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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
- --- FOR THE YEAR ENDED DECEMBER 31, 1999, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
- --- 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-3754
GENERAL MOTORS ACCEPTANCE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 38-0572512
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3044 West Grand Boulevard, Detroit, Michigan 48202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-556-5000
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The registrant meets the conditions set forth in General Instruction I(1) (a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
7.00% Notes due March 1, 2000 Global Floating Rate Notes due September 25, 2002
9 3/8% Notes due April 1, 2000 6 5/8% Notes due October 1, 2002
9 5/8% Notes due May 15, 2000 8 1/2% Notes due January 1, 2003
5 5/8% Notes due February 15, 2001 5 7/8% Notes due January 22, 2003
7 1/8% Notes due May 1, 2001 6 3/4% Notes due March 15, 2003
6 7/8% Notes due July 15, 2001 7 1/8% Notes due May 1, 2003
7.00% Notes due August 15, 2001 8 3/4% Notes due July 15, 2005
6 3/8% Notes due December 1, 2001 6 5/8% Notes due October 15, 2005
9 5/8% Notes due December 15, 2001 6 1/8% Notes due January 22, 2008
5 1/2% Debentures due December 15, 2001 8 7/8% Notes due June 1, 2010
6.00% Notes due February 1, 2002 6.00% Debentures due April 1, 2011
6 3/4% Notes due February 7, 2002 10.00% Deferred Interest Debentures due December 1, 2012
Floating Rate Notes due April 29, 2002 10.30% Deferred Interest Debentures due June 15, 2015
7.00% Notes due September 15, 2002
All of the securities listed above are registered on the New York Stock
Exchange.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes X . No .
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As of December 31, 1999, there were outstanding 10 shares of the issuer's common
stock.
Documents incorporated by reference. None.
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CONTENTS
PART I Page No.
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Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters 8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21
Item 8. Financial Statements and Supplementary Data 24
Management's Responsibilities for Consolidated Financial Statements 24
Independent Auditors' Report 25
Consolidated Balance Sheet 26
Consolidated Statement of Income 27
Consolidated Statement of Changes in Stockholder's Equity 28
Consolidated Statement of Cash Flows 30
Notes to Consolidated Financial Statements 32
Supplementary Financial Data 57
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 58
Signatures 59
Exhibit Index 61
Ratio of Earnings to Fixed Charges 62
Independent Auditors' Consent 63
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PART I
ITEM 1. BUSINESS
General Motors Acceptance Corporation (the "Company" or "GMAC"), a wholly-owned
subsidiary of General Motors Corporation ("General Motors" or "GM"), was
incorporated in 1997 under Delaware General Corporation Law. On January 1, 1998,
the Company merged with its predecessor, which was originally incorporated in
New York in 1919.
In conducting its primary form of business, GMAC and its affiliated companies
have a presence in 36 countries and offer a wide variety of automotive financial
services to and through franchised General Motors dealers throughout the world.
GMAC also offers financial services to other automobile dealerships and to the
customers of those dealerships. Additionally, the Company provides