | |
| $ | 39,441 |
| | $ | 39,887 |
|
| 44,079 |
| | 40,830 |
|
Deferred income | 3,336 |
| | 3,221 |
|
Related party payables (Note 2) | 132 |
| | 92 |
|
Other liabilities | 3,286 |
| | 2,691 |
|
Total liabilities | 90,274 |
| | 86,721 |
|
Commitments and contingencies (Note 9) |
| |
|
Shareholders' equity (Note 10) | | | |
Common stock, $0.0001 par value per share | — |
| | — |
|
Preferred stock, $0.01 par value per share | — |
| | — |
|
Additional paid-in capital | 7,541 |
| | 7,525 |
|
Accumulated other comprehensive loss | (708 | ) | | (768 | ) |
Retained earnings | 3,915 |
| | 3,537 |
|
Total shareholders' equity | 10,748 |
| | 10,294 |
|
Total liabilities and shareholders' equity | $ | 101,022 |
| | $ | 97,015 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions) (Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
Revenue | | | | | | | | | | |
Finance charge income | $ | 837 |
| | $ | 721 |
| | $ | 2,401 |
| | $ | 2,110 |
| $ | 866 |
| | $ | 752 |
|
Leased vehicle income | 2,244 |
| | 1,582 |
| | 6,282 |
| | 4,144 |
| 2,447 |
| | 1,931 |
|
Other income | 80 |
| | 57 |
| | 216 |
| | 175 |
| 98 |
| | 65 |
|
Total revenue | 3,161 |
| | 2,360 |
| | 8,899 |
| | 6,429 |
| 3,411 |
| | 2,748 |
|
Costs and expenses | | | | | | | | | | |
Salaries and benefits | 224 |
| | 195 |
| | 621 |
| | 536 |
| 221 |
| | 199 |
|
Other operating expenses | 122 |
| | 132 |
| | 388 |
| | 360 |
| 144 |
| | 131 |
|
Total operating expenses | 346 |
| | 327 |
| | 1,009 |
| | 896 |
| 365 |
| | 330 |
|
Leased vehicle expenses | 1,670 |
| | 1,197 |
| | 4,648 |
| | 3,148 |
| 1,787 |
| | 1,429 |
|
Provision for loan losses | 204 |
| | 167 |
| | 573 |
| | 501 |
| |
Provision for loan losses (Note 3) | | 136 |
| | 211 |
|
Interest expense | 672 |
| | 511 |
| | 1,903 |
| | 1,393 |
| 732 |
| | 596 |
|
Total costs and expenses | 2,892 |
| | 2,202 |
| | 8,133 |
| | 5,938 |
| 3,020 |
| | 2,566 |
|
| 41 |
| | 36 |
| | 129 |
| | 109 |
| |
| | 52 |
| | 47 |
|
Income from continuing operations before income taxes | 310 |
| | 194 |
| | 895 |
| | 600 |
| 443 |
| | 229 |
|
| 124 |
| | 60 |
| | 260 |
| | 185 |
| |
| | 74 |
| | 50 |
|
Income from continuing operations | 186 |
| | 134 |
| | 635 |
| | 415 |
| 369 |
| | 179 |
|
Income (loss) from discontinued operations, net of tax (Note 2) | 16 |
| | 13 |
| | (169 | ) | | 85 |
| |
Income from discontinued operations, net of tax (Note 12) | | — |
| | 23 |
|
Net income | $ | 202 |
| | $ | 147 |
| | $ | 466 |
| | $ | 500 |
| $ | 369 |
| | $ | 202 |
|
| | | | | | | | | | |
Net income attributable to common shareholder | $ | 200 |
| | $ | 147 |
| | $ | 464 |
| | $ | 500 |
| $ | 355 |
| | $ | 202 |
|
| | | | | | | |
| | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 202 |
| | $ | 147 |
| | $ | 466 |
| | $ | 500 |
|
Other comprehensive income (loss), net of tax | | | | | | | |
Unrealized loss on cash flow hedges, net of income tax benefit of $2, $1, $10 and $3 | (3 | ) | | (1 | ) | | (14 | ) | | (5 | ) |
Defined benefit plans, net of income tax | — |
| | — |
| | (1 | ) | | — |
|
Foreign currency translation adjustment, net of income tax expense of $21, $0, $30 and $0 | 120 |
| | (10 | ) | | 318 |
| | 60 |
|
Other comprehensive income (loss), net of tax | 117 |
| | (11 | ) | | 303 |
| | 55 |
|
Comprehensive income | $ | 319 |
| | $ | 136 |
| | $ | 769 |
| | $ | 555 |
|
|
| | | | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Net income | $ | 369 |
| | $ | 202 |
|
Other comprehensive income, net of tax (Note 10) | | | |
Unrealized gain (loss) on cash flow hedges, net of income tax expense (benefit) of $1 and $(3) | 1 |
| | (4 | ) |
Foreign currency translation adjustment, net of income tax (benefit) expense of $(1) and $4 | 59 |
| | 94 |
|
Other comprehensive income, net of tax | 60 |
| | 90 |
|
Comprehensive income | $ | 429 |
| | $ | 292 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
| | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | 2018 | | 2017 |
Net cash provided by operating activities - continuing operations | $ | 4,795 |
| | $ | 3,566 |
| $ | 1,669 |
| | $ | 1,355 |
|
Net cash provided by operating activities - discontinued operations | 243 |
| | 290 |
| — |
| | 61 |
|
Net cash provided by operating activities | 5,038 |
| | 3,856 |
| 1,669 |
| | 1,416 |
|
Cash flows from investing activities | | | | | | |
Purchases of retail finance receivables, net | (15,267 | ) | | (10,408 | ) | (5,073 | ) | | (5,475 | ) |
Principal collections and recoveries on retail finance receivables | 9,410 |
| | 7,368 |
| 3,576 |
| | 2,810 |
|
Net funding of commercial finance receivables | (1,557 | ) | | (1,145 | ) | |
Net collections (funding) of commercial finance receivables | | 32 |
| | (577 | ) |
Purchases of leased vehicles, net | (14,809 | ) | | (14,939 | ) | (4,496 | ) | | (4,760 | ) |
Proceeds from termination of leased vehicles | 4,649 |
| | 1,799 |
| 2,379 |
| | 1,079 |
|
Other investing activities | (65 | ) | | (59 | ) | (20 | ) | | (20 | ) |
Net cash used in investing activities - continuing operations | (17,639 | ) | | (17,384 | ) | (3,602 | ) | | (6,943 | ) |
Net cash used in investing activities - discontinued operations | (468 | ) | | (949 | ) | |
Net cash provided by (used in) investing activities - discontinued operations | | — |
| | (140 | ) |
Net cash used in investing activities | (18,107 | ) | | (18,333 | ) | (3,602 | ) | | (7,083 | ) |
Cash flows from financing activities | | | | | | |
Net change in debt (original maturities less than three months) | (305 | ) | | (301 | ) | 23 |
| | (360 | ) |
Borrowings and issuance of secured debt | 26,731 |
| | 18,420 |
| |
Borrowings and issuances of secured debt | | 5,602 |
| | 8,055 |
|
Payments on secured debt | (20,905 | ) | | (12,525 | ) | (6,166 | ) | | (4,440 | ) |
Borrowings and issuance of unsecured debt | 12,626 |
| | 10,358 |
| |
Borrowings and issuances of unsecured debt | | 3,861 |
| | 2,968 |
|
Payments on unsecured debt | (4,375 | ) | | (2,345 | ) | (486 | ) | | (531 | ) |
Debt issuance costs | (131 | ) | | (112 | ) | (40 | ) | | (27 | ) |
Proceeds from issuance of preferred stock | 985 |
| | — |
| |
Dividends paid | | (30 | ) | | — |
|
Net cash provided by financing activities - continuing operations | 14,626 |
| | 13,495 |
| 2,764 |
| | 5,665 |
|
Net cash provided by financing activities - discontinued operations | 63 |
| | 601 |
| |
Net cash provided by (used in) financing activities - discontinued operations | | — |
| | (10 | ) |
Net cash provided by financing activities | 14,689 |
| | 14,096 |
| 2,764 |
| | 5,655 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | 1,620 |
| | (381 | ) | 831 |
| | (12 | ) |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | 112 |
| | 22 |
| 8 |
| | 37 |
|
Cash, cash equivalents and restricted cash at beginning of period | 5,302 |
| | 5,002 |
| 6,567 |
| | 5,302 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 7,034 |
| | $ | 4,643 |
| $ | 7,406 |
| | $ | 5,327 |
|
Cash, cash equivalents and restricted cash from continuing operations at end of period | $ | 6,469 |
| | $ | 3,918 |
| $ | 7,406 |
| | $ | 4,737 |
|
Cash, cash equivalents and restricted cash from discontinued operations at end of period | $ | 565 |
| | $ | 725 |
| $ | — |
| | $ | 590 |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet:
| | | September 30, 2017 | March 31, 2018 |
Cash and cash equivalents | $ | 3,976 |
| $ | 4,178 |
|
Restricted cash included in other assets | 2,493 |
| 3,228 |
|
Total | $ | 6,469 |
| $ | 7,406 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation The condensed consolidated financial statements include our accounts and the accounts of our consolidated subsidiaries, including certain special-purpose financingspecial purpose entities (SPEs) utilized in secured financing transactions, which are considered variable interest entities (VIEs). We consolidate certain operating entities that provide auto finance and financial services, which we do not control through a majority voting interest. We manage these entities and maintain a controlling financial interest in them and are exposed to the risks of ownership through contractual arrangements. The majority voting interests in these entities are indirectly wholly-owned by our parent, General Motors Company (GM). All intercompany transactions and balancesaccounts have been eliminated in consolidation.
Our operations in EuropeOn October 31, 2017, we completed the sale of certain of our European subsidiaries and branches (collectively, our European Operations) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Operations are presented as discontinued operations and the related assets and liabilities are presented as held for sale in our condensed consolidated financial statements for all periods presented.the three months ended March 31, 2017. Refer to Note 12 for additional details regarding our disposal of these operations. Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to continuing operations. Refer to Note 2 - "Discontinued Operations" for additional details regarding our planned disposal of thesecontinuing operations.The condensed consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles (GAAP) in the United States of America. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements that are included in our Annual Report on Form 10-K filed on February 7, 20176, 2018 (Form 10-K). Except as otherwise specified, dollar amounts presented within tables are stated in millions.
The condensed consolidated financial statements at September 30, 2017,March 31, 2018, and for the three and nine months ended September 30,March 31, 2018 and 2017, and 2016, are unaudited and, in management’s opinion, include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations. The results for interim periods are not necessarily indicative of results for a full year.
In August The condensed consolidated balance sheet at December 31, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), which simplifies the application of hedge accounting and more closely aligns hedge accounting with companies' risk management strategies thereby making more hedging strategies eligible for hedge accounting. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. ASU 2017-12 requires a cumulative-effect adjustment for certain items upon adoption. We are currently evaluating the impact the adoption of ASU 2017-12 will have on our consolidatedwas derived from audited annual financial statements.
Segment Information We are the wholly-owned captive finance subsidiary of GM.General Motors Company (GM). We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments. Thesegments: North America (the North America Segment) and International (the International Segment). Our North America Segment includes our operations in the U.S. and Canada. TheOur International Segment includes our operations in Brazil, Chile, Colombia, Mexico and Peru, as well as our equity investment in SAIC-GMAC Automotive Finance Company Limited (SAIC-GMAC), a joint venture that conducts autoautomobile finance operations in China.
Recently Adopted Accounting Standards Note 2. Discontinued Operations
On March 5, 2017, General Motors Holdings LLC,Effective January 1, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09) as amended, as incorporated into Accounting Standards Codification (ASC) 606, on a wholly-owned subsidiarymodified retrospective basis by recognizing a cumulative effect adjustment of GM and our parent, entered into a Master Agreement (the Agreement) with Peugeot S.A. Pursuant$33 million as an increase to the Agreement, Peugeot S.A. acquired on July 31, 2017 GM’s Opelopening balance of retained earnings. Under the new standard, commission revenue and Vauxhall businesses andexpenses related to certain other assets in Europe (the Opel/Vauxhall Business) and will acquire, together with a financial partner, certain of our European financial subsidiaries and branches (collectively, our European Operations and, together with Opel/Vauxhall Business, GM's European Business). The transfer of our European Operations is expected to close byretail finance receivables that were previously recognized as earned or incurred ratably over the endterm of the year subjectrelated receivables will now be recognized in full at the origination of the receivables.
Effective January 1, 2018, we adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" (ASU 2018-02). ASU 2018-02 provides the option to reclassify stranded tax effects related to the receiptU.S. Tax Cuts and Jobs Act of 2017 (the Act) in accumulated other comprehensive income to retained earnings. The cumulative effect of the necessary regulatory approvalsadjustments to the opening balance of retained earnings for the adopted standard was insignificant.
Effective January 1, 2018, we adopted ASU 2017-12, "Derivatives and satisfactionHedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), on a modified retrospective basis, which is intended to facilitate financial reporting that more closely reflects risk management activities and simplifies the application of other closing conditions.hedge accounting. Changes to the new guidance include expanded disclosures regarding the types of risk management strategies eligible for hedge accounting, simplifying the documentation and effectiveness assessment requirements, changing how ineffectiveness is measured, and changing the presentation and disclosure requirements for hedge accounting activities. The cumulative effect of the adjustments to the opening balance of retained earnings for the adopted standard was insignificant.
The net considerationfollowing change to be paid for our European Operations will be 0.8 times their book value at closing. Based on exchange rates at September 30, 2017, we estimate the net consideration will be approximately $1.1 billion,derivative accounting policy became effective upon adoption of ASU 2017-12:
Certain interest rate swap and we currently expect to recognize a disposal loss of approximately $500 million, subject to foreign currency fluctuations, whichswap agreements have hadbeen designated as cash flow hedges. The risk being hedged is the foreign currency and interest rate risk related to forecasted transactions. If the contract has been designated as a favorable impact oncash flow hedge, the estimated loss. The purchase price is subject to certain adjustments as providedchange in the Agreement. During the nine months ended September 30, 2017, we recognized a portionfair value of the disposalcash flow hedge is deferred in accumulated other comprehensive loss and is recognized in accordanceinterest, operating and other expenses along with ASC 360 - "Property, Plant and Equipment." We expect to recognize the remainderearnings effect of the disposal loss athedged item when the closing of the transaction.hedged item affects earnings.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table summarizesChanges in the assetsfair value of amounts excluded from the assessment of effectiveness are recorded currently in earnings and liabilities held for sale: |
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
ASSETS | | | |
Cash and cash equivalents | $ | 242 |
| | $ | 386 |
|
Finance receivables, net | 11,303 |
| | 9,715 |
|
Related party receivables | — |
| | 163 |
|
Other assets | 549 |
| | 687 |
|
Total assets held for sale | $ | 12,094 |
| | $ | 10,951 |
|
LIABILITIES | | | |
Secured debt | $ | 4,872 |
| | $ | 4,183 |
|
Unsecured debt | 5,469 |
| | 5,130 |
|
Related party payables | — |
| | 80 |
|
Other liabilities | 517 |
| | 300 |
|
Total liabilities held for sale | $ | 10,858 |
| | $ | 9,693 |
|
The following table summarizesare presented in the resultssame income statement line as the earnings effect of operations for the discontinued operations: |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Total revenue | $ | 148 |
| | $ | 138 |
| | $ | 422 |
| | $ | 436 |
|
Interest expense | 24 |
| | 30 |
| | 70 |
| | 112 |
|
Other expenses | 75 |
| | 74 |
| | 231 |
| | 205 |
|
Total costs and expenses | 99 |
| | 104 |
| | 301 |
| | 317 |
|
Income from discontinued operations before income taxes | 49 |
| | 34 |
| | 121 |
| | 119 |
|
Loss on sale of discontinued operations before income taxes | 38 |
| | — |
| | 374 |
| | — |
|
Income (loss) from discontinued operations before income taxes | 11 |
| | 34 |
| | (253 | ) | | 119 |
|
Income tax (benefit) provision | (5 | ) | | 21 |
| | (84 | ) | | 34 |
|
Income (loss) from discontinued operations, net of tax | $ | 16 |
| | $ | 13 |
| | $ | (169 | ) | | $ | 85 |
|
hedged item.Note 2. Related Party Transactions
We offer loan and lease finance products through GM-franchised dealers to customers purchasing new vehicles manufactured by GM and certain used vehicles and make commercial loans directly to GM-franchised dealers and their affiliates. We also offer commercial loans to dealers that are consolidated by GM and those balances are included in our finance receivables, net.
Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on retail loan and lease finance products. In addition, GM makes cash payments to us to cover certain interest payments on commercial loans. The balance in subvention receivable increased from December 31, 2017 due to a re-timing of cash payments from GM.
We purchase certain program vehicles from GM subsidiaries. We simultaneously lease these vehicles to those subsidiaries for use in their ride-sharing arrangements. We account for these leases as direct-financing leases, which are included in our finance receivables, net.
We periodically purchase finance receivables from other GM subsidiaries for vehicles sold to rental car companies and for vehicles sold to certain dealerships. During the three months ended March 31, 2018, we purchased $136 million of these receivables from GM.
We have related party payables due to GM, primarily for commercial finance receivables originated but not yet funded.
The following tables present related party transactions:
|
| | | | | | | |
Balance Sheet Data | March 31, 2018 | | December 31, 2017 |
Commercial finance receivables, net due from dealers consolidated by GM(a) | $ | 369 |
| | $ | 355 |
|
Direct-financing lease receivables from GM subsidiaries(a) | $ | 101 |
| | $ | 88 |
|
Subvention receivable(b) | $ | 658 |
| | $ | 306 |
|
Commercial loan funding payable(c) | $ | 130 |
| | $ | 90 |
|
|
| | | | | | | |
| Three Months Ended March 31, |
Income Statement Data | 2018 | | 2017 |
Interest subvention earned on retail finance receivables(d) | $ | 112 |
| | $ | 95 |
|
Interest subvention earned on commercial finance receivables(d) | $ | 18 |
| | $ | 15 |
|
Leased vehicle subvention earned(e) | $ | 798 |
| | $ | 706 |
|
_________________
| |
(a) | Included in finance receivables, net. |
| |
(b) | Included in related party receivables. We received subvention payments from GM of $0.6 billion and $1.0 billion for the three months ended March 31, 2018 and 2017. |
| |
(c) | Included in related party payables. |
| |
(d) | Included in finance charge income. |
| |
(e) | Included as a reduction to leased vehicle expenses. |
Under the support agreement with GM (the Support Agreement), if our earning assets leverage ratio at the end of any calendar quarter exceeds the applicable threshold set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio to within the applicable threshold. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time.
Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding. GM also agreed to certain provisions in the Support Agreement intended to ensure that we maintain adequate access to liquidity. Pursuant to these provisions, GM provided us with a $1.0 billion junior subordinated unsecured intercompany revolving credit facility (the Junior Subordinated Revolving Credit Facility), and GM agreed to use commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower under GM's corporate revolving credit facilities. At March 31, 2018, we had no amounts borrowed under either of GM's unsecured revolving credit facilities.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On April 18, 2018, GM amended and restated its revolving credit facilities, consisting of a three-year, $4.0 billion facility and a five-year, $10.5 billion facility, and added a 364-day, $2.0 billion facility (the 364-day facility). Also on April 18, 2018, we and GM amended the Support Agreement to, among other things, allow for irrevocable and exclusive access by us of no less than $2.0 billion of the 364-day facility to support our liquidity.
We are included in GM's consolidated U.S. federal income tax returns. For taxable income we recognize in any period beginning on or after October 1, 2010, we are obligated to pay GM for our share of the consolidated U.S. federal and certain state tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable. At March 31, 2018 and December 31, 2017, there are no related party taxes payable to GM.
Note 3. Related Party Transactions
We offer loan and lease finance products through GM-franchised dealers to customers purchasing new vehicles manufactured by GM and certain used vehicles and make commercial loans directly to GM-franchised dealers and their affiliates. We also offer commercial loans to dealers that are consolidated by GM and those balances are included in our finance receivables, net.
Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on retail loan and lease finance products. In addition, GM makes payments to us to cover certain interest payments on commercial loans.
In March 2017, we executed an agreement to purchase certain program vehicles from Maven Drive LLC (Maven), a wholly-owned subsidiary of GM. We simultaneously leased these vehicles to Maven for use in their ride-sharing arrangements. We account for these leases as direct-financing leases, which are included in our finance receivables, net.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
We have related party payables due to GM, primarily for commercial finance receivables originated but not yet funded. These payables typically settle within 30 days. The following tables present related party transactions:
|
| | | | | | | |
Balance Sheet Data | September 30, 2017 | | December 31, 2016 |
Commercial finance receivables, net due from dealers consolidated by GM(a) | $ | 349 |
| | $ | 347 |
|
Direct-financing lease receivables from Maven(a) | $ | 96 |
| | $ | — |
|
Subvention receivable(b) | $ | 338 |
| | $ | 347 |
|
Commercial loan funding payable(c) | $ | 251 |
| | $ | 320 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Income Statement Data | 2017 | | 2016 | | 2017 | | 2016 |
Interest subvention earned on retail finance receivables(d) | $ | 115 |
| | $ | 90 |
| | $ | 319 |
| | $ | 245 |
|
Interest subvention earned on commercial finance receivables(d) | $ | 14 |
| | $ | 13 |
| | $ | 42 |
| | $ | 35 |
|
Leased vehicle subvention earned(e) | $ | 786 |
| | $ | 591 |
| | $ | 2,246 |
| | $ | 1,588 |
|
_________________
| |
(a) | Included in finance receivables, net. |
| |
(b) | Included in related party receivables. We received subvention payments from GM of $1.1 billion and $1.0 billion for the three months ended September 30, 2017 and 2016, and $3.3 billion and $3.2 billion for the nine months ended September 30, 2017 and 2016. |
| |
(c) | Included in related party payables. |
| |
(d) | Included in finance charge income. |
| |
(e) | Included as a reduction to leased vehicle expenses. |
Under our support agreement with GM (the Support Agreement), if our earning assets leverage ratio at the end of any calendar quarter exceeds the applicable threshold set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio to within the applicable threshold. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time.
Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding and that GM will use commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower of up to $4.0 billion under GM’s corporate revolving credit facilities. We have the ability to borrow up to $1.0 billion under GM's three-year, $4.0 billion unsecured revolving credit facility and $3.0 billion under GM's five-year, $10.5 billion unsecured revolving credit facility, subject to available capacity. GM also agreed to certain provisions in the Support Agreement intended to ensure that we maintain adequate access to liquidity. Pursuant to these provisions, GM provided us with a $1.0 billion junior subordinated unsecured intercompany revolving credit facility (the Junior Subordinated Revolving Credit Facility).
We are included in GM's consolidated U.S. federal income tax returns. For taxable income we recognize in any period beginning on or after October 1, 2010, we are obligated to pay GM for our share of the consolidated U.S. federal and certain state tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable. At September 30, 2017 and December 31, 2016, there are no related party taxes payable to GM due to our taxable loss position.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Finance Receivables
| | | September 30, 2017 | | December 31, 2016 |
| March 31, 2018 | | December 31, 2017 |
|
Retail finance receivables | | | | | | |
Retail finance receivables, collectively evaluated for impairment, net of fees | $ | 30,147 |
| | $ | 24,480 |
| $ | 32,121 |
| | $ | 30,574 |
|
Retail finance receivables, individually evaluated for impairment, net of fees | 2,170 |
| | 1,920 |
| 2,199 |
| | 2,228 |
|
Total retail finance receivables, net of fees(a) | 32,317 |
| | 26,400 |
| 34,320 |
| | 32,802 |
|
Less: allowance for loan losses - collective | (571 | ) | | (489 | ) | (551 | ) | | (561 | ) |
Less: allowance for loan losses - specific | (328 | ) | | (276 | ) | (307 | ) | | (328 | ) |
Total retail finance receivables, net | 31,418 |
| | 25,635 |
| 33,462 |
| | 31,913 |
|
Commercial finance receivables | | | | | | |
Commercial finance receivables, collectively evaluated for impairment, net of fees | 9,468 |
| | 7,853 |
| 10,342 |
| | 10,290 |
|
Commercial finance receivables, individually evaluated for impairment, net of fees | 27 |
| | 27 |
| 23 |
| | 22 |
|
Total commercial finance receivables, net of fees | 9,495 |
| | 7,880 |
| 10,365 |
| | 10,312 |
|
Less: allowance for loan losses - collective | (46 | ) | | (36 | ) | (50 | ) | | (50 | ) |
Less: allowance for loan losses - specific | (3 | ) | | (4 | ) | (4 | ) | | (3 | ) |
Total commercial finance receivables, net | 9,446 |
| | 7,840 |
| 10,311 |
| | 10,259 |
|
Total finance receivables, net | $ | 40,864 |
| | $ | 33,475 |
| $ | 43,773 |
| | $ | 42,172 |
|
Fair value of finance receivables | $ | 40,957 |
| | $ | 33,528 |
| $ | 43,505 |
| | $ | 42,178 |
|
________________(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $282$217 million and $178$228 million at September 30, 2017March 31, 2018 and December 31, 2016.2017.
We estimate the fair value of retail finance receivables using observable and unobservable Level 3 inputs within a cash flow model. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables. The projected cash flows are then discounted to derive the fair value of the portfolio. Macroeconomic factors could affect the credit performance of the portfolio and, therefore, could potentially affect the assumptions used in our cash flow model. A substantial majority of our commercial finance receivables have variable interest rates. The carrying amount, a Level 2 input, is considered to be a reasonable estimate of fair value.
| | Retail Finance Receivables | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
Allowance for retail loan losses beginning balance | $ | 844 |
| | $ | 790 |
| | $ | 765 |
| | $ | 713 |
| $ | 889 |
| | $ | 765 |
|
Provision for loan losses | 204 |
| | 164 |
| | 563 |
| | 497 |
| 135 |
| | 207 |
|
Charge-offs | (286 | ) | | (284 | ) | | (856 | ) | | (826 | ) | (295 | ) | | (298 | ) |
Recoveries | 135 |
| | 128 |
| | 420 |
| | 403 |
| 123 |
| | 143 |
|
Foreign currency translation | 2 |
| | (2 | ) | | 7 |
| | 9 |
| 6 |
| | 6 |
|
Allowance for retail loan losses ending balance | $ | 899 |
| | $ | 796 |
| | $ | 899 |
| | $ | 796 |
| $ | 858 |
| | $ | 823 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. We use proprietary scoring systems in the underwriting process that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score or itstheir equivalent), and contract characteristics. We also consider other factors, such as employment history, financial stability and capacity to pay. In North America, while we historically focused on consumers with lower than prime credit scores, we have expanded our prime lending programs. A summary of the credit risk profile by FICO score band or equivalent scores, determined at origination, of the retail finance receivables in North America is as follows:
| | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Amount | | Percent | | Amount | | Percent | Amount | | Percent | | Amount | | Percent |
Prime - FICO Score 680 and greater | $ | 12,332 |
| | 45.7 | % | | $ | 7,923 |
| | 36.4 | % | $ | 18,392 |
| | 53.6 | % | | $ | 16,892 |
| | 51.5 | % |
Near-prime - FICO Score 620 to 679 | 4,194 |
| | 15.6 |
| | 3,468 |
| | 15.9 |
| 5,451 |
| | 15.9 |
| | 5,226 |
| | 15.9 |
|
Sub-prime - FICO Score less than 620 | 10,443 |
| | 38.7 |
| | 10,395 |
| | 47.7 |
| 10,477 |
| | 30.5 |
| | 10,684 |
| | 32.6 |
|
Balance at end of period | $ | 26,969 |
| | 100.0 | % | | $ | 21,786 |
| | 100.0 | % | $ | 34,320 |
| | 100.0 | % | | $ | 32,802 |
| | 100.0 | % |
In addition, we review the credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following is a consolidated summary of the contractual amounts of delinquent retail finance receivables, which is not significantly different than the recorded investment for such receivables.
| | | September 30, 2017 | | September 30, 2016 | March 31, 2018 | | March 31, 2017 |
| Amount | | Percent of Contractual Amount Due | | Amount | | Percent of Contractual Amount Due | Amount | | Percent of Contractual Amount Due | | Amount | | Percent of Contractual Amount Due |
31 - 60 days | $ | 1,176 |
| | 3.6 | % | | $ | 1,112 |
| | 4.4 | % | $ | 1,265 |
| | 3.7 | % | | $ | 995 |
| | 3.4 | % |
Greater than 60 days | 521 |
| | 1.6 |
| | 491 |
| | 1.9 |
| 605 |
| | 1.7 |
| | 430 |
| | 1.4 |
|
Total finance receivables more than 30 days delinquent | 1,697 |
| | 5.2 |
| | 1,603 |
| | 6.3 |
| 1,870 |
| | 5.4 |
| | 1,425 |
| | 4.8 |
|
In repossession | 55 |
| | 0.2 |
| | 57 |
| | 0.2 |
| 53 |
| | 0.2 |
| | 46 |
| | 0.2 |
|
Total finance receivables more than 30 days delinquent or in repossession | $ | 1,752 |
| | 5.4 | % | | $ | 1,660 |
| | 6.5 | % | $ | 1,923 |
| | 5.6 | % | | $ | 1,471 |
| | 5.0 | % |
At September 30, 2017March 31, 2018 and December 31, 2016,2017, the accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $797$852 million and $798$778 million.
Impaired Retail Finance Receivables - TDRs Retail finance receivables that become classified as troubled debt restructurings (TDRs) are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. Accounts that become classified as TDRs because of a payment deferral accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer; therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in the U.S. in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs.
The outstanding recorded investment for retail finance receivables that are considered to be TDRs and the related allowance is presented below:
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
Outstanding recorded investment | $ | 2,199 |
| | $ | 2,228 |
|
Less: allowance for loan losses | (307 | ) | | (328 | ) |
Outstanding recorded investment, net of allowance | $ | 1,892 |
| | $ | 1,900 |
|
Unpaid principal balance | $ | 2,239 |
| | $ | 2,266 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The outstanding recorded investment for retail finance receivables that are considered to be TDRs and the related allowance is presented below:
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Outstanding recorded investment | $ | 2,170 |
| | $ | 1,920 |
|
Less: allowance for loan losses | (328 | ) | | (276 | ) |
Outstanding recorded investment, net of allowance | $ | 1,842 |
| | $ | 1,644 |
|
Unpaid principal balance | $ | 2,210 |
| | $ | 1,967 |
|
Additional information about loans classified as TDRs is presented below:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
Average outstanding recorded investment | $ | 2,091 |
| | $ | 1,785 |
| | $ | 2,045 |
| | $ | 1,725 |
| $ | 2,214 |
| | $ | 1,939 |
|
Finance charge income recognized | $ | 56 |
| | $ | 55 |
| | $ | 173 |
| | $ | 156 |
| $ | 64 |
| | $ | 60 |
|
Number of loans classified as TDRs during the period | 23,015 |
| | 18,548 |
| | 56,853 |
| | 49,327 |
| 13,336 |
| | 16,474 |
|
Recorded investment of loans classified as TDRs during the period | $ | 407 |
| | $ | 315 |
| | $ | 997 |
| | $ | 846 |
| $ | 251 |
| | $ | 287 |
|
The unpaid principal balance,balances, net of recoveries, of loans that were charged off during the reporting period and were within 12 months of being modified as a TDR were insignificant for the three and nine months ended September 30, 2017March 31, 2018 and 2016.2017.
Commercial Finance Receivables
Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model isProprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables:
| | | | September 30, 2017 | | December 31, 2016 | | March 31, 2018 | | December 31, 2017 |
| | Amount | | Percent | | Amount | | Percent | | Amount | | Percent | | Amount | | Percent |
Group I | - | Dealers with superior financial metrics | $ | 1,547 |
| | 16.3 | % | | $ | 1,389 |
| | 17.6 | % | - | Dealers with superior financial metrics | $ | 1,799 |
| | 17.4 | % | | $ | 1,915 |
| | 18.6 | % |
Group II | - | Dealers with strong financial metrics | 3,565 |
| | 37.5 |
| | 2,661 |
| | 33.8 |
| - | Dealers with strong financial metrics | 3,708 |
| | 35.8 |
| | 3,584 |
| | 34.7 |
|
Group III | - | Dealers with fair financial metrics | 3,112 |
| | 32.8 |
| | 2,775 |
| | 35.2 |
| - | Dealers with fair financial metrics | 3,414 |
| | 32.9 |
| | 3,424 |
| | 33.2 |
|
Group IV | - | Dealers with weak financial metrics | 931 |
| | 9.8 |
| | 631 |
| | 8.0 |
| - | Dealers with weak financial metrics | 1,111 |
| | 10.7 |
| | 1,048 |
| | 10.2 |
|
Group V | - | Dealers warranting special mention due to elevated risks | 238 |
| | 2.5 |
| | 334 |
| | 4.2 |
| - | Dealers warranting special mention due to elevated risks | 268 |
| | 2.6 |
| | 260 |
| | 2.5 |
|
Group VI | - | Dealers with loans classified as substandard, doubtful or impaired | 102 |
| | 1.1 |
| | 90 |
| | 1.2 |
| - | Dealers with loans classified as substandard, doubtful or impaired | 65 |
| | 0.6 |
| | 81 |
| | 0.8 |
|
Balance at end of period | Balance at end of period | $ | 9,495 |
| | 100.0 | % | | $ | 7,880 |
| | 100.0 | % | Balance at end of period | $ | 10,365 |
| | 100.0 | % | | $ | 10,312 |
| | 100.0 | % |
At September 30, 2017March 31, 2018 and December 31, 2016,2017, substantially all of our commercial finance receivables were current with respect to payment status. Commercial finance receivables on non-accrual status were insignificant, and none were classified as TDRs. Activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30, 2017March 31, 2018 and 2016.2017.
Note 4. Leased Vehicles
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
Leased vehicles | $ | 63,486 |
| | $ | 62,203 |
|
Manufacturer subvention | (9,610 | ) | | (9,468 | ) |
| 53,876 |
| | 52,735 |
|
Less: accumulated depreciation | (10,432 | ) | | (9,853 | ) |
Leased vehicles, net | $ | 43,444 |
| | $ | 42,882 |
|
The following table summarizes minimum rental payments due to us as lessor under operating leases at March 31, 2018:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Minimum rental payments under operating leases | $ | 5,241 |
| | $ | 5,064 |
| | $ | 2,336 |
| | $ | 346 |
| | $ | 19 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Leased VehiclesEquity in Net Assets of Non-consolidated Affiliate
We use the equity method to account for our equity interest in SAIC-GMAC, a joint venture that conducts auto finance operations in China. The income of SAIC-GMAC is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income.
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Leased vehicles | $ | 60,112 |
| | $ | 48,340 |
|
Manufacturer subvention | (9,265 | ) | | (7,686 | ) |
| 50,847 |
| | 40,654 |
|
Less: accumulated depreciation | (9,072 | ) | | (6,312 | ) |
Leased vehicles, net | $ | 41,775 |
| | $ | 34,342 |
|
|
| | | | | | | |
| Three Months Ended March 31, |
Summarized Operating Data(a) | 2018 | | 2017 |
Finance charge income | $ | 307 |
| | $ | 258 |
|
Provision for loan losses | $ | 3 |
| | $ | (15 | ) |
Interest expense | $ | 124 |
| | $ | 76 |
|
Income before income taxes | $ | 198 |
| | $ | 178 |
|
Net income | $ | 148 |
| | $ | 134 |
|
The following table summarizes minimum rental payments due_________________
| |
(a) | This data represents that of the entire entity and not our 35% proportionate share. |
During the three months ended March 31, 2018 and 2017, there were no dividends received from SAIC-GMAC. At March 31, 2018 and December 31, 2017 we had undistributed earnings of $367 million and $315 million related to us as lessor under operating leases:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2017 | | 2018 | | 2019 | | 2020 | | 2021 |
Minimum rental payments under operating leases | $ | 1,800 |
| | $ | 6,256 |
| | $ | 3,861 |
| | $ | 1,182 |
| | $ | 110 |
|
SAIC-GMAC. |
| | | | | | | | | | | | | | | |
| March 31, 2018 | | December 31, 2017 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | | | | | | | |
Revolving credit facilities | $ | 3,587 |
| | $ | 3,605 |
| | $ | 4,694 |
| | $ | 4,713 |
|
Securitization notes payable | 35,854 |
| | 35,790 |
| | 35,193 |
| | 35,235 |
|
Total secured debt | 39,441 |
| | 39,395 |
| | 39,887 |
| | 39,948 |
|
Unsecured debt | | | | | | | |
Senior notes | 40,056 |
| | 40,708 |
| | 36,820 |
| | 37,969 |
|
Credit facilities | 2,311 |
| | 2,314 |
| | 2,368 |
| | 2,375 |
|
Other unsecured debt | 1,712 |
| | 1,716 |
| | 1,642 |
| | 1,645 |
|
Total unsecured debt | 44,079 |
| | 44,738 |
| | 40,830 |
| | 41,989 |
|
Total secured and unsecured debt | $ | 83,520 |
| | $ | 84,133 |
| | $ | 80,717 |
| | $ | 81,937 |
|
Fair value utilizing Level 2 inputs | | | $ | 81,931 |
| | | | $ | 79,623 |
|
Fair value utilizing Level 3 inputs | | | $ | 2,202 |
| | | | $ | 2,314 |
|
The fair value of our debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt with original maturity or revolving period of eighteen months or less, par value is considered to be a reasonable estimate of fair value. The fair value of our debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.
Secured Debt Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 7 for further discussion. During the three months ended March 31, 2018, we issued $4.7 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.59% and legal final maturity dates ranging from 2022 to 2025.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Unsecured DebtDuring the three months ended March 31, 2018, we issued $3.4 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 2.30% and maturity dates ranging from 2021 to 2028.
In April 2018, we issued $2.5 billion in senior notes with a weighted average interest rate of 3.80% and maturity dates ranging from 2021 to 2025.
All of these notes are guaranteed by AmeriCredit Financial Services, Inc. (AFSI), our primary U.S. operating subsidiary, and $1.2 billion in senior notes issued by subsidiaries in Canada and Mexico are also guaranteed by General Motors Financial Company, Inc.
Compliance with Debt CovenantsSeveral of our revolving credit facilities require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Certain of our secured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. Our unsecured senior notes contain covenants including limitations on our ability to incur certain liens. At March 31, 2018, we were in compliance with these debt covenants.
Note 6. Equity in Net Assets of Non-consolidated Affiliate
We use the equity method to account for our equity interest in SAIC-GMAC, a joint venture that conducts auto finance operations in China. The income of SAIC-GMAC is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Summarized Operating Data(a) | 2017 | | 2016 | | 2017 | | 2016 |
Finance charge income | $ | 261 |
| | $ | 229 |
| | $ | 775 |
| | $ | 700 |
|
Provision for loan losses | $ | 2 |
| | $ | 7 |
| | $ | (9 | ) | | $ | 21 |
|
Interest expense | $ | 83 |
| | $ | 65 |
| | $ | 241 |
| | $ | 192 |
|
Income before income taxes | $ | 157 |
| | $ | 137 |
| | $ | 490 |
| | $ | 411 |
|
Net income | $ | 118 |
| | $ | 103 |
| | $ | 368 |
| | $ | 308 |
|
_________________
| |
(a) | This data represents that of the entire entity and not our 35% proportionate share. |
There were no dividends received from SAIC-GMAC during the nine months ended September 30, 2017. We received dividends from SAIC-GMAC of $129 million during the nine months ended September 30, 2016. At September 30, 2017 and December 31, 2016 we had undistributed earnings of $271 million and $142 million related to SAIC-GMAC.
|
| | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | | | | | | | |
Revolving credit facilities | $ | 4,751 |
| | $ | 4,769 |
| | $ | 8,503 |
| | $ | 8,498 |
|
Securitization notes payable | 36,024 |
| | 36,120 |
| | 26,584 |
| | 26,664 |
|
Total secured debt | 40,775 |
| | 40,889 |
| | 35,087 |
| | 35,162 |
|
Unsecured debt | | | | | | | |
Senior notes | 34,794 |
| | 35,927 |
| | 26,737 |
| | 27,304 |
|
Credit facilities | 2,162 |
| | 2,174 |
| | 1,961 |
| | 1,961 |
|
Other unsecured debt | 1,307 |
| | 1,310 |
| | 778 |
| | 780 |
|
Total unsecured debt | 38,263 |
| | 39,411 |
| | 29,476 |
| | 30,045 |
|
Total secured and unsecured debt | $ | 79,038 |
| | $ | 80,300 |
| | $ | 64,563 |
| | $ | 65,207 |
|
Fair value utilizing Level 2 inputs | | | $ | 78,293 |
| | | | $ | 62,951 |
|
Fair value utilizing Level 3 inputs | | | $ | 2,007 |
| | | | $ | 2,256 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of our debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt with original maturity or revolving period of eighteen months or less par value is considered to be a reasonable estimate of fair value. The fair value of our debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.
Secured Debt Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 8 - "Variable Interest Entities" for further discussion.During the nine months ended September 30, 2017, we entered into new credit facilities or renewed credit facilities with a total net additional borrowing capacity of $1.7 billion, and we issued $18.8 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.09% and legal final maturity dates ranging from 2019 to 2025.
Unsecured DebtDuring the nine months ended September 30, 2017, we issued $10.6 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 2.87% and maturity dates ranging from 2019 to 2027.
All of these notes are guaranteed by AmeriCredit Financial Services, Inc. (AFSI), our primary U.S. operating subsidiary, and $407 million in senior notes issued by subsidiaries in Canada and Mexico are also guaranteed by General Motors Financial Company, Inc.
Compliance with Debt CovenantsSeveral of our revolving credit facilities require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Certain of our secured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. Our unsecured senior notes contain covenants including limitations on our ability to incur certain liens. At September 30, 2017, we were in compliance with our debt covenants.
Note 8. Variable Interest Entities
Securitizations and Credit Facilities The following table summarizes the assets and liabilities related to our consolidated VIEs:
| | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
Restricted cash(a) | $ | 2,291 |
| | $ | 1,780 |
| $ | 2,539 |
| | $ | 2,267 |
|
Finance receivables, net of fees | $ | 26,451 |
| | $ | 24,644 |
| $ | 28,120 |
| | $ | 28,364 |
|
Lease related assets | $ | 23,751 |
| | $ | 19,341 |
| $ | 20,525 |
| | $ | 22,222 |
|
Secured debt | $ | 40,188 |
| | $ | 34,185 |
| $ | 39,026 |
| | $ | 39,328 |
|
_______________
(a) Included in other assets in the condensed consolidated balance sheets.assets.
These amounts are related to securitization and credit facilities held by consolidated VIEs. Our continuing involvement with these VIEs consists of servicing assets held by the entities and holding residual interests in the entities. We have determined that we are the primary beneficiary of each VIE because we hold both (i) the power to direct the activities of the VIEs that most significantly impact the VIEs' economic performance and (ii) the obligation to absorb losses from and the right to receive benefits of the VIEs that could potentially be significant to the VIEs. We are not required, and do not currently intend, to provide any additional financial support to these VIEs. Liabilities recognized as a result of consolidating these entities generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of these entities operations and cannot be used to satisfy our or our other subsidiaries' obligations.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8. Derivative Financial Instruments and Hedging Activities
We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our assets and liabilities and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our borrowings.
Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates. We primarily finance our earning assets with debt in the same currency to minimize the impact to earnings from our exposure to fluctuations in exchange rates. When we use a different currency, these fluctuations may impact the value of our cash receipts and payments in terms of our functional currency. We enter into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of the relevant functional currency. The table below presents the gross amounts of fair value of our derivative instruments and the associated notional amounts.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2018 | | December 31, 2017 |
| | Notional | | Fair Value of Assets(a) | | Fair Value of Liabilities(a) | | Notional | | Fair Value of Assets(a) | | Fair Value of Liabilities(a) |
Derivatives designated as hedges | | | | | | | | | | | | |
Fair value hedges | | | | | | | | | | | | |
Interest rate contracts | | $ | 9,780 |
| | $ | 4 |
| | $ | 396 |
| | $ | 11,110 |
| | $ | 2 |
| | $ | 290 |
|
Cash flow hedges | | | | | | | | | | | | |
Interest rate contracts | | 1,794 |
| | 17 |
| | — |
| | 2,177 |
| | 15 |
| | — |
|
Foreign currency swaps | | 2,228 |
| | 154 |
| | 14 |
| | 1,574 |
| | 103 |
| | — |
|
Derivatives not designated as hedges | | | | | | | | | | | | |
Interest rate contracts | | 91,206 |
| | 464 |
| | 514 |
| | 81,938 |
| | 329 |
| | 207 |
|
Foreign currency swaps | | 1,968 |
| | 130 |
| | 5 |
| | 1,201 |
| | 104 |
| | — |
|
Total(b) | | $ | 106,976 |
| | $ | 769 |
| | $ | 929 |
| | $ | 98,000 |
| | $ | 553 |
| | $ | 497 |
|
_________________
| |
(a) | The gross amounts of the fair value of our assets and liabilities are included in other assets and other liabilities, respectively. Amounts accrued for interest payments in a net receivable position are included in other assets. All our derivatives are categorized within Level 2 of the fair value hierarchy. The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves. |
| |
(b) | We primarily enter into derivatives contracts through AFSI; however our SPEs may also be parties to derivative transactions. Agreements between AFSI and its derivative counterparties include rights of setoff for positions with offsetting values or for collateral held or posted. At March 31, 2018 and December 31, 2017, the fair value of assets and liabilities available for offset was $453 million and $284 million. At March 31, 2018 and December 31, 2017, we held $40 million and $25 million and posted $541 million and $299 million of collateral available for netting. |
As of March 31, 2018, the following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:
|
| | | | | | | |
| March 31, 2018 |
| Carrying Amount of Hedged Items | | Cumulative Amount of Fair Value Hedging Adjustments(a) |
Unsecured debt | $ | 13,672 |
| | $ | 602 |
|
_________________
| |
(a) | Includes $163 million of hedging adjustment remaining on hedged items for which hedge accounting has been discontinued. |
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The table below presents the effect of our derivative financial instruments in the condensed consolidated statement of income for the three months ended March 31, 2018.
|
| | | | | | | |
| Income (Losses) Recognized In Income |
| Three Months Ended March 31, |
| 2018 |
| Interest Expense(a) | | Other Operating Expenses(b) |
Fair value hedges | | | |
Hedged items | $ | 208 |
| | $ | — |
|
Interest rate contracts | (210 | ) | | — |
|
Cash flow hedges | | | |
Interest rate contracts | 4 |
| | — |
|
Foreign currency contracts | (9 | ) | | 24 |
|
Derivatives not designated as hedges | | | |
Interest rate contracts | 6 |
| | — |
|
Foreign currency contracts | (7 | ) | | 22 |
|
Total | $ | (8 | ) | | $ | 46 |
|
_________________
| |
(a) | Total interest expense was $732 million for the three months ended March 31, 2018. |
| |
(b) | Activity is offset by translation activity also recorded in other operating expenses related to foreign currency-denominated loans. Total operating expense was $144 million for the three months ended March 31, 2018. |
The table below presents the effect of our derivative financial instruments in the condensed consolidated statement of income for the three months ended March 31, 2017.
|
| | | |
| Income (Losses) Recognized In Income |
| Three Months Ended March 31, |
| 2017 |
Fair value hedges | |
Interest rate contracts(a)(b) | $ | 11 |
|
Cash flow hedges | |
Interest rate contracts(a) | (1 | ) |
Foreign currency contracts(c) | 6 |
|
Derivatives not designated as hedges | |
Interest rate contracts(a) | (5 | ) |
Foreign currency contracts(c)(d) | (7 | ) |
Total | $ | 4 |
|
_________________
| |
(a) | Recognized in earnings as interest expense. |
| |
(b) | Includes hedge ineffectiveness which reflects the net change in the fair value of interest rate contracts offset by the change in fair value of hedged debt attributable to the hedged risk. |
| |
(c) | Recognized in earnings as other operating expenses and interest expense. |
| |
(d) | Activity is partially offset by translation activity (included in other operating expenses) related to foreign currency-denominated loans. |
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
|
| | | | | | | | | | | | | | | | | |
| Gains (Losses) Recognized In Accumulated Other Comprehensive Loss | | Gains (Losses) Reclassified From Accumulated Other Comprehensive Loss Into Income | | Location of Amounts Reclassified from Accumulated OCI |
| Three Months Ended March 31, | | Three Months Ended March 31, | |
| 2018 | | 2017 | | 2018 | | 2017 | |
Cash flow hedges | | | | | | | | | |
Interest rate contracts | $ | 4 |
| | $ | 2 |
| | $ | (3 | ) | | $ | 1 |
| | Interest expense |
Foreign currency contracts | 18 |
| | (3 | ) | | (18 | ) | | (4 | ) | | Interest expense |
Total | $ | 22 |
| | $ | (1 | ) | | $ | (21 | ) | | $ | (3 | ) | | |
Note 9. Derivative Financial Instruments and Hedging Activities
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | | December 31, 2016 |
| Level | | Notional | | Fair Value | | Notional | | Fair Value |
Derivatives designated as hedges | | | | | | | | | |
Assets | | | | | | | | | |
Fair value hedges | | | | | | | | | |
Interest rate swaps | 2 | | $ | 3,500 |
| | $ | 20 |
| | $ | — |
| | $ | — |
|
Cash flow hedges | | | | | | | | | |
Interest rate swaps | 2,3 | | 2,561 |
| | 12 |
| | 3,070 |
| | 12 |
|
Foreign currency swaps | 2 | | 1,356 |
| | 60 |
| | — |
| | — |
|
Total assets(a) | | | $ | 7,417 |
| | $ | 92 |
| | $ | 3,070 |
| | $ | 12 |
|
Liabilities | | | | | | | | | |
Fair value hedges | | | | | | | | | |
Interest rate swaps | 2 | | $ | 7,860 |
| | $ | 260 |
| | $ | 7,700 |
| | $ | 276 |
|
Cash flow hedges | | | | | | | | | |
Interest rate swaps | 2,3 | | — |
| | — |
| | 500 |
| | 1 |
|
Foreign currency swaps | 2 | | — |
| | — |
| | 791 |
| | 33 |
|
Total liabilities(b) | | | $ | 7,860 |
| | $ | 260 |
| | $ | 8,991 |
| | $ | 310 |
|
Derivatives not designated as hedges | | | | | | | | | |
Assets | | | | | | | | | |
Interest rate swaps | 2,3 | | $ | 33,218 |
| | $ | 123 |
| | $ | 7,959 |
| | $ | 54 |
|
Interest rate caps and floors | 2 | | 16,810 |
| | 43 |
| | 9,698 |
| | 26 |
|
Foreign currency swaps | 2 | | 1,182 |
| | 85 |
| | — |
| | — |
|
Total assets(a) | | | $ | 51,210 |
| | $ | 251 |
| | $ | 17,657 |
| | $ | 80 |
|
Liabilities | | | | | | | | | |
Interest rate swaps | 2,3 | | $ | 12,823 |
| | $ | 59 |
| | $ | 6,170 |
| | $ | 28 |
|
Interest rate caps and floors | 2 | | 18,467 |
| | 43 |
| | 12,146 |
| | 26 |
|
Foreign currency swaps | 2 | | — |
| | — |
| | — |
| | — |
|
Total liabilities(b) | | | $ | 31,290 |
| | $ | 102 |
| | $ | 18,316 |
| | $ | 54 |
|
_________________
| |
(a) | Derivative assets are included in other assets in the condensed consolidated balance sheets. |
| |
(b) | Derivative liabilities are included in other liabilities in the condensed consolidated balance sheets. Amounts accrued for interest payments in a net receivable position are included in other assets in the condensed consolidated balance sheets. |
The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves. The fair value for Level 3 instruments was derived using the income approach based on a discounted cash flow model, in which expected cash flows are discounted using current risk-adjusted rates. The activity for interest rate swap agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) was insignificant for the three and nine months ended September 30, 2017 and 2016.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
|
| | | | | | | | | | | | | | | |
| Income (Losses) Recognized In Income |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Fair value hedges | | | | | | | |
Interest rate contracts(a)(b) | $ | 9 |
| | $ | 6 |
| | $ | 38 |
| | $ | 26 |
|
Cash flow hedges | | | | | | | |
Interest rate contracts(a) | 2 |
| | (1 | ) | | 1 |
| | (2 | ) |
Foreign currency contracts(c) | 44 |
| | (1 | ) | | 99 |
| | (1 | ) |
Derivatives not designated as hedges | | | | | | | |
Interest rate contracts(a) | 16 |
| | 4 |
| | 7 |
| | 7 |
|
Foreign currency contracts(c)(d) | 37 |
| | — |
| | 72 |
| | — |
|
Total | $ | 108 |
| | $ | 8 |
| | $ | 217 |
| | $ | 30 |
|
_________________
| |
(a) | Recognized in earnings as interest expense. |
| |
(b) | Includes hedge ineffectiveness which reflects the net change in the fair value of interest rate contracts offset by the change in fair value of hedged debt attributable to the hedged risk. |
| |
(c) | Recognized in earnings as other operating expenses and interest expense. |
| |
(d) | Activity is partially offset by translation activity (included in other operating expenses) related to foreign currency-denominated loans. |
|
| | | | | | | | | | | | | | | |
| Gains (Losses) Recognized In Accumulated Other Comprehensive Loss |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Cash flow hedges | | | | | | | |
Interest rate contracts | $ | — |
| | $ | 2 |
| | $ | 1 |
| | $ | (2 | ) |
Foreign currency contracts | 24 |
| | — |
| | 45 |
| | — |
|
Total | $ | 24 |
| | $ | 2 |
| | $ | 46 |
| | $ | (2 | ) |
|
| | | | | | | | | | | | | | | |
| Gains (Losses) Reclassified From Accumulated Other Comprehensive Loss Into Income |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Cash flow hedges | | | | | | | |
Interest rate contracts | $ | (1 | ) | | $ | 1 |
| | $ | — |
| | $ | 1 |
|
Foreign currency contracts | (26 | ) | | (4 | ) | | (60 | ) | | (4 | ) |
Total | $ | (27 | ) | | $ | (3 | ) | | $ | (60 | ) | | $ | (3 | ) |
Note 10. Commitments and Contingencies
Guarantees of Indebtedness The payments of principal and interest on senior notes issued by our top-tier holding company and our primary Canadian and Mexican operating subsidiary and a European subsidiarysubsidiaries are guaranteed by our primary U.S. operating subsidiary, AFSI. At September 30, 2017March 31, 2018 and December 31, 2016,2017, the par valueaggregate principal amount of theseour senior notes was $37.3$40.8 billion and $29.0$37.3 billion. Refer to Note 16 - 15"Guarantor Condensed Consolidating Financial Statements" for further discussion. At March 31, 2018 and December 31, 2017, we and AFSI guaranteed approximately $1.2 billion and $2.0 billion in aggregate principal amount of Euro Medium Term Notes issued by General Motors Financial International B.V., our former subsidiary, pursuant to our Euro Medium Term Note Programme. Subject to the terms and conditions of a letter agreement entered into with BNP Paribas in connection with the sale of certain of our European Operations on October 31, 2017, BNP Paribas has agreed to pay to us and AFSI any amount that we and AFSI may pay under any such guarantees.
Legal Proceedings As a finance company, weWe are subject to various customerpending and potential legal and regulatory proceedings in the ordinary course of business, including litigation, arbitration, claims, investigations, examinations, subpoenas and litigation seeking damages and statutory penalties based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract, and discriminatory treatment of credit applicants.enforcement proceedings. Some litigation against us could take the form of class action complaints by customersactions. The outcome of these proceedings is inherently uncertain, and certain legal actions include claimsthus we cannot confidently predict how or when proceedings will be resolved. An adverse outcome in one or more of these proceedings could result in substantial damages, settlements, fines, penalties, diminished income or reputational harm. We identify below the material proceedings in connection with which we believe a material loss is reasonably possible or probable.
In accordance with the current accounting standards for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Weloss contingencies, we establish reserves for legal claimsmatters when paymentsit is probable that a loss associated with the claims become probablematter has been incurred and the paymentsamount of the loss can be reasonably estimated. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters, it is generally very difficult to predict what the eventual
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
outcome will be, and when the matter will be resolved. The actual costs of resolving legal claimsmatters may be higher or lower than any amounts reserved for the claims.these matters. At September 30, 2017,March 31, 2018, we estimateestimated our reasonably possible legal exposure for unfavorable outcomes is up to $73$68 million, excluding $38 million related to the discontinued operations. Weand have accrued $24 million excluding $10 million related to the discontinued operations.$21 million.
In 2014 and 2015, we were served with investigative subpoenas to produce documents from various state attorneys general and other local governmental offices to produce documents and data relating to our automobile loan and lease business and securitization of automobile loans and leases. These investigations are ongoing and could in the future result in the imposition of damages, fines or other civil or criminal penalties. No assurance can be givenWe believe that the ultimate outcome of the investigations or any resulting proceedings would not materially and adversely affect us or any of our subsidiaries and affiliates.we have cooperated fully with all reasonable requests for information.
Other Administrative Tax Matters We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.
In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time. Where there is a reasonable possibility that losses exceeding amounts already recognized may be incurred, our estimate of the additional range of loss is up to $18 million excluding $18 million related to the discontinued operations..
Note 10. Shareholders' Equity
At March 31, 2018 and December 31, 2017, we had 250 million shares of preferred stock and 10 million shares of common stock authorized for issuance. At March 31, 2018 and December 31, 2017, we had 1.0 million shares of Series A Preferred Stock and 5.05 million shares of common stock issued and outstanding. On March 30, 2018, we paid a dividend of $30.4 million at $30.35 per share of Series A Preferred Stock to holders of record of Series A Preferred Stock as of March 15, 2018.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table summarizes the significant components of accumulated other comprehensive loss:
|
| | | | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Unrealized gain on cash flow hedges | | | |
Beginning balance | $ | 16 |
| | $ | 17 |
|
Change in value of cash flow hedges, net of tax | 1 |
| | (4 | ) |
Ending balance | 17 |
| | 13 |
|
Defined benefit plans | | | |
Beginning balance | 1 |
| | (20 | ) |
Unrealized loss on subsidiary pension, net of tax | — |
| | — |
|
Ending balance | 1 |
| | (20 | ) |
Foreign currency translation adjustment | | | |
Beginning balance | (785 | ) | | (1,235 | ) |
Translation gain, net of tax | 59 |
| | 94 |
|
Ending balance | (726 | ) | | (1,141 | ) |
Total accumulated other comprehensive loss | $ | (708 | ) | | $ | (1,148 | ) |
Note 11. Income Taxes
For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
During the three months ended March 31, 2018 and 2017, income tax expense of $74 million and $50 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation.
We are included in GM’s consolidated U.S. federal income tax return and for certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction.
On December 22, 2017, the Act was signed into law. The Act changed many aspects of U.S. corporate income taxation, including the reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, we made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. We will continue to assess our provision for income taxes as future guidance is issued, but do not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. As of March 31, 2018, no material amounts have been identified.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11. Shareholders' Equity12. Discontinued Operations
On September 1,October 31, 2017, we executed a 10,000 to 1 stock splitcompleted the sale of each sharecertain of our previously authorized common stock, par value $1.00 per share. Each outstanding share was deemed automatically converted into 10,000 shares of common stock, par value $0.0001 per share.
In September 2017, we issued 1,000,000 shares, par value $0.01 per share, of Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series A, at a liquidation preference $1,000 per share,European Operations to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. Refer to Note 2 - "Discontinued Operations" to our consolidated financial statements in our Form 10-K for net proceeds of $985 million.
For the first 10 years after issuance, holdersfurther discussion of the preferred stock will be entitled to receive cash dividend payments at an annual rate of 5.750%, payable semi-annually in arrears on March 30 and September 30 of each year beginning on March 30, 2018. After 10 years, holdersterms of the preferred stock will be entitled to receive cash dividend payments at a floating rate equal toagreement.
The following table summarizes the then applicable three-month U.S. dollar LIBOR plus a spreadresults of 3.598% per annum, payable quarterly in arrears, on March 30, June 30, September 30 and December 30 of each year. Dividends on the preferred stock are cumulative whether or not we have earnings, whether or not there are funds legally available for the paymentoperations of the dividends and whether or not the dividends are authorized or declared.European Operations: The preferred stock does not have a maturity date. We may, at our option, redeem the shares of preferred stock, in whole or in part, at any time on or after September 30, 2027, at a price of $1,000 per share of preferred stock plus all accumulated and unpaid dividends. |
| | | |
| Three Months Ended March 31, 2017 |
Total revenue | $ | 131 |
|
Interest expense | 23 |
|
Other expenses | 77 |
|
Total costs and expenses | 100 |
|
Income from discontinued operations before income taxes | 31 |
|
Loss on sale of discontinued operations before income taxes | — |
|
Income from discontinued operations before income taxes | 31 |
|
Income tax provision | 8 |
|
Income from discontinued operations, net of tax | $ | 23 |
|
Note 12. Income Taxes
For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
During the three and nine months ended September 30, 2017, income tax expense of $124 million and $260 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. During the three and nine months ended September 30, 2016, income tax expense of $60 million and $185 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation.
We are included in GM’s consolidated U.S. federal income tax return and for certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 13. Segment Reporting
We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: the North America Segment and the International Segment. The North America Segment includes our operations in the U.S. and Canada. The International Segment includes our operations in Brazil, Chile, Colombia, Mexico and Peru as well as our equity investment in SAIC-GMAC, a joint venture that conducts auto finance operations in China. Our chief operating decision maker evaluates the operating results and performance of our business based on theseour North America and International operating segments. The management of each segment is responsible for executing our strategies. As discussed in Note 212 - "Discontinued Operations,", our European Operations are presented as discontinued operations and are excluded from our segment results for all periods presented.the three months ended March 31, 2017. These operations were previously included in our International Segment. Key operating data for our operating segments were as follows: | | | Three Months Ended September 30, 2017 | Three Months Ended March 31, 2018 |
| North America | | International | | Total | North America | | International | | Total |
Total revenue | $ | 2,868 |
| | $ | 293 |
| | $ | 3,161 |
| $ | 3,085 |
| | $ | 326 |
| | $ | 3,411 |
|
Operating expenses | 265 |
| | 81 |
| | 346 |
| 271 |
| | 94 |
| | 365 |
|
Leased vehicle expenses | 1,662 |
| | 8 |
| | 1,670 |
| 1,778 |
| | 9 |
| | 1,787 |
|
Provision for loan losses | 177 |
| | 27 |
| | 204 |
| 97 |
| | 39 |
| | 136 |
|
Interest expense | 536 |
| | 136 |
| | 672 |
| 597 |
| | 135 |
| | 732 |
|
Equity income | — |
| | 41 |
| | 41 |
| — |
| | 52 |
| | 52 |
|
Income from continuing operations before income taxes | $ | 228 |
| | $ | 82 |
| | $ | 310 |
| $ | 342 |
| | $ | 101 |
| | $ | 443 |
|
|
| | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
| North America | | International | | Total |
Total revenue | $ | 2,092 |
| | $ | 268 |
| | $ | 2,360 |
|
Operating expenses | 240 |
| | 87 |
| | 327 |
|
Leased vehicle expenses | 1,194 |
| | 3 |
| | 1,197 |
|
Provision for loan losses | 147 |
| | 20 |
| | 167 |
|
Interest expense | 383 |
| | 128 |
| | 511 |
|
Equity income | — |
| | 36 |
| | 36 |
|
Income from continuing operations before income taxes | $ | 128 |
| | $ | 66 |
| | $ | 194 |
|
| | | Nine Months Ended September 30, 2017 | Three Months Ended March 31, 2017 |
| North America | | International | | Total | North America | | International | | Total |
Total revenue | $ | 8,042 |
| | $ | 857 |
| | $ | 8,899 |
| $ | 2,474 |
| | $ | 274 |
| | $ | 2,748 |
|
Operating expenses | 766 |
| | 243 |
| | 1,009 |
| 248 |
| | 82 |
| | 330 |
|
Leased vehicle expenses | 4,631 |
| | 17 |
| | 4,648 |
| 1,426 |
| | 3 |
| | 1,429 |
|
Provision for loan losses | 497 |
| | 76 |
| | 573 |
| 187 |
| | 24 |
| | 211 |
|
Interest expense | 1,488 |
| | 415 |
| | 1,903 |
| 455 |
| | 141 |
| | 596 |
|
Equity income | — |
| | 129 |
| | 129 |
| — |
| | 47 |
| | 47 |
|
Income from continuing operations before income taxes | $ | 660 |
| | $ | 235 |
| | $ | 895 |
| $ | 158 |
| | $ | 71 |
| | $ | 229 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
|
| | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
| North America | | International | | Total |
Total revenue | $ | 5,666 |
| | $ | 763 |
| | $ | 6,429 |
|
Operating expenses | 656 |
| | 240 |
| | 896 |
|
Leased vehicle expenses | 3,143 |
| | 5 |
| | 3,148 |
|
Provision for loan losses | 449 |
| | 52 |
| | 501 |
|
Interest expense | 1,025 |
| | 368 |
| | 1,393 |
|
Equity income | — |
| | 109 |
| | 109 |
|
Income from continuing operations before income taxes | $ | 393 |
| | $ | 207 |
| | $ | 600 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| North America | | International | | Total | | North America | | International | | Total |
Finance receivables, net | $ | 34,225 |
| | $ | 6,639 |
| | $ | 40,864 |
| | $ | 27,617 |
| | $ | 5,858 |
| | $ | 33,475 |
|
Leased vehicles, net | $ | 41,657 |
| | $ | 118 |
| | $ | 41,775 |
| | $ | 34,284 |
| | $ | 58 |
| | $ | 34,342 |
|
Total assets(a) | $ | 84,971 |
| | $ | 21,164 |
| | $ | 106,135 |
| | $ | 68,656 |
| | $ | 19,109 |
| | $ | 87,765 |
|
________________
(a) International Segment includes assets held for sale of $12.1 billion and $11.0 billion at September 30, 2017 and December 31, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2018 | | December 31, 2017 |
| North America | | International | | Total | | North America | | International | | Total |
Finance receivables, net | $ | 36,901 |
| | $ | 6,872 |
| | $ | 43,773 |
| | $ | 35,436 |
| | $ | 6,736 |
| | $ | 42,172 |
|
Leased vehicles, net | $ | 43,297 |
| | $ | 147 |
| | $ | 43,444 |
| | $ | 42,753 |
| | $ | 129 |
| | $ | 42,882 |
|
Total assets | $ | 91,357 |
| | $ | 9,665 |
| | $ | 101,022 |
| | $ | 87,618 |
| | $ | 9,397 |
| | $ | 97,015 |
|
Note 14. Accumulated Other Comprehensive Loss |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Unrealized gain (loss) on cash flow hedges | | | | | | | |
Beginning balance | $ | 6 |
| | $ | (4 | ) | | $ | 17 |
| | $ | — |
|
Change in value of cash flow hedges, net of tax | (3 | ) | | (1 | ) | | (14 | ) | | (5 | ) |
Ending balance | 3 |
| | (5 | ) | | 3 |
| | (5 | ) |
Defined benefit plans | | | | | | | |
Beginning balance | (21 | ) | | (13 | ) | | (20 | ) | | (13 | ) |
Unrealized gain (loss) on subsidiary pension, net of tax | — |
| | — |
| | (1 | ) | | — |
|
Ending balance | (21 | ) | | (13 | ) | | (21 | ) | | (13 | ) |
Foreign currency translation adjustment | | | | | | | |
Beginning balance | (1,037 | ) | | (1,021 | ) | | (1,235 | ) | | (1,091 | ) |
Translation gain (loss), net of tax | 120 |
| | (10 | ) | | 318 |
| | 60 |
|
Ending balance | (917 | ) | | (1,031 | ) | | (917 | ) | | (1,031 | ) |
Total accumulated other comprehensive loss | $ | (935 | ) | | $ | (1,049 | ) | | $ | (935 | ) | | $ | (1,049 | ) |
Note 15.14. Regulatory Capital and otherOther Regulatory Matters
We are required to comply with a wide variety of laws and regulations. Certain of our entities operate in international markets as either banks or regulated finance companies that are subject to regulatory restrictions. These regulatory restrictions, among other things, require that certain of these entities meet minimum capital requirements and may restrict dividend distributions and ownership of certain assets. We were in compliance with all regulatory capital requirements as most recently reported.
Total assets of our regulated international banks and finance companies were approximately $7.6$8.0 billion and $6.9$7.8 billion at September 30, 2017March 31, 2018 and December 31, 2016.2017.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 16.15. Guarantor Condensed Consolidating Financial Statements
The payment of principal and interest on senior notes issued by our top-tier holding company is currently guaranteed solely by AFSI (the Guarantor) and none of our other subsidiaries (the Non-Guarantor Subsidiaries). The Guarantor is a 100% owned consolidated subsidiary and is unconditionally liable for the obligations represented by the senior notes. The Guarantor’s guarantee may be released only upon customaryin certain circumstances, the terms of which vary by issuance. Customary circumstances includeincluding the sale or disposition of all of the Guarantor’s assets or capital stock, the achievement of investment grade rating of the senior notes and legal or covenant defeasance.defeasance, and the discharge of certain guaranteed senior notes. Our currently outstanding $500 million 6.75% senior notes mature on June 1, 2018, and when, among other things, such notes are discharged on or before the stated maturity date, the Guarantor's guarantees on all outstanding senior notes will be automatically and unconditionally released and discharged.
The condensed consolidating financial statements present consolidating financial data for (i) General Motors Financial Company, Inc. (on a parent-only basis), (ii) the Guarantor, (iii) the combined Non-Guarantor Subsidiaries and (iv) the parent company and our subsidiaries on a consolidated basis at September 30, 2017March 31, 2018 and December 31, 2016,2017, and for the three and nine months ended September 30,March 31, 2018 and 2017 and 2016 (after the elimination of intercompany balances and transactions).
Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations 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.
17
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2017March 31, 2018
(Unaudited)
| | | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | 3,546 |
| | $ | 430 |
| | $ | — |
| | $ | 3,976 |
| $ | — |
| | $ | 3,086 |
| | $ | 1,092 |
| | $ | — |
| | $ | 4,178 |
|
Finance receivables, net | — |
| | 10,097 |
| | 30,767 |
| | — |
| | 40,864 |
| — |
| | 11,114 |
| | 32,659 |
| | — |
| | 43,773 |
|
Leased vehicles, net | — |
| | — |
| | 41,775 |
| | — |
| | 41,775 |
| — |
| | — |
| | 43,444 |
| | — |
| | 43,444 |
|
Goodwill | 1,095 |
| | — |
| | 106 |
| | — |
| | 1,201 |
| 1,095 |
| | — |
| | 103 |
| | — |
| | 1,198 |
|
Equity in net assets of non-consolidated affiliate | — |
| | — |
| | 1,119 |
| | — |
| | 1,119 |
| — |
| | — |
| | 1,281 |
| | — |
| | 1,281 |
|
Related party receivables | — |
| | 38 |
| | 301 |
| | — |
| | 339 |
| — |
| | 91 |
| | 568 |
| | — |
| | 659 |
|
Other assets | 855 |
| | 1,230 |
| | 3,933 |
| | (1,251 | ) | | 4,767 |
| 633 |
| | 2,045 |
| | 4,899 |
| | (1,088 | ) | | 6,489 |
|
Assets held for sale | — |
| | — |
| | 12,095 |
| | (1 | ) | | 12,094 |
| |
Due from affiliates | 32,762 |
| | 19,467 |
| | — |
| | (52,229 | ) | | — |
| 38,038 |
| | 23,975 |
| | — |
| | (62,013 | ) | | — |
|
Investment in affiliates | 10,177 |
| | 5,610 |
| | — |
| | (15,787 | ) | | — |
| 10,436 |
| | 6,844 |
| | — |
| | (17,280 | ) | | — |
|
Total assets | $ | 44,889 |
| | $ | 39,988 |
| | $ | 90,526 |
| | $ | (69,268 | ) | | $ | 106,135 |
| $ | 50,202 |
| | $ | 47,155 |
| | $ | 84,046 |
| | $ | (80,381 | ) | | $ | 101,022 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Secured debt | $ | — |
| | $ | — |
| | $ | 41,177 |
| | $ | (402 | ) | | $ | 40,775 |
| $ | — |
| | $ | — |
| | $ | 39,871 |
| | $ | (430 | ) | | $ | 39,441 |
|
Unsecured debt | 34,047 |
| | — |
| | 4,216 |
| | — |
| | 38,263 |
| 39,055 |
| | — |
| | 5,024 |
| | — |
| | 44,079 |
|
Deferred income | — |
| | — |
| | 3,066 |
| | — |
| | 3,066 |
| — |
| | — |
| | 3,336 |
| | — |
| | 3,336 |
|
Related party payables | 2 |
| | — |
| | 251 |
| | — |
| | 253 |
| 2 |
| | — |
| | 130 |
| | — |
| | 132 |
|
Other liabilities | 369 |
| | 772 |
| | 2,157 |
| | (849 | ) | | 2,449 |
| 397 |
| | 1,429 |
| | 2,118 |
| | (658 | ) | | 3,286 |
|
Liabilities held for sale | — |
| | — |
| | 10,864 |
| | (6 | ) | | 10,858 |
| |
Due to affiliates | — |
| | 32,576 |
| | 19,648 |
| | (52,224 | ) | | — |
| — |
| | 37,772 |
| | 24,241 |
| | (62,013 | ) | | — |
|
Total liabilities | 34,418 |
| | 33,348 |
| | 81,379 |
| | (53,481 | ) | | 95,664 |
| 39,454 |
| | 39,201 |
| | 74,720 |
| | (63,101 | ) | | 90,274 |
|
Shareholders' equity | | | | | | | | | | | | | | | | | | |
Common stock | — |
| | — |
| | 698 |
| | (698 | ) | | — |
| — |
| | — |
| | 698 |
| | (698 | ) | | — |
|
Preferred stock | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
|
Additional paid-in capital | 7,514 |
| | 79 |
| | 3,450 |
| | (3,529 | ) | | 7,514 |
| 7,541 |
| | 79 |
| | 2,128 |
| | (2,207 | ) | | 7,541 |
|
Accumulated other comprehensive loss | (935 | ) | | (107 | ) | | (874 | ) | | 981 |
| | (935 | ) | (708 | ) | | (133 | ) | | (661 | ) | | 794 |
| | (708 | ) |
Retained earnings | 3,892 |
| | 6,668 |
| | 5,873 |
| | (12,541 | ) | | 3,892 |
| 3,915 |
| | 8,008 |
| | 7,161 |
| | (15,169 | ) | | 3,915 |
|
Total shareholders' equity | 10,471 |
| | 6,640 |
| | 9,147 |
| | (15,787 | ) | | 10,471 |
| 10,748 |
| | 7,954 |
| | 9,326 |
| | (17,280 | ) | | 10,748 |
|
Total liabilities and shareholders' equity | $ | 44,889 |
| | $ | 39,988 |
| | $ | 90,526 |
| | $ | (69,268 | ) | | $ | 106,135 |
| $ | 50,202 |
| | $ | 47,155 |
| | $ | 84,046 |
| | $ | (80,381 | ) | | $ | 101,022 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 20162017
(Unaudited)
| | | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
ASSETS | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | 2,284 |
| | $ | 531 |
| | $ | — |
| | $ | 2,815 |
| $ | — |
| | $ | 3,535 |
| | $ | 730 |
| | $ | — |
| | $ | 4,265 |
|
Finance receivables, net | — |
| | 4,969 |
| | 28,506 |
| | — |
| | 33,475 |
| — |
| | 9,569 |
| | 32,603 |
| | — |
| | 42,172 |
|
Leased vehicles, net | — |
| | — |
| | 34,342 |
| | — |
| | 34,342 |
| — |
| | — |
| | 42,882 |
| | — |
| | 42,882 |
|
Goodwill | 1,095 |
| | — |
| | 101 |
| | — |
| | 1,196 |
| 1,095 |
| | — |
| | 102 |
| | — |
| | 1,197 |
|
Equity in net assets of non-consolidated affiliate | — |
| | — |
| | 944 |
| | — |
| | 944 |
| — |
| | — |
| | 1,187 |
| | — |
| | 1,187 |
|
Related party receivables | — |
| | 25 |
| | 322 |
| | — |
| | 347 |
| 2 |
| | 23 |
| | 284 |
| | — |
| | 309 |
|
Other assets | 506 |
| | 884 |
| | 3,065 |
| | (760 | ) | | 3,695 |
| 558 |
| | 1,497 |
| | 3,920 |
| | (972 | ) | | 5,003 |
|
Assets held for sale | — |
| | — |
| | 10,959 |
| | (8 | ) | | 10,951 |
| |
Due from affiliates | 24,548 |
| | 16,065 |
| | — |
| | (40,613 | ) | | — |
| 35,312 |
| | 22,603 |
| | — |
| | (57,915 | ) | | — |
|
Investment in affiliates | 8,986 |
| | 6,445 |
| | — |
| | (15,431 | ) | | — |
| 9,870 |
| | 6,426 |
| | — |
| | (16,296 | ) | | — |
|
Total assets | $ | 35,135 |
| | $ | 30,672 |
| | $ | 78,770 |
| | $ | (56,812 | ) | | $ | 87,765 |
| $ | 46,837 |
| | $ | 43,653 |
| | $ | 81,708 |
| | $ | (75,183 | ) | | $ | 97,015 |
|
LIABILITIES AND SHAREHOLDER'S EQUITY | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Secured debt | $ | — |
| | $ | — |
| | $ | 35,256 |
| | $ | (169 | ) | | $ | 35,087 |
| $ | — |
| | $ | — |
| | $ | 40,289 |
| | $ | (402 | ) | | $ | 39,887 |
|
Unsecured debt | 26,076 |
| | — |
| | 3,400 |
| | — |
| | 29,476 |
| 36,145 |
| | — |
| | 4,685 |
| | — |
| | 40,830 |
|
Deferred income | — |
| | — |
| | 2,355 |
| | — |
| | 2,355 |
| — |
| | — |
| | 3,221 |
| | — |
| | 3,221 |
|
Related party payables | 1 |
| | — |
| | 319 |
| | — |
| | 320 |
| 2 |
| | — |
| | 90 |
| | — |
| | 92 |
|
Other liabilities | 365 |
| | 690 |
| | 1,677 |
| | (591 | ) | | 2,141 |
| 396 |
| | 967 |
| | 1,898 |
| | (570 | ) | | 2,691 |
|
Liabilities held for sale | — |
| | — |
| | 9,694 |
| | (1 | ) | | 9,693 |
| |
Due to affiliates | — |
| | 24,437 |
| | 16,183 |
| | (40,620 | ) | | — |
| — |
| | 35,110 |
| | 22,805 |
| | (57,915 | ) | | — |
|
Total liabilities | 26,442 |
| | 25,127 |
| | 68,884 |
| | (41,381 | ) | | 79,072 |
| 36,543 |
| | 36,077 |
| | 72,988 |
| | (58,887 | ) | | 86,721 |
|
Shareholder's equity | | | | | | | | | | |
Shareholders' equity | | | | | | | | | | |
Common stock | — |
| | — |
| | 698 |
| | (698 | ) | | — |
| — |
| | — |
| | 698 |
| | (698 | ) | | — |
|
Preferred stock | | — |
| | — |
| | — |
| | — |
| | — |
|
Additional paid-in capital | 6,505 |
| | 79 |
| | 5,345 |
| | (5,424 | ) | | 6,505 |
| 7,525 |
| | 79 |
| | 2,123 |
| | (2,202 | ) | | 7,525 |
|
Accumulated other comprehensive loss | (1,238 | ) | | (161 | ) | | (1,223 | ) | | 1,384 |
| | (1,238 | ) | (768 | ) | | (109 | ) | | (714 | ) | | 823 |
| | (768 | ) |
Retained earnings | 3,426 |
| | 5,627 |
| | 5,066 |
| | (10,693 | ) | | 3,426 |
| 3,537 |
| | 7,606 |
| | 6,613 |
| | (14,219 | ) | | 3,537 |
|
Total shareholder's equity | 8,693 |
| | 5,545 |
| | 9,886 |
| | (15,431 | ) | | 8,693 |
| |
Total liabilities and shareholder's equity | $ | 35,135 |
| | $ | 30,672 |
| | $ | 78,770 |
| | $ | (56,812 | ) | | $ | 87,765 |
| |
Total shareholders' equity | | 10,294 |
| | 7,576 |
| | 8,720 |
| | (16,296 | ) | | 10,294 |
|
Total liabilities and shareholders' equity | | $ | 46,837 |
| | $ | 43,653 |
| | $ | 81,708 |
| | $ | (75,183 | ) | | $ | 97,015 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2018
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Revenue | | | | | | | | | |
Finance charge income | $ | — |
| | $ | 169 |
| | $ | 697 |
| | $ | — |
| | $ | 866 |
|
Leased vehicle income | — |
| | — |
| | 2,447 |
| | — |
| | 2,447 |
|
Other income | 2 |
| | 311 |
| | 28 |
| | (243 | ) | | 98 |
|
Total revenue | 2 |
| | 480 |
| | 3,172 |
| | (243 | ) | | 3,411 |
|
Costs and expenses | | | | | | | | | |
Salaries and benefits | — |
| | 181 |
| | 40 |
| | — |
| | 221 |
|
Other operating expenses | 82 |
| | (16 | ) | | 216 |
| | (138 | ) | | 144 |
|
Total operating expenses | 82 |
| | 165 |
| | 256 |
| | (138 | ) | | 365 |
|
Leased vehicle expenses | — |
| | — |
| | 1,787 |
| | — |
| | 1,787 |
|
Provision for loan losses | — |
| | 88 |
| | 48 |
| | — |
| | 136 |
|
Interest expense | 101 |
| | 290 |
| | 446 |
| | (105 | ) | | 732 |
|
Total costs and expenses | 183 |
| | 543 |
| | 2,537 |
| | (243 | ) | | 3,020 |
|
Equity income | 475 |
| | 442 |
| | 52 |
| | (917 | ) | | 52 |
|
Income before income taxes | 294 |
| | 379 |
| | 687 |
| | (917 | ) | | 443 |
|
Income tax (benefit) provision | (75 | ) | | (23 | ) | | 172 |
| | — |
| | 74 |
|
Net income | 369 |
| | 402 |
| | 515 |
| | (917 | ) | | 369 |
|
| | | | | | | | | |
Net income attributable to common shareholder | $ | 355 |
| | $ | 402 |
| | $ | 515 |
| | $ | (917 | ) | | $ | 355 |
|
| | | | | | | | | |
Comprehensive income | $ | 429 |
| | $ | 378 |
| | $ | 568 |
| | $ | (946 | ) | | $ | 429 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended September 30,March 31, 2017
(Unaudited)
| | | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Revenue | | | | | | | | | | | | | | | | | | |
Finance charge income | $ | — |
| | $ | 146 |
| | $ | 691 |
| | $ | — |
| | $ | 837 |
| $ | — |
| | $ | 95 |
| | $ | 657 |
| | $ | — |
| | $ | 752 |
|
Leased vehicle income | — |
| | — |
| | 2,244 |
| | — |
| | 2,244 |
| — |
| | — |
| | 1,931 |
| | — |
| | 1,931 |
|
Other income | — |
| | 306 |
| | — |
| | (226 | ) | | 80 |
| — |
| | 273 |
| | (9 | ) | | (199 | ) | | 65 |
|
Total revenue | — |
| | 452 |
| | 2,935 |
| | (226 | ) | | 3,161 |
| — |
| | 368 |
| | 2,579 |
| | (199 | ) | | 2,748 |
|
Costs and expenses | | | | | | | | | | | | | | | | | | |
Salaries and benefits | — |
| | 182 |
| | 42 |
| | — |
| | 224 |
| — |
| | 163 |
| | 36 |
| | — |
| | 199 |
|
Other operating expenses | 94 |
| | (48 | ) | | 203 |
| | (127 | ) | | 122 |
| 7 |
| | 44 |
| | 190 |
| | (110 | ) | | 131 |
|
Total operating expenses | 94 |
| | 134 |
| | 245 |
| | (127 | ) | | 346 |
| 7 |
| | 207 |
| | 226 |
| | (110 | ) | | 330 |
|
Leased vehicle expenses | — |
| | — |
| | 1,670 |
| | — |
| | 1,670 |
| — |
| | — |
| | 1,429 |
| | — |
| | 1,429 |
|
Provision for loan losses | — |
| | 196 |
| | 8 |
| | — |
| | 204 |
| — |
| | 73 |
| | 138 |
| | — |
| | 211 |
|
Interest expense | 301 |
| | 1 |
| | 469 |
| | (99 | ) | | 672 |
| 235 |
| | 33 |
| | 417 |
| | (89 | ) | | 596 |
|
Total costs and expenses | 395 |
| | 331 |
| | 2,392 |
| | (226 | ) | | 2,892 |
| 242 |
| | 313 |
| | 2,210 |
| | (199 | ) | | 2,566 |
|
Equity income | 461 |
| | 306 |
| | 41 |
| | (767 | ) | | 41 |
| 315 |
| | 215 |
| | 47 |
| | (530 | ) | | 47 |
|
Income from continuing operations before income taxes | 66 |
| | 427 |
| | 584 |
| | (767 | ) | | 310 |
| 73 |
| | 270 |
| | 416 |
| | (530 | ) | | 229 |
|
Income tax (benefit) provision | (136 | ) | | 40 |
| | 220 |
| | — |
| | 124 |
| (129 | ) | | 26 |
| | 153 |
| | — |
| | 50 |
|
Income from continuing operations | 202 |
| | 387 |
| | 364 |
| | (767 | ) | | 186 |
| 202 |
| | 244 |
| | 263 |
| | (530 | ) | | 179 |
|
Income (loss) from discontinued operations, net of tax | — |
| | (6 | ) | | 22 |
| | — |
| | 16 |
| |
Income from discontinued operations, net of tax | | — |
| | — |
| | 23 |
| | — |
| | 23 |
|
Net income | 202 |
| | 381 |
| | 386 |
| | (767 | ) | | 202 |
| $ | 202 |
| | $ | 244 |
| | $ | 286 |
| | $ | (530 | ) | | $ | 202 |
|
| | | | | | | | | | | | | | | | | | |
Net income attributable to common shareholder | $ | 200 |
| | $ | 381 |
| | $ | 386 |
| | $ | (767 | ) | | $ | 200 |
| |
| | | | | | | | | | |
Comprehensive income | $ | 319 |
| | $ | 411 |
| | $ | 525 |
| | $ | (936 | ) | | $ | 319 |
| $ | 292 |
| | $ | 248 |
| | $ | 386 |
| | $ | (634 | ) | | $ | 292 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOMECASH FLOWS
Three Months Ended September 30, 2016March 31, 2018
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Revenue | | | | | | | | | |
Finance charge income | $ | — |
| | $ | 127 |
| | $ | 594 |
| | $ | — |
| | $ | 721 |
|
Leased vehicle income | — |
| | — |
| | 1,582 |
| | — |
| | 1,582 |
|
Other income | — |
| | 213 |
| | 15 |
| | (171 | ) | | 57 |
|
Total revenue | — |
| | 340 |
| | 2,191 |
| | (171 | ) | | 2,360 |
|
Costs and expenses | | | | | | | | | |
Salaries and benefits | — |
| | 157 |
| | 38 |
| | — |
| | 195 |
|
Other operating expenses | 6 |
| | 54 |
| | 173 |
| | (101 | ) | | 132 |
|
Total operating expenses | 6 |
| | 211 |
| | 211 |
| | (101 | ) | | 327 |
|
Leased vehicle expenses | — |
| | — |
| | 1,197 |
| | — |
| | 1,197 |
|
Provision for loan losses | — |
| | 102 |
| | 65 |
| | — |
| | 167 |
|
Interest expense | 171 |
| | 54 |
| | 356 |
| | (70 | ) | | 511 |
|
Total costs and expenses | 177 |
| | 367 |
| | 1,829 |
| | (171 | ) | | 2,202 |
|
Equity income | 267 |
| | 202 |
| | 36 |
| | (469 | ) | | 36 |
|
Income from continuing operations before income taxes | 90 |
| | 175 |
| | 398 |
| | (469 | ) | | 194 |
|
Income tax (benefit) provision | (72 | ) | | (17 | ) | | 149 |
| | — |
| | 60 |
|
Income from continuing operations | 162 |
| | 192 |
| | 249 |
| | (469 | ) | | 134 |
|
(Loss) income from discontinued operations, net of tax | (15 | ) | | — |
| | 28 |
| | — |
| | 13 |
|
Net income | $ | 147 |
| | $ | 192 |
| | $ | 277 |
| | $ | (469 | ) | | $ | 147 |
|
| | | | | | | | | |
Comprehensive income | $ | 136 |
| | $ | 183 |
| | $ | 270 |
| | $ | (453 | ) | | $ | 136 |
|
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Net cash (used in) provided by operating activities | $ | (324 | ) | | $ | (47 | ) | | $ | 2,040 |
| | $ | — |
| | $ | 1,669 |
|
Cash flows from investing activities | | | | | | | | | |
Purchases of retail finance receivables, net | — |
| | (5,289 | ) | | (4,074 | ) | | 4,290 |
| | (5,073 | ) |
Principal collections and recoveries on retail finance receivables | — |
| | 828 |
| | 2,748 |
| | — |
| | 3,576 |
|
Proceeds from transfer of retail finance receivables, net | — |
| | 3,135 |
| | 1,155 |
| | (4,290 | ) | | — |
|
Net funding (collections) of commercial finance receivables | — |
| | (322 | ) | | 354 |
| | — |
| | 32 |
|
Purchases of leased vehicles, net | — |
| | — |
| | (4,496 | ) | | — |
| | (4,496 | ) |
Proceeds from termination of leased vehicles | — |
| | — |
| | 2,379 |
| | — |
| | 2,379 |
|
Other investing activities | — |
| | (44 | ) | | (4 | ) | | 28 |
| | (20 | ) |
Net change in due from affiliates | (2,726 | ) | | (1,372 | ) | | — |
| | 4,098 |
| | — |
|
Net change in investment in affiliates | (5 | ) | | — |
| | 5 |
| | — |
| | — |
|
Net cash used in investing activities | (2,731 | ) | | (3,064 | ) | | (1,933 | ) | | 4,126 |
| | (3,602 | ) |
Cash flows from financing activities | | | | | | | | | |
Net change in debt (original maturities less than three months) | 48 |
| | — |
| | (25 | ) | | — |
| | 23 |
|
Borrowings and issuances of secured debt | — |
| | — |
| | 5,630 |
| | (28 | ) | | 5,602 |
|
Payments on secured debt | — |
| | — |
| | (6,166 | ) | | — |
| | (6,166 | ) |
Borrowings and issuances of unsecured debt | 3,053 |
| | — |
| | 808 |
| | — |
| | 3,861 |
|
Payments on unsecured debt | — |
| | — |
| | (486 | ) | | — |
| | (486 | ) |
Debt issuance costs | (16 | ) | | — |
| | (24 | ) | | — |
| | (40 | ) |
Dividends paid | (30 | ) | | — |
| | — |
| | — |
| | (30 | ) |
Net capital contributions | — |
| | — |
| | — |
| | — |
| | — |
|
Net change in due to affiliates | — |
| | 2,662 |
| | 1,436 |
| | (4,098 | ) | | — |
|
Net cash provided by financing activities | 3,055 |
| | 2,662 |
| | 1,173 |
| | (4,126 | ) | | 2,764 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | — |
| | (449 | ) | | 1,280 |
| | — |
| | 831 |
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | — |
| | — |
| | 8 |
| | — |
| | 8 |
|
Cash, cash equivalents and restricted cash at beginning of period | — |
| | 3,535 |
| | 3,032 |
| | — |
| | 6,567 |
|
Cash, cash equivalents and restricted cash at end of period | $ | — |
| | $ | 3,086 |
| | $ | 4,320 |
| | $ | — |
| | $ | 7,406 |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidating balance sheet:
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Cash and cash equivalents | $ | — |
| | $ | 3,086 |
| | $ | 1,092 |
| | $ | — |
| | $ | 4,178 |
|
Restricted cash included in other assets | — |
| | — |
| | 3,228 |
| | — |
| | 3,228 |
|
Total | $ | — |
| | $ | 3,086 |
| | $ | 4,320 |
| | $ | — |
| | $ | 7,406 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Nine Months Ended September 30, 2017
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Revenue | | | | | | | | | |
Finance charge income | $ | — |
| | $ | 375 |
| | $ | 2,026 |
| | $ | — |
| | $ | 2,401 |
|
Leased vehicle income | — |
| | — |
| | 6,282 |
| | — |
| | 6,282 |
|
Other income | — |
| | 870 |
| | (15 | ) | | (639 | ) | | 216 |
|
Total revenue | — |
| | 1,245 |
| | 8,293 |
| | (639 | ) | | 8,899 |
|
Costs and expenses | | | | | | | | | |
Salaries and benefits | — |
| | 504 |
| | 117 |
| | — |
| | 621 |
|
Other operating expenses | 200 |
| | (43 | ) | | 587 |
| | (356 | ) | | 388 |
|
Total operating expenses | 200 |
| | 461 |
| | 704 |
| | (356 | ) | | 1,009 |
|
Leased vehicle expenses | — |
| | — |
| | 4,648 |
| | — |
| | 4,648 |
|
Provision for loan losses | — |
| | 356 |
| | 217 |
| | — |
| | 573 |
|
Interest expense | 883 |
| | (28 | ) | | 1,331 |
| | (283 | ) | | 1,903 |
|
Total costs and expenses | 1,083 |
| | 789 |
| | 6,900 |
| | (639 | ) | | 8,133 |
|
Equity income | 1,051 |
| | 797 |
| | 129 |
| | (1,848 | ) | | 129 |
|
(Loss) income from continuing operations before income taxes | (32 | ) | | 1,253 |
| | 1,522 |
| | (1,848 | ) | | 895 |
|
Income tax (benefit) provision | (498 | ) | | 199 |
| | 559 |
| | — |
| | 260 |
|
Income from continuing operations | 466 |
| | 1,054 |
| | 963 |
| | (1,848 | ) | | 635 |
|
Income (loss) from discontinued operations, net of tax | — |
| | (13 | ) | | (156 | ) | | — |
| | (169 | ) |
Net income | 466 |
| | 1,041 |
| | 807 |
| | (1,848 | ) | | 466 |
|
| | | | | | | | | |
Net income attributable to common shareholder | $ | 464 |
| | $ | 1,041 |
| | $ | 807 |
| | $ | (1,848 | ) | | $ | 464 |
|
| | | | | | | | | |
Comprehensive income | $ | 769 |
| | $ | 1,095 |
| | $ | 1,156 |
| | $ | (2,251 | ) | | $ | 769 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Nine Months Ended September 30, 2016
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Revenue | | | | | | | | | |
Finance charge income | $ | — |
| | $ | 344 |
| | $ | 1,766 |
| | $ | — |
| | $ | 2,110 |
|
Leased vehicle income | — |
| | — |
| | 4,144 |
| | — |
| | 4,144 |
|
Other income | (1 | ) | | 628 |
| | 28 |
| | (480 | ) | | 175 |
|
Total revenue | (1 | ) | | 972 |
| | 5,938 |
| | (480 | ) | | 6,429 |
|
Costs and expenses | | | | | | | | | |
Salaries and benefits | — |
| | 432 |
| | 104 |
| | — |
| | 536 |
|
Other operating expenses | 2 |
| | 175 |
| | 475 |
| | (292 | ) | | 360 |
|
Total operating expenses | 2 |
| | 607 |
| | 579 |
| | (292 | ) | | 896 |
|
Leased vehicle expenses | — |
| | — |
| | 3,148 |
| | — |
| | 3,148 |
|
Provision for loan losses | — |
| | 282 |
| | 219 |
| | — |
| | 501 |
|
Interest expense | 612 |
| | (67 | ) | | 1,036 |
| | (188 | ) | | 1,393 |
|
Total costs and expenses | 614 |
| | 822 |
| | 4,982 |
| | (480 | ) | | 5,938 |
|
Equity income | 858 |
| | 538 |
| | 109 |
| | (1,396 | ) | | 109 |
|
Income from continuing operations before income taxes | 243 |
| | 688 |
| | 1,065 |
| | (1,396 | ) | | 600 |
|
Income tax (benefit) provision | (272 | ) | | 63 |
| | 394 |
| | — |
| | 185 |
|
Income from continuing operations | 515 |
| | 625 |
| | 671 |
| | (1,396 | ) | | 415 |
|
(Loss) income from discontinued operations, net of tax | (15 | ) | | — |
| | 100 |
| | — |
| | 85 |
|
Net income | $ | 500 |
| | $ | 625 |
| | $ | 771 |
| | $ | (1,396 | ) | | $ | 500 |
|
| | | | | | | | | |
Comprehensive income | $ | 555 |
| | $ | 653 |
| | $ | 837 |
| | $ | (1,490 | ) | | $ | 555 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NineThree Months Ended September 30,March 31, 2017
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Net cash (used in) provided by operating activities - continuing operations | $ | (690 | ) | | $ | 616 |
| | $ | 4,869 |
| | $ | — |
| | $ | 4,795 |
|
Net cash provided by (used in) operating activities - discontinued operations | 26 |
| | (24 | ) | | 241 |
| | — |
| | 243 |
|
Net cash (used in) provided by operating activities | (664 | ) | | 592 |
| | 5,110 |
| | — |
| | 5,038 |
|
Cash flows from investing activities | | | | | | | | | |
Purchases of retail finance receivables, net | — |
| | (15,709 | ) | | (11,312 | ) | | 11,754 |
| | (15,267 | ) |
Principal collections and recoveries on retail finance receivables | — |
| | 1,875 |
| | 7,535 |
| | — |
| | 9,410 |
|
Proceeds from transfer of retail finance receivables, net | — |
| | 8,787 |
| | 2,967 |
| | (11,754 | ) | | — |
|
Net funding of commercial finance receivables | — |
| | (429 | ) | | (1,128 | ) | | — |
| | (1,557 | ) |
Purchases of leased vehicles, net | — |
| | — |
| | (14,809 | ) | | — |
| | (14,809 | ) |
Proceeds from termination of leased vehicles | — |
| | — |
| | 4,649 |
| | — |
| | 4,649 |
|
Other investing activities | — |
| | (288 | ) | | (10 | ) | | 233 |
| | (65 | ) |
Net change in due from affiliates | (8,213 | ) | | (3,397 | ) | | — |
| | 11,610 |
| | — |
|
Net change in investment in affiliates | 54 |
| | 1,686 |
| | — |
| | (1,740 | ) | | — |
|
Net cash used in investing activities - continuing operations | (8,159 | ) | | (7,475 | ) | | (12,108 | ) | | 10,103 |
| | (17,639 | ) |
Net cash provided by (used in) investing activities - discontinued operations | 131 |
| | — |
| | (599 | ) | | — |
| | (468 | ) |
Net cash used in investing activities | (8,028 | ) | | (7,475 | ) | | (12,707 | ) | | 10,103 |
| | (18,107 | ) |
Cash flows from financing activities | | | | | | | | | |
Net change in debt (original maturities less than three months) | 66 |
| | — |
| | (371 | ) | | — |
| | (305 | ) |
Borrowings and issuance of secured debt | — |
| | — |
| | 26,964 |
| | (233 | ) | | 26,731 |
|
Payments on secured debt | — |
| | — |
| | (20,905 | ) | | — |
| | (20,905 | ) |
Borrowings and issuance of unsecured debt | 10,133 |
| | — |
| | 2,493 |
| | — |
| | 12,626 |
|
Payments on unsecured debt | (2,450 | ) | | — |
| | (1,925 | ) | | — |
| | (4,375 | ) |
Debt issuance costs | (42 | ) | | — |
| | (89 | ) | | — |
| | (131 | ) |
Proceeds from issuance of preferred stock | 985 |
| | — |
| | — |
| | — |
| | 985 |
|
Net capital contributions | — |
| | — |
| | (1,740 | ) | | 1,740 |
| | — |
|
Net change in due to affiliates | — |
| | 8,145 |
| | 3,465 |
| | (11,610 | ) | | — |
|
Net cash provided by financing activities - continuing operations | 8,692 |
| | 8,145 |
| | 7,892 |
| | (10,103 | ) | | 14,626 |
|
Net cash provided by financing activities - discontinued operations | — |
| | — |
| | 63 |
| | — |
| | 63 |
|
Net cash provided by financing activities | 8,692 |
| | 8,145 |
| | 7,955 |
| | (10,103 | ) | | 14,689 |
|
Net increase in cash, cash equivalents and restricted cash | — |
| | 1,262 |
| | 358 |
| | — |
| | 1,620 |
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | — |
| | — |
| | 112 |
| | — |
| | 112 |
|
Cash, cash equivalents and restricted cash at beginning of period | — |
| | 2,284 |
| | 3,018 |
| | — |
| | 5,302 |
|
Cash, cash equivalents and restricted cash at end of period | $ | — |
| | $ | 3,546 |
| | $ | 3,488 |
| | $ | — |
| | $ | 7,034 |
|
Cash, cash equivalents and restricted cash from continuing operations at end of period | $ | — |
| | $ | 3,546 |
| | $ | 2,923 |
| | $ | — |
| | $ | 6,469 |
|
Cash, cash equivalents and restricted cash from discontinued operations at end of period | $ | — |
| | $ | — |
| | $ | 565 |
| | $ | — |
| | $ | 565 |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidating balance sheet:
|
| | | | | | | | | | | | | | | | | | | |
| General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Cash and cash equivalents | $ | — |
| | $ | 3,546 |
| | $ | 430 |
| | $ | — |
| | $ | 3,976 |
|
Restricted cash included in other assets | — |
| | — |
| | 2,493 |
| | — |
| | 2,493 |
|
Total | $ | — |
| | $ | 3,546 |
| | $ | 2,923 |
| | $ | — |
| | $ | 6,469 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2016
(Unaudited)
| | | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated | General Motors Financial Company, Inc. | | Guarantor | | Non- Guarantors | | Eliminations | | Consolidated |
Net cash (used in) provided by operating activities - continuing operations | $ | (454 | ) | | $ | (389 | ) | | $ | 4,409 |
| | $ | — |
| | $ | 3,566 |
| $ | (273 | ) | | $ | 117 |
| | $ | 1,511 |
| | $ | — |
| | $ | 1,355 |
|
Net cash provided by operating activities - discontinued operations | (15 | ) | | 10 |
| | 295 |
| | — |
| | 290 |
| |
Net cash provided by (used in) operating activities - discontinued operations | | — |
| | (14 | ) | | 75 |
| | — |
| | 61 |
|
Net cash (used in) provided by operating activities | (469 | ) | | (379 | ) | | 4,704 |
| | — |
| | 3,856 |
| (273 | ) | | 103 |
| | 1,586 |
| | — |
| | 1,416 |
|
Cash flows from investing activities | | | | | | | | | | | | | | | | | | |
Purchases of retail finance receivables, net | — |
| | (12,676 | ) | | (10,047 | ) | | 12,315 |
| | (10,408 | ) | — |
| | (4,920 | ) | | (2,924 | ) | | 2,369 |
| | (5,475 | ) |
Principal collections and recoveries on retail finance receivables | — |
| | 1,274 |
| | 6,094 |
| | — |
| | 7,368 |
| — |
| | 450 |
| | 2,360 |
| | — |
| | 2,810 |
|
Proceeds from transfer of retail finance receivables, net | — |
| | 8,232 |
| | 4,083 |
| | (12,315 | ) | | — |
| — |
| | 2,095 |
| | 274 |
| | (2,369 | ) | | — |
|
Net funding of commercial finance receivables | — |
| | (335 | ) | | (810 | ) | | — |
| | (1,145 | ) | — |
| | (194 | ) | | (383 | ) | | — |
| | (577 | ) |
Purchases of leased vehicles, net | — |
| | — |
| | (14,939 | ) | | — |
| | (14,939 | ) | — |
| | — |
| | (4,760 | ) | | — |
| | (4,760 | ) |
Proceeds from termination of leased vehicles | — |
| | — |
| | 1,799 |
| | — |
| | 1,799 |
| — |
| | — |
| | 1,079 |
| | — |
| | 1,079 |
|
Other investing activities | — |
| | (219 | ) | | (9 | ) | | 169 |
| | (59 | ) | — |
| | (98 | ) | | (1 | ) | | 79 |
| | (20 | ) |
Net change in due from affiliates | (7,506 | ) | | (6,621 | ) | | — |
| | 14,127 |
| | — |
| (2,230 | ) | | 80 |
| | — |
| | 2,150 |
| | — |
|
Net change in investment in affiliates | 24 |
| | 2,473 |
| | — |
| | (2,497 | ) | | — |
| — |
| | 694 |
| | — |
| | (694 | ) | | — |
|
Net cash used in investing activities - continuing operations | (7,482 | ) | | (7,872 | ) | | (13,829 | ) | | 11,799 |
| | (17,384 | ) | (2,230 | ) | | (1,893 | ) | | (4,355 | ) | | 1,535 |
| | (6,943 | ) |
Net cash used in investing activities - discontinued operations | — |
| | — |
| | (949 | ) | | — |
| | (949 | ) | |
Net cash provided by (used in) investing activities - discontinued operations | | — |
| | — |
| | (140 | ) | | — |
| | (140 | ) |
Net cash used in investing activities | (7,482 | ) | | (7,872 | ) | | (14,778 | ) | | 11,799 |
| | (18,333 | ) | (2,230 | ) | | (1,893 | ) | | (4,495 | ) | | 1,535 |
| | (7,083 | ) |
Cash flows from financing activities | | | | | | | | | | | | | | | | | | |
Net change in debt (original maturities less than three months) | 1 |
| | — |
| | (302 | ) | | — |
| | (301 | ) | 17 |
| | — |
| | (377 | ) | | — |
| | (360 | ) |
Borrowings and issuance of secured debt | — |
| | — |
| | 18,589 |
| | (169 | ) | | 18,420 |
| |
Borrowings and issuances of secured debt | | — |
| | — |
| | 8,134 |
| | (79 | ) | | 8,055 |
|
Payments on secured debt | — |
| | — |
| | (12,525 | ) | | — |
| | (12,525 | ) | — |
| | — |
| | (4,440 | ) | | — |
| | (4,440 | ) |
Borrowings and issuance of unsecured debt | 8,987 |
| | — |
| | 1,371 |
| | — |
| | 10,358 |
| |
Borrowings and issuances of unsecured debt | | 2,497 |
| | — |
| | 471 |
| | — |
| | 2,968 |
|
Payments on unsecured debt | (1,000 | ) | | — |
| | (1,345 | ) | | — |
| | (2,345 | ) | — |
| | — |
| | (531 | ) | | — |
| | (531 | ) |
Debt issuance costs | (37 | ) | | — |
| | (75 | ) | | — |
| | (112 | ) | (11 | ) | | — |
| | (16 | ) | | — |
| | (27 | ) |
Net capital contributions | — |
| | — |
| | (2,497 | ) | | 2,497 |
| | — |
| — |
| | — |
| | (694 | ) | | 694 |
| | — |
|
Net change in due to affiliates | — |
| | 7,643 |
| | 6,484 |
| | (14,127 | ) | | — |
| — |
| | 1,546 |
| | 604 |
| | (2,150 | ) | | — |
|
Net cash provided by financing activities - continuing operations | 7,951 |
| | 7,643 |
| | 9,700 |
| | (11,799 | ) | | 13,495 |
| 2,503 |
| | 1,546 |
| | 3,151 |
| | (1,535 | ) | | 5,665 |
|
Net cash provided by financing activities - discontinued operations | — |
| | — |
| | 601 |
| | — |
| | 601 |
| |
Net cash provided by (used in) financing activities - discontinued operations | | — |
| | — |
| | (10 | ) | | — |
| | (10 | ) |
Net cash provided by financing activities | 7,951 |
| | 7,643 |
| | 10,301 |
| | (11,799 | ) | | 14,096 |
| 2,503 |
| | 1,546 |
| | 3,141 |
| | (1,535 | ) | | 5,655 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | — |
| | (608 | ) | | 227 |
| | — |
| | (381 | ) | — |
| | (244 | ) | | 232 |
| | — |
| | (12 | ) |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | — |
| | — |
| | 22 |
| | — |
| | 22 |
| — |
| | — |
| | 37 |
| | — |
| | 37 |
|
Cash, cash equivalents and restricted cash at beginning of period | — |
| | 2,319 |
| | 2,683 |
| | — |
| | 5,002 |
| — |
| | 2,284 |
| | 3,018 |
| | — |
| | 5,302 |
|
Cash, cash equivalents and restricted cash at end of period | $ | — |
| | $ | 1,711 |
| | $ | 2,932 |
| | $ | — |
| | $ | 4,643 |
| $ | — |
| | $ | 2,040 |
| | $ | 3,287 |
| | $ | — |
| | $ | 5,327 |
|
Cash, cash equivalents and restricted cash from continuing operations at end of period | $ | — |
| | $ | 1,711 |
| | $ | 2,207 |
| | $ | — |
| | $ | 3,918 |
| $ | — |
| | $ | 2,040 |
| | $ | 2,697 |
| | $ | — |
| | $ | 4,737 |
|
Cash, cash equivalents and restricted cash from discontinued operations at end of period | $ | — |
| | $ | — |
| | $ | 725 |
| | $ | — |
| | $ | 725 |
| $ | — |
| | $ | — |
| | $ | 590 |
| | $ | — |
| | $ | 590 |
|
GENERAL MOTORS FINANCIAL COMPANY, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Basis of Presentation This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the audited consolidated financial statements and notes thereto included in our 20162017 Form 10-K.
OurThe European Operations are presented as discontinued operations and the assets and liabilities of our European Operations are presented as held for sale in our condensed consolidated financial statements for all periods presented.the three months ended March 31, 2017. Unless otherwise indicated, information in this discussion and analysisreport relates to our continuing operations. Refer to Note 2 - "Discontinued Operations" to our condensed consolidated financial statements for additional details regarding our planned disposal of these operations.Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and the "Risk Factors" section of our 20162017 Form 10-K for a discussion of these risks and uncertainties. Except as otherwise specified, dollar amounts presented within tables are stated in millions.
Retail Our retail automobile finance programs in the U.S. include full-spectrum lending and leasing offered through GM-franchised dealers under the "GM Financial" brand. We also offer a sub-prime lending product through non-GM-franchised and select independent dealers under the "AmeriCredit" brand. Our sub-prime lending program is designed to serve customers who have limited access to automobile financing through banks and credit unions. We therefore generally charge higher rates than those charged by banks and credit unions and expect to sustain a higher level of credit losses than on prime lending. We finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low mileage used vehicles.
Our international retail lending and leasing programs focus on financing new GM vehicles and select used vehicles. We also offer finance and/or car-related insurance products through third parties, such as payment protection, gap, extended warranty and motor insurance.
We have expanded our leasing and prime lending programs through GM-franchised dealerships in the U.S.; therefore, leasing and prime lending have become a larger percentage of our originations and retail portfolio balance. We have been the exclusive subvented lease provider for GM in the U.S. since April 2015 and the exclusive subvented loan provider for GM in the U.S. since January 2016. The following table presents our retail loan and lease originations in the North America Segment by FICO score band or equivalents:
|
| | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| Amount | | Percentage | | Amount | | Percentage |
Prime - FICO Score 680 and greater | $ | 24,082 |
| | 74.2 | % | | $ | 19,330 |
| | 69.6 | % |
Near-prime - FICO Score 620 to 679 | 3,783 |
| | 11.7 |
| | 3,606 |
| | 13.0 |
|
Sub-prime - FICO Score less than 620 | 4,577 |
| | 14.1 |
| | 4,829 |
| | 17.4 |
|
Total originations | $ | 32,442 |
| | 100.0 | % | | $ | 27,765 |
| | 100.0 | % |
The following table summarizes additional information for operating leases (in thousands):
|
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Operating leases originated(a) | 174 |
| | 161 |
| | 530 |
| | 518 |
|
Operating leases terminated(b) | 98 |
| | 36 |
| | 242 |
| | 94 |
|
Operating lease vehicles returned(c) | 68 |
| | 17 |
| | 163 |
| | 44 |
|
Return rate(d) | 69 | % | | 47 | % | | 67 | % | | 47 | % |
________________
| |
(a) | Operating leases originated represents the number of operating leases we purchase during a given period. |
| |
(b) | Operating leases terminated represents the number of vehicles for which the lease has ended during a given period. |
| |
(c) | Operating lease vehicles returned represents the number of vehicles returned to us for remarketing at the end of the lease term. |
| |
(d) | Return rates are calculated as the number of operating leases returned divided by the number of operating leases terminated. |
GENERAL MOTORS FINANCIAL COMPANY, INC.
Operating leases terminated and operating lease vehicles returned increased due to the growth and maturity of the leased asset portfolio. Due to the current age and size of our lease portfolio, the current return rate is lower than we expect it to be in future periods as our lease portfolio grows and matures.
The following table summarizes the residual value and the number of units included in leased vehicles, net by vehicle type (units in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Residual Value | | Units | | Unit Percentage | | Residual Value | | Units | | Unit Percentage |
Cars | $ | 5,968 |
| | 460 |
| | 28.6 | % | | $ | 5,240 |
| | 420 |
| | 31.7 | % |
Trucks | 6,722 |
| | 276 |
| | 17.1 |
| | 5,231 |
| | 224 |
| | 16.9 |
|
CUVs | 13,107 |
| | 782 |
| | 48.5 |
| | 10,349 |
| | 604 |
| | 45.7 |
|
SUVs | 3,456 |
| | 93 |
| | 5.8 |
| | 2,791 |
| | 75 |
| | 5.7 |
|
Total | $ | 29,253 |
| | 1,611 |
| | 100.0 | % | | $ | 23,611 |
| | 1,323 |
| | 100.0 | % |
Based on recent pricing trends for used vehicles in the secondary market, which have remained more favorable than previously expected, as well as the temporary impact from Hurricanes Harvey and Irma, we now expect used car prices to decline less than 7% during 2017 compared to 2016. We continue to expect an increased supply of used vehicles to pressure used car prices in 2018.
Commercial Our commercial lending programs are offered primarily to our GM-franchised dealer customers and their affiliates. Commercial lending products primarily include floorplan financing, working capital financing, loans to purchase and/or finance dealership real estate and loans to finance improvements to dealership facilities. Other commercial products include financing for parts and accessories, dealer fleets and storage centers.
Financing We primarily finance our loan, lease and commercial origination volume through the use of our secured and unsecured credit facilities, through public and private securitization transactions where such markets are developed and through the issuance of unsecured debt in the public markets. Generally, we seek to fund our operations through local sources of funding to minimize currency and country risk, although we may issue debt globally in order to enhance funding source diversification and support financing needs for the U.S. As such, the mix of funding sources varies from country to country, based on the characteristics of our earning assets and the relative development of the capital markets in each country. We actively monitor the capital markets and seek to optimize our mix of funding sources and our cost of funds.
Peugeot S.A. Transaction On March 5, 2017, General Motors Holdings LLC, a wholly-owned subsidiary of GM and our parent, entered into a Master Agreement (the Agreement) with Peugeot S.A. Pursuant to the Agreement, Peugeot S.A. acquired on July 31, 2017 GM’s Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) and will acquire, together with a financial partner, certain of our European financial subsidiaries and branches (collectively, our European Operations and, together with Opel/Vauxhall Business, GM's European Business), as described in Note 2 - "Discontinued Operations" to our condensed consolidated financial statements.The net consideration to be paid for our European Operations will be 0.8 times their book value at closing. Based on exchange rates at September 30, 2017, we estimate the net consideration will be approximately $1.1 billion, and we currently expect to recognize a disposal loss of approximately $500 million, subject to foreign currency fluctuations, which have had a favorable impact on the estimated loss. The purchase price is subject to certain adjustments as provided in the Agreement. During the nine months ended September 30, 2017, we recognized a portion of the disposal loss, in accordance with ASC 360 - "Property, Plant and Equipment." We expect to recognize the remainder of the disposal loss at the closing of the transaction.
At and during the nine months ended September 30, 2017, the assets and liabilities of our European Operations have been presented as held for sale and its operations and cash flows have been presented as discontinued operations based on the progress towards satisfying the various closing conditions necessary to complete the transaction. The transfer of our European Operations is expected to close by the end of the year subject to the receipt of the remaining necessary regulatory approvals and satisfaction of other closing conditions. Refer to Note 2 - "Discontinued Operations" to our condensed consolidated financial statements for more information related to the assets and liabilities held for sale and discontinued operations of our European Operations.Our principal focus is on expanding our business in the U.S. to reach full captive penetration levels; therefore, we do not expect that the sale of our European Operations will have a material adverse effect on our consolidated results of operations, financial condition, liquidity or financing strategies, including the mix of secured and unsecured debt issuances. We also do not expect that the sale of our European Operations will result in a material increase in our ratio of total debt to total equity or our earning assets leverage ratio as calculated under our Support Agreement with GM. Due to the size of the prime retail loan portfolio held by our European Operations, we expect that, for a period of time following the sale, leased vehicles will make up a greater
GENERAL MOTORS FINANCIAL COMPANY, INC.
percentage of our earning assets than they have historically. As our U.S. operations increase purchases of prime retail loans, we expect that our earning asset mix will return to more recent historical levels. We will distribute 50% of the sales proceeds to GM as a special dividend shortly following the completion of the sale.
We continue to expect pre-tax income to double from 2014 earnings of $815 million once full captive penetration levels are achieved on a consistent basis.
Results of Operations
In our tabular presentation of the changes in results between financial periods, we provide the following information: (i) the amount of change excluding the impact of foreign currency translation (FX); (ii) the amount of the impact of foreign currency translation; and (iii) the total change. The amount of the impact of foreign currency translation is derived by translating current year results at the average of prior year exchange rates, and is driven by the change in the U.S. Dollar against the currencies used by our foreign operations. We believe the amount of change excluding the foreign currency translation impact facilitates a better comparison of results. In our discussion below, we discuss changes in relevant items excluding any foreign currency translation impact. Average balances are calculated using daily balances, where available. Otherwise, average balances are calculated using monthly balances.
Results of Operations
Three Months Ended September 30, 2017March 31, 2018 compared to Three Months Ended September 30, 2016March 31, 2017
| | Average Earning Assets | Three Months Ended September 30, | | 2017 vs. 2016 | Three Months Ended March 31, | | 2018 vs. 2017 Change |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % | 2018 | | 2017 | | Amount | | Percentage |
Average retail finance receivables | $ | 31,796 |
| | $ | 24,740 |
| | $ | 6,905 |
| | $ | 151 |
| | $ | 7,056 |
| | 28.5 | % | $ | 33,471 |
| | $ | 27,484 |
| | $ | 5,987 |
| | 21.8 | % |
Average commercial finance receivables | 9,617 |
| | 6,161 |
| | 3,397 |
| | 59 |
| | 3,456 |
| | 56.1 | % | 10,068 |
| | 7,963 |
| | 2,105 |
| | 26.4 | % |
Average finance receivables | 41,413 |
| | 30,901 |
| | 10,302 |
| | 210 |
| | 10,512 |
| | 34.0 | % | 43,539 |
| | 35,447 |
| | 8,092 |
| | 22.8 | % |
Average leased vehicles, net | 40,789 |
| | 29,971 |
| | 10,736 |
| | 82 |
| | 10,818 |
| | 36.1 | % | 43,177 |
| | 35,751 |
| | 7,426 |
| | 20.8 | % |
Average earning assets | $ | 82,202 |
| | $ | 60,872 |
| | $ | 21,038 |
| | $ | 292 |
| | $ | 21,330 |
| | 35.0 | % | $ | 86,716 |
| | $ | 71,198 |
| | $ | 15,518 |
| | 21.8 | % |
| | | | | | | | | | | | | | | | | | |
Retail finance receivables purchased | $ | 4,686 |
| | $ | 4,159 |
| | $ | 495 |
| | $ | 32 |
| | $ | 527 |
| | 12.7 | % | $ | 5,078 |
| | $ | 5,607 |
| | $ | (529 | ) | | (9.4 | )% |
Leased vehicles purchased | $ | 6,557 |
| | $ | 6,129 |
| | $ | 411 |
| | $ | 17 |
| | $ | 428 |
| | 7.0 | % | $ | 5,712 |
| | $ | 6,273 |
| | $ | (561 | ) | | (8.9 | )% |
Average retail finance receivables increased as a resultdue to the volume of the continuednew loan originations in excess of principal collections and payoffs. Average commercial finance receivables increased due primarily to an increase ofin our share of GM's business in the U.S.GM-franchised dealer commercial lending relationships. The increase in average leased vehicles, net primarily resulted from our exclusive lease subvention arrangement in the U.S. with GM.GM, which began in early calendar 2015. Our retail penetration in North America declined to approximately 39% in the three months ended March 31, 2018 from approximately 48% in the corresponding period in 2017 due to lower GM lease penetration and down payment assistance being offered by GM on fewer vehicles, with a smaller incentive per vehicle.
GENERAL MOTORS FINANCIAL COMPANY, INC.
| | Revenue | Three Months Ended September 30, | | 2017 vs. 2016 | Three Months Ended March 31, | | 2018 vs. 2017 Change |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % | 2018 | | 2017 | | Amount | | Percentage |
Finance charge income | | | | | | | | | | | | | | | | | | |
Retail finance receivables | $ | 724 |
| | $ | 655 |
| | $ | 61 |
| | $ | 8 |
| | $ | 69 |
| | 10.5 | % | $ | 742 |
| | $ | 665 |
| | $ | 77 |
| | 11.6 | % |
Commercial finance receivables | $ | 113 |
| | $ | 66 |
| | $ | 46 |
| | $ | 1 |
| | $ | 47 |
| | 71.2 | % | $ | 124 |
| | $ | 87 |
| | $ | 37 |
| | 42.5 | % |
Leased vehicle income | $ | 2,244 |
| | $ | 1,582 |
| | $ | 655 |
| | $ | 7 |
| | $ | 662 |
| | 41.8 | % | $ | 2,447 |
| | $ | 1,931 |
| | $ | 516 |
| | 26.7 | % |
Other income | $ | 80 |
| | $ | 57 |
| | $ | 21 |
| | $ | 2 |
| | $ | 23 |
| | 40.4 | % | $ | 98 |
| | $ | 65 |
| | $ | 33 |
| | 50.8 | % |
Equity income | $ | 41 |
| | $ | 36 |
| | $ | 5 |
| | $ | — |
| | $ | 5 |
| | 13.9 | % | $ | 52 |
| | $ | 47 |
| | $ | 5 |
| | 10.6 | % |
Effective yield - retail finance receivables | 9.0 | % | | 10.5 | % | | | | | | | | | 9.0 | % | | 9.8 | % | | | | |
Effective yield - commercial finance receivables | 4.7 | % | | 4.3 | % | | | | | | | | | 5.0 | % | | 4.4 | % | | | | |
Finance charge income on retail finance receivables increased due to growth in the portfolio, substantiallypartially offset by a decrease in effective yield. The effective yield on our retail finance receivables decreased due primarily to a decrease in the average annual percentage rate on new originations in the U.S. to 5.2% for the three months ended September 30, 2017 from 6.2% for the three months ended September 30, 2016, as we have increased our lending to borrowers with prime credit. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average retail finance receivables. The effective yield, as a percentage of average retail finance receivables, is higher than the contractual rates of our auto finance contracts primarily because the effective yield includes, in addition to the contractual rates and fees, the impact of rate subvention provided by GM.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Finance charge income on commercial finance receivables increased due to growth in the portfolio, and due to an increase in the effective yield resulting from rising benchmark interest rates.
The increase in leased vehicle income reflects the growth of the leased asset portfolio.
Equity income in our China joint venture increased due primarily to growth in asset levels driven by increased retail penetration.
|
| | | | | | | | | | | | | | | | | | | | | | |
Costs and Expenses | Three Months Ended September 30, | | 2017 vs. 2016 |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % |
Operating expenses | $ | 346 |
| | $ | 327 |
| | $ | 18 |
| | $ | 1 |
| | $ | 19 |
| | 5.8 | % |
Leased vehicle expenses | $ | 1,670 |
| | $ | 1,197 |
| | $ | 469 |
| | $ | 4 |
| | $ | 473 |
| | 39.5 | % |
Provision for loan losses | $ | 204 |
| | $ | 167 |
| | $ | 36 |
| | $ | 1 |
| | $ | 37 |
| | 22.2 | % |
Interest expense | $ | 672 |
| | $ | 511 |
| | $ | 157 |
| | $ | 4 |
| | $ | 161 |
| | 31.5 | % |
Average debt outstanding | $ | 78,953 |
| | $ | 56,902 |
| | $ | 21,823 |
| | $ | 228 |
| | $ | 22,051 |
| | 38.8 | % |
Effective rate of interest on debt | 3.4 | % | | 3.6 | % | | | | | | | | |
Operating Expenses The increase in operating expenses relates to the growth in earning assets and investments to support the prime lending program and enhance lease origination and servicing capabilities in the U.S. Operating expenses as an annualized percentage of average earning assets decreased to 1.7% from 2.1% for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, due primarily to efficiency gains achieved through higher earning asset levels.
Leased Vehicle Expenses Leased vehicle expenses, which are primarily comprised of depreciation of leased vehicles, increased due to the growth of the leased asset portfolio.
Provision for Loan Losses The provision for retail loan losses increased due primarily to the growth of the retail finance receivables portfolio. As an annualized percentage of average retail finance receivables, the provision for retail loan losses decreased to 2.5% for the three months ended September 30, 2017 from 2.6% for the three months ended September 30, 2016, due primarily to a shift in the credit mix of the portfolio to a larger percentage of prime loans. The provision for commercial loan losses was insignificant for the three months ended September 30, 2017 and 2016.
Interest Expense Interest expense increased due primarily to an increase in the average debt outstanding resulting from growth in the loan and lease portfolios.
Taxes Our consolidated effective income tax rate was 46.1% and 38.0% of income before income taxes and equity income for the three months ended September 30, 2017 and 2016. The increase in the effective income tax rate is due primarily to differences in U.S. taxation of foreign earnings and a decrease in certain U.S. federal tax credits.
Other Comprehensive Income
Foreign Currency Translation Adjustment Foreign currency translation adjustments included in other comprehensive income (loss) were $120 million and $(10) million for the three months ended September 30, 2017 and 2016. Translation adjustments result from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changes in relation to international currencies.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | |
Average Earning Assets | Nine Months Ended September 30, | | 2017 vs. 2016 |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % |
Average retail finance receivables | $ | 29,918 |
| | $ | 23,728 |
| | $ | 6,030 |
| | $ | 160 |
| | $ | 6,190 |
| | 26.1 | % |
Average commercial finance receivables | 8,844 |
| | 5,731 |
| | 3,091 |
| | 22 |
| | 3,113 |
| | 54.3 | % |
Average finance receivables | 38,762 |
| | 29,459 |
| | 9,121 |
| | 182 |
| | 9,303 |
| | 31.6 | % |
Average leased vehicles, net | 38,282 |
| | 26,128 |
| | 12,131 |
| | 23 |
| | 12,154 |
| | 46.5 | % |
Average earning assets | $ | 77,044 |
| | $ | 55,587 |
| | $ | 21,252 |
| | $ | 205 |
| | $ | 21,457 |
| | 38.6 | % |
| | | | | | | | | | | |
Retail finance receivables purchased | $ | 15,546 |
| | $ | 10,580 |
| | $ | 4,872 |
| | $ | 94 |
| | $ | 4,966 |
| | 46.9 | % |
Leased vehicles purchased | $ | 19,581 |
| | $ | 19,327 |
| | $ | 242 |
| | $ | 12 |
| | $ | 254 |
| | 1.3 | % |
Average finance receivables increased as a result of the continued increase of our share of GM's business. The increase in average leased vehicles, net primarily resulted from our exclusive lease subvention arrangement in the U.S. with GM.
|
| | | | | | | | | | | | | | | | | | | | | | |
Revenue | Nine Months Ended September 30, | | 2017 vs. 2016 |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % |
Finance charge income | | | | | | | | | | | |
Retail finance receivables | $ | 2,098 |
| | $ | 1,924 |
| | $ | 140 |
| | $ | 34 |
| | $ | 174 |
| | 9.0 | % |
Commercial finance receivables | $ | 303 |
| | $ | 186 |
| | $ | 113 |
| | $ | 4 |
| | $ | 117 |
| | 62.9 | % |
Leased vehicle income | $ | 6,282 |
| | $ | 4,144 |
| | $ | 2,133 |
| | $ | 5 |
| | $ | 2,138 |
| | 51.6 | % |
Other income | $ | 216 |
| | $ | 175 |
| | $ | 35 |
| | $ | 6 |
| | $ | 41 |
| | 23.4 | % |
Equity income | $ | 129 |
| | $ | 109 |
| | $ | 24 |
| | $ | (4 | ) | | $ | 20 |
| | 18.3 | % |
Effective yield - retail finance receivables | 9.4 | % | | 10.8 | % | | | | | | | | |
Effective yield - commercial finance receivables | 4.6 | % | | 4.3 | % | | | | | | | | |
Finance charge income on retail finance receivables increased due to growth in the portfolio, substantially offset by a decrease in effective yield. The effective yield on our retail finance receivables decreased due primarily to a decrease in the average annual percentage rate on new originations in the U.S. to 5.9% for the nine months ended September 30, 2017 from 7.0% for the nine months ended September 30, 2016, as we have increased our lending to borrowers with prime credit. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average retail finance receivables. The effective yield, as a percentage of average retail finance receivables, is higher than the contractual rates of our auto finance contracts primarily because the effective yield includes, in addition to the contractual rates and fees, the impact of rate subvention provided by GM.
Finance charge income on commercial finance receivables increased due to growth in the portfolio, including an increase in the number of dealers in our floorplan program, and due to an increase in the effective yield resulting from rising benchmark interest rates.
The increase in leased vehicle income reflects the growth of the leased asset portfolio.
Equity income in our China joint venture increased due primarily to growth in asset levels driven by increased retail penetration.
GENERAL MOTORS FINANCIAL COMPANY, INC.
| | Costs and Expenses | Nine Months Ended September 30, | | 2017 vs. 2016 | Three Months Ended March 31, | | 2018 vs. 2017 Change |
| 2017 | | 2016 | | Change excluding FX | | FX | | Total change | | % | 2018 | | 2017 | | Amount | | Percentage |
Operating expenses | $ | 1,009 |
| | $ | 896 |
| | $ | 103 |
| | $ | 10 |
| | $ | 113 |
| | 12.6 | % | $ | 365 |
| | $ | 330 |
| | $ | 35 |
| | 10.6 | % |
Leased vehicle expenses | $ | 4,648 |
| | $ | 3,148 |
| | $ | 1,497 |
| | $ | 3 |
| | $ | 1,500 |
| | 47.6 | % | $ | 1,787 |
| | $ | 1,429 |
| | $ | 358 |
| | 25.1 | % |
Provision for loan losses | $ | 573 |
| | $ | 501 |
| | $ | 70 |
| | $ | 2 |
| | $ | 72 |
| | 14.4 | % | $ | 136 |
| | $ | 211 |
| | $ | (75 | ) | | (35.5 | )% |
Interest expense | $ | 1,903 |
| | $ | 1,393 |
| | $ | 489 |
| | $ | 21 |
| | $ | 510 |
| | 36.6 | % | $ | 732 |
| | $ | 596 |
| | $ | 136 |
| | 22.8 | % |
Average debt outstanding | $ | 73,278 |
| | $ | 52,378 |
| | $ | 20,720 |
| | $ | 180 |
| | $ | 20,900 |
| | 39.9 | % | $ | 81,525 |
| | $ | 67,049 |
| | $ | 14,476 |
| | 21.6 | % |
Effective rate of interest on debt | 3.5 | % | | 3.6 | % | | | | | | | | | 3.6 | % | | 3.6 | % | | | | |
Operating Expenses The increase in operating expenses relates to the growth in earning assets and investments to support the prime lending program and enhance lease origination and servicing capabilities in the U.S. Operating expenses as an annualized percentage of average earning assets decreased to 1.8%1.7% from 2.2%1.9% for the ninethree months ended September 30, 2017,March 31, 2018, compared to the ninethree months ended September 30, 2016,March 31, 2017, due primarily to efficiency gains achieved through higher earning asset levels.
Leased Vehicle Expenses Leased vehicle expenses, which are primarily comprised of depreciation of leased vehicles, increased due to the growth of the leased asset portfolio.
Provision for Loan Losses The provision for retail loan losses increased due primarily to the growth of the retail finance receivables portfolio. As an annualized percentage of average retail finance receivables, the provision for retail loan losses decreased to 2.5%1.6% for the ninethree months ended September 30, 2017March 31, 2018 from 2.8%3.1% for the ninethree months ended September 30, 2016,March 31, 2017, due primarily to a decrease in the loss confirmation period, resulting from a shift in the credit mix of the portfolio to a larger percentage of prime loans. The loss confirmation period represents the average amount of time between when a loss event first occurs to when the receivable is charged off. The provision for commercial loan losses was insignificant for the ninethree months ended September 30, 2017March 31, 2018 and 2016.2017.
Interest Expense Interest expense increased due primarily to an increase in the average debt outstanding resulting from growth in the loan and lease portfolios.
Taxes Our consolidated effective income tax rate was 33.9%18.9% and 37.7%27.5% of income before income taxes and equity income for the ninethree months ended September 30, 2017March 31, 2018 and 2016.2017. The decrease in the effective income tax rate is due primarily to reduceda favorable impact from the U.S. tax expense attributable to entities included in our effective tax rate calculation and an increase in certain U.S. federal tax credits.reform legislation.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Other Comprehensive Income
Foreign Currency Translation Adjustment Foreign currency translation adjustments included in other comprehensive income were $318$59 million and $60$94 million for the ninethree months ended September 30, 2017March 31, 2018 and 2016.2017. Translation adjustments resultresulted from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changeschanged in relation to international currencies.
CreditEarning Asset Quality
| | Retail Finance Receivables | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
Retail finance receivables, net of fees | $ | 32,317 |
| | $ | 26,400 |
| $ | 34,320 |
| | $ | 32,802 |
|
Less: allowance for loan losses | (899 | ) | | (765 | ) | (858 | ) | | (889 | ) |
Retail finance receivables, net | $ | 31,418 |
| | $ | 25,635 |
| $ | 33,462 |
| | $ | 31,913 |
|
Number of outstanding contracts | 2,262,017 |
| | 2,011,818 |
| 2,363,155 |
| | 2,308,826 |
|
Average amount of outstanding contracts (in dollars)(a) | $ | 14,287 |
| | $ | 13,122 |
| $ | 14,523 |
| | $ | 14,207 |
|
Allowance for loan losses as a percentage of retail finance receivables, net of fees | 2.8 | % | | 2.9 | % | 2.5 | % | | 2.7 | % |
_________________
| |
(a) | Average amount of outstanding contracts consists of retail finance receivables, net of fees, divided by number of outstanding contracts. |
At September 30, 2017,March 31, 2018, the allowance for loan losses as a percentage of retail finance receivables, net of fees, decreased from the level at December 31, 2016 consistent with2017 due primarily to a decrease in the improvedloss confirmation period, resulting from a shift in the credit mix of the portfolio to a larger percentage of prime loans. The loss confirmation period represents the average amount of time between when a loss event first occurs to when the receivable is charged off.
Delinquency The following is a consolidated summary of the contractual amounts of delinquent retail finance receivables:
|
| | | | | | | | | | | | | |
| March 31, 2018 | | March 31, 2017 |
| Amount | | Percent of Contractual Amount Due | | Amount | | Percent of Contractual Amount Due |
31 - 60 days | $ | 1,265 |
| | 3.7 | % | | $ | 995 |
| | 3.4 | % |
Greater than 60 days | 605 |
| | 1.7 |
| | 430 |
| | 1.4 |
|
Total finance receivables more than 30 days delinquent | 1,870 |
| | 5.4 |
| | 1,425 |
| | 4.8 |
|
In repossession | 53 |
| | 0.2 |
| | 46 |
| | 0.2 |
|
Total finance receivables more than 30 days delinquent or in repossession | $ | 1,923 |
| | 5.6 | % | | $ | 1,471 |
| | 5.0 | % |
Overall, delinquency continues to improve due primarily to the continued shift in our portfoliocredit mix to prime credit; however, delinquency at March 31, 2018 was elevated due to operational constraints resulting from the conversion of our expansionloan servicing system at the beginning of prime lending. The allowancecalendar 2018.
TDRs Refer to Note 3 to our condensed consolidated financial statements for loan losses reflects our estimatefurther discussion of the impact on credit losses resulting from hurricane activity during the three months ended September 30, 2017, which we expect to be minimal.
GENERAL MOTORS FINANCIAL COMPANY, INC.
TDRs.
Deferrals In accordance with our policies and guidelines, in the North America Segment, we, mayat times, offer payment deferrals to retail customers,consumers, whereby the borrower is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferralsdeferments that may be granted. Additionally, we generally limit the granting of deferralsdeferments on new accounts until a requisite number of payments have been received. Contracts receiving a payment deferral as an average quarterly percentage of average retail finance receivables outstanding increased to 6.1%were 3.1% and 4.3% for the three months ended September 30, 2017March 31, 2018 and 2017. The decrease in deferments is due in part to operational constraints resulting from 5.1% for the three months ended September 30, 2016 primarily due to deferrals granted on accountsconversion of borrowers who were impacted by hurricane activity duringour loan servicing system at the quarter. Contracts receiving a payment deferral as an average quarterly percentagebeginning of average retail finance receivables outstanding were 4.9% and 5.1% for the nine months ended September 30, 2017 and 2016. Deferrals in the International Segment were insignificant.calendar 2018.
Delinquency and Troubled Debt Restructurings Refer to
Note 4 - "Finance Receivables" to our condensed consolidated financial statements for further discussionTable of delinquent retail finance receivables and TDRs.ContentsGENERAL MOTORS FINANCIAL COMPANY, INC.
Net Charge-offs The following table presents charge-off data with respect to our retail finance receivables portfolio:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
Charge-offs | $ | 286 |
| | $ | 284 |
| | $ | 856 |
| | $ | 826 |
| $ | 295 |
| | $ | 298 |
|
Less: recoveries | (135 | ) | | (128 | ) | | (420 | ) | | (403 | ) | (123 | ) | | (143 | ) |
Net charge-offs | $ | 151 |
| | $ | 156 |
| | $ | 436 |
| | $ | 423 |
| $ | 172 |
| | $ | 155 |
|
Net charge-offs as an annualized percentage(a) | 1.9 | % | | 2.5 | % | | 1.9 | % | | 2.4 | % | 2.1 | % | | 2.3 | % |
_________________
| |
(a) | Net charge-offs as an annualized percentage is calculated as a percentage of average retail finance receivables. |
Net charge-offs as an annualized percentage of average retail finance receivables decreased during the three and nine months ended September 30, 2017March 31, 2018 from the priorcorresponding period in 2017, due primarily due to the shift in the North America receivables portfolio toward prime credit quality, and due to growth in the North America portfolio.as well as better recovery rates. The recovery rate as a percentage of gross repossession charge-offs in North America was 51.8%53.1% and 52.4%51.6% for the three and nine months ended September 30, 2017March 31, 2018 and 52.3% and 53.8% for the three and nine months ended September 30, 2016.2017.
| | Commercial Finance Receivables | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
Commercial finance receivables, net of fees | $ | 9,495 |
| | $ | 7,880 |
| $ | 10,365 |
| | $ | 10,312 |
|
Less: allowance for loan losses | (49 | ) | | (40 | ) | (54 | ) | | (53 | ) |
Total commercial finance receivables, net | $ | 9,446 |
| | $ | 7,840 |
| |
Commercial finance receivables, net | | $ | 10,311 |
| | $ | 10,259 |
|
Number of dealers | 1,502 |
| | 1,356 |
| 1,592 |
| | 1,538 |
|
Average carrying amount per dealer | $ | 6 |
| | $ | 6 |
| $ | 6 |
| | $ | 7 |
|
Allowance for loan losses as a percentage of commercial finance receivables, net of fees | 0.5 | % | | 0.5 | % | 0.5 | % | | 0.5 | % |
There were insignificantno charge-offs of commercial finance receivables during the three and nine months ended September 30, 2017March 31, 2018 and none during the three and nine months ended September 30, 2016.2017. At September 30, 2017March 31, 2018 and December 31, 2016,2017, substantially all of our commercial finance receivables were current with respect to payment status and none were classified as TDRs. The inventory securing our commercial finance receivables is generally covered by insurance; therefore, we do not expect any significant impact to credit losses resulting from hurricane activity during the three months ended September 30, 2017.
Leased Vehicles At September 30,March 31, 2018 and 2017, 98.8% and 2016, 99.1% of99.2% of our operating leases were current with respect to payment status. Our
The following table summarizes the residual value and the number of units included in leased vehicles, are generally insured; therefore, we do not expect any significant lossesnet by vehicle type (units in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| March 31, 2018 | | December 31, 2017 |
| Residual Value | | Units | | Percentage of Units | | Residual Value | | Units | | Percentage of Units |
Cars | $ | 5,518 |
| | 430 |
| | 25.6 | % | | $ | 5,701 |
| | 450 |
| | 27.2 | % |
Trucks | 7,317 |
| | 292 |
| | 17.4 |
| | 7,173 |
| | 285 |
| | 17.3 |
|
CUVs | 14,201 |
| | 852 |
| | 50.8 |
| | 13,723 |
| | 818 |
| | 49.5 |
|
SUVs | 3,939 |
| | 103 |
| | 6.2 |
| | 3,809 |
| | 99 |
| | 6.0 |
|
Total | $ | 30,975 |
| | 1,677 |
| | 100.0 | % | | $ | 30,406 |
| | 1,652 |
| | 100.0 | % |
The industry supply of used vehicles resulting from hurricane activity duringoff-lease returns is expected to continue to increase through 2019. As a result, we expect a decline in used car prices in the U.S. of between 5% and 6% as compared to 2017, although we have experienced stronger results than anticipated in the three months ended September 30, 2017.March 31, 2018.
GENERAL MOTORS FINANCIAL COMPANY, INC.
The following table summarizes additional information for operating leases (in thousands):
|
| | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Operating leases originated | 149 |
| | 171 |
|
Operating leases terminated | 124 |
| | 59 |
|
Operating lease vehicles returned(a) | 94 |
| | 38 |
|
Return rate(b) | 76 | % | | 64 | % |
________________
| |
(a) | Represents the number of vehicles returned to us for remarketing. |
| |
(b) | Calculated as the number of operating leases returned divided by the number of operating leases terminated. |
Operating leases terminated and operating lease vehicles returned increased due to the growth and maturity of the leased asset portfolio. Due to the current age and size of our lease portfolio, the current return rate is lower than we expect it to be in future periods as our lease portfolio grows and matures.
Liquidity and Capital Resources
General Our primary sources of cash are finance charge income, leasing income and proceeds from the sale of terminated leased vehicles, servicing fees, net distributions from secured debtcredit facilities, including securitizations, secured and unsecured borrowings and collections and recoveries on finance receivables. Our primary uses of cash are purchases of retail finance receivables and leased vehicles, the funding of commercial finance receivables, repayment of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured credit facilities, operating expenses, interest costs and interest costs.preferred stock dividends.
OurTypically, our purchase and funding of retail and commercial finance receivables and leased vehicles are financed initially utilizing cash and borrowings on our secured credit facilities. Subsequently, we typically obtain long-term financing for finance receivables and leased vehicles through securitization transactions and the issuance of unsecured debt.
Cash Flow During the ninethree months ended September 30, 2017,March 31, 2018, net cash provided by operating activities increased due primarily to an increase in net leased vehicle income, partially offset by increased interest expense and increased operating expenses.
During the ninethree months ended September 30, 2017,March 31, 2018, net cash used in investing activities increaseddecreased due to an increase in net purchasesproceeds received on terminated leases of retail finance receivables of $4.9$1.3 billion, and an increase in net fundings of commercial finance receivables of $0.4 billion, partially offset by a decrease in purchases of leased vehicles of $130 million, increased collections and recoveries on retail finance receivables of $2.0$0.8 billion, a decrease in net fundings of commercial finance receivables of $0.6 billion, a decrease in purchases of retail finance receivables of $0.4 billion, and an increasea decrease in proceeds received on terminated leasespurchases of $2.9leased vehicles of $0.3 billion.
During the ninethree months ended September 30, 2017,March 31, 2018, net cash provided by financing activities increaseddecreased due primarily to the issuance of preferred stock of $985 million and an increasea decrease in borrowings, net of repayments, of $146 million.$2.9 billion.
| | Liquidity | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
Cash and cash equivalents(a) | $ | 3,976 |
| | $ | 2,815 |
| $ | 4,178 |
| | $ | 4,265 |
|
Borrowing capacity on unpledged eligible assets | 12,661 |
| | 8,321 |
| 14,073 |
| | 12,533 |
|
Borrowing capacity on committed unsecured lines of credit | 132 |
| | 105 |
| 136 |
| | 129 |
|
Borrowing capacity on the Junior Subordinated Revolving Credit Facility | 1,000 |
| | 1,000 |
| 1,000 |
| | 1,000 |
|
Available liquidity | $ | 17,769 |
| | $ | 12,241 |
| $ | 19,387 |
| | $ | 17,927 |
|
_________________
| |
(a) | Includes $377$512 million and $454$656 million in unrestricted cash outside of the U.S. at September 30, 2017March 31, 2018 and December 31, 2016.2017. This cash is considered to be indefinitely invested based on specific plans for reinvestment of these earnings. |
During the ninethree months ended September 30, 2017,March 31, 2018, available liquidity increased due primarily to an increase in cashreceivables eligible to be pledged and additional capacitya decrease in advances outstanding on new and renewed secured revolving credit facilities, resulting from the issuance of secured and unsecured debt and preferred stock.facilities.
We have the abilityOur Support Agreement with GM provides that GM will use commercially reasonable efforts to borrow upensure that we will continue to $1.0 billionbe designated as a subsidiary borrower under GM's three-year, $4.0 billion unsecured revolving credit facilityfacilities. At March 31, 2018, we had no borrowings outstanding, and up to $3.0 billion under GM's five-year, $10.5 billion unsecured revolving credit facility, subject to available capacity. Our borrowings under GM's facilities are limited by GM's ability to borrow the entire amount available under the facilities. Therefore, we may be able to borrow up to $4.0 billion in total or may be unable to borrow depending on GM's borrowing activity. If we do borrow under these facilities, we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business. Neither we, nor any of our subsidiaries, guarantee any obligations under these facilities and none of our assets secure these facilities. Liquidityliquidity available to us under the GM unsecured revolving credit facilities is not includedreflected in the table above. At September 30, 2017, we had no amounts borrowed under either
GENERAL MOTORS FINANCIAL COMPANY, INC.
In April 2018, GM amended and restated its revolving credit facilities.facilities, consisting of a three-year, $4.0 billion facility and a five-year, $10.5 billion facility, and added a 364-day, $2.0 billion facility. We have access to the entire $16.5 billion, subject to available capacity, with irrevocable and exclusive access of no less than $2.0 billion of the 364-day facility to support our liquidity.
Credit Facilities In the normal course of business, in addition to using our available cash, we utilize borrowings under our credit facilities, which may be secured and/or structured as securitizations, or may be unsecured, and we repay these borrowings as appropriate under our liquidity management strategy.
GENERAL MOTORS FINANCIAL COMPANY, INC.
At September 30, 2017,March 31, 2018, credit facilities consist of the following:
| | Facility Type | | Facility Amount | | Advances Outstanding | | Facility Amount | | Advances Outstanding |
Revolving retail asset-secured facilities(a) | | $ | 21,077 |
| | $ | 4,563 |
| | $ | 22,154 |
| | $ | 3,310 |
|
Revolving commercial asset-secured facilities(b) | | 3,920 |
| | 188 |
| | 3,910 |
| | 277 |
|
Total secured | | 24,997 |
| | 4,751 |
| | 26,064 |
| | 3,587 |
|
Unsecured committed facilities(c) | | 132 |
| | — |
| | 136 |
| | — |
|
Unsecured uncommitted facilities(d) | | 2,162 |
| | 2,162 |
| | 2,311 |
| | 2,311 |
|
Total unsecured | | 2,294 |
| | 2,162 |
| | 2,447 |
| | 2,311 |
|
Junior Subordinated Revolving Credit Facility | | 1,000 |
| | — |
| | 1,000 |
| | — |
|
Total | | $ | 28,291 |
| | $ | 6,913 |
| | $ | 29,511 |
| | $ | 5,898 |
|
_________________ | |
(a) | Includes committed and uncommitted revolving credit facilities backed by retail finance receivables and leases. The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them. We had $158$126 million in advances outstanding and $831$822 million in unused borrowing capacity on these facilities at September 30, 2017.March 31, 2018. |
| |
(b) | Includes revolving credit facilities backed by loans to dealers for floorplan financing. |
| |
(c) | Does not include $4.0 billion in liquidity available to us under GM's unsecured revolving credit facilities. |
| |
(d) | The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them. We had $1.3 billion in unused borrowing capacity on these facilities at September 30, 2017.March 31, 2018. |
Refer to Note 8 - "Debt" to our consolidated financial statements in our Form 10-K for further discussion of the terms of our revolving credit facilities.
Securitization Notes Payable We periodically finance our retail and commercial finance receivables and leases through public and private term securitization transactions, where the securitization markets are sufficiently developed. A summary of securitization notes payable is as follows:
| | Year of Transaction | | Maturity Date(a) | | Original Note Issuance(b) | | Note Balance At September 30, 2017 | | Maturity Date (a) | | Original Note Issuance (b) | | Note Balance At March 31, 2018 |
2013 | | October 2020 | - | October 2021 | | $ | 4,058 |
| | $ | 523 |
| | April 2021 | - | October 2021 | | $ | 1,080 |
| | $ | 112 |
|
2014 | | July 2019 | - | March 2022 | | $ | 6,336 |
| | 1,685 |
| | July 2021 | - | March 2022 | | $ | 4,850 |
| | 883 |
|
2015 | | July 2019 | - | December 2023 | | $ | 13,110 |
| | 5,553 |
| | July 2019 | - | December 2023 | | $ | 12,098 |
| | 3,577 |
|
2016 | | April 2018 | - | September 2024 | | $ | 15,528 |
| | 10,652 |
| | May 2019 | - | September 2024 | | $ | 15,405 |
| | 8,219 |
|
2017 | | August 2019 | - | February 2025 | | $ | 19,039 |
| | 17,686 |
| | June 2019 | - | May 2025 | | $ | 22,679 |
| | 18,568 |
|
2018 | | | March 2022 | - | December 2025 | | $ | 4,750 |
| | 4,565 |
|
Total active securitizations | | | | 36,099 |
| | | | 35,924 |
|
Debt issuance costs | | | | (75 | ) | | | | (70 | ) |
Total | | | | $ | 36,024 |
| | | | $ | 35,854 |
|
_________________
| |
(a) | Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables and leases pledged. |
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(b) | At historical foreign currency exchange rates at the time of issuance. |
Our securitizations utilize special purpose entitiesSPEs which are also VIEs that meet the requirements to be consolidated in our financial statements. Refer to Note 87 - "Variable Interest Entities" to our condensed consolidated financial statements in this Form 10-Q for further discussion.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Senior Notes and Other Unsecured Debt We periodically access the unsecured debt capital markets through the issuance of senior unsecured notes, predominantly from registered shelves in the U.S., Europe and Mexico. At September 30, 2017,March 31, 2018, the par valueaggregate principal amount of our outstanding senior notes was $35.2$40.8 billion.
We issue other unsecured debt through commercial paper offerings and other non-bank funding sources. At September 30, 2017,March 31, 2018, we had $1.3$1.7 billion of this type of unsecured debt outstanding.
Support AgreementLeverage Ratio At September 30,March 31, 2018 and December 31, 2017, our earning assets leverage ratio calculated in accordance with the terms of the Support Agreement was 10.23,9.10x and 9.49x, and the applicable leverage ratio threshold was 11.50.11.50x. The earning assets leverage ratio decreased during the three months ended March 31, 2018 due to growth in earnings.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Forward-Looking Statements
This report contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" or "anticipate" and other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2016.2017. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.
The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:
GM's ability to sell new vehicles that we finance in the markets we serve;
the viability of GM-franchised dealers that are commercial loan customers;
the availability and cost of sources of financing;
our joint venture in China, which we cannot operate solely for our benefit and over which we have limited control;
the level of net charge-offs, delinquencies and prepayments on the loans and leases we originate;
the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;
the prices at which used cars are sold in the wholesale auction markets;
vehicle return rates and the residual value performance on vehicles we lease;
interest rate fluctuations and certain related derivatives exposure;
foreign currency exchange rate fluctuations;
our financial condition and liquidity, as well as future cash flows and earnings;
changes in general economic and business conditions;
competition;
our ability to manage risks related to security breaches and other disruptions to our networks and systems; and
changes in business strategy, including expansion of product lines and credit risk appetite, acquisitions and divestitures; and
risks and uncertainties associated with the consummation of the sale of GM's European Business to Peugeot S.A., including satisfaction of the closing conditions.divestitures.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in our exposure to market risk since December 31, 2016.2017. Refer to Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in our 20162017 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods specified in the SEC's rules and forms and accumulated and communicated to our management, including our principal executive officer (CEO) and principal financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) at September 30, 2017.March 31, 2018. Based on this evaluation required by paragraph (b) of RuleRules 13a-15 and/or 15d-15, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2017.
GENERAL MOTORS FINANCIAL COMPANY, INC.
March 31, 2018.
Changes in Internal Control Overover Financial Reporting There have not been any changes in our internal control over financial reporting during the three months ended September 30, 2017,March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
Refer to Note 109 -"Commitments and Contingencies" to our condensed consolidated financial statements for information relating to certain legal proceedings. Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business and the results of our operations and financial condition could be materially adversely affected by these risks factors. There have been no material changes to the Risk Factors disclosed in our 20162017 Form 10-K.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Item 6. Exhibits
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| | | | Filed Herewith |
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| | | | Incorporated by Reference |
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| | | | Furnished with this Report |
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101.INS | | XBRL Instance Document | | Filed Herewith |
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101.SCH | | XBRL Taxonomy Extension Schema Document | | Filed Herewith |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | Filed Herewith |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | Filed Herewith |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | Filed Herewith |
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101.PRE | | XBRL Taxonomy Presentation Linkbase Document | | Filed Herewith |
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* | The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request. |
Instruments defining the rights of holders of certain issues of long-term debt of General Motors Financial Company, Inc. have not been filed as exhibits because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of General Motors Financial Company, Inc. General Motors Financial Company, Inc. will furnish a copy of each such instrument to the SEC upon request.
GENERAL MOTORS FINANCIAL COMPANY, INC.
SIGNATURE
Pursuant to the requirements 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.
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| | | | | General Motors Financial Company, Inc. |
| | | | | (Registrant) |
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Date: | October 24, 2017April 26, 2018 | | By: | | /S/ CSHRISUSAN A. CB. SHOATEHEFFIELD |
| | | | | (Signature) |
| | | | | Chris A. ChoateSusan B. Sheffield |
| | | | | Executive Vice President and |
| | | | | Chief Financial Officer |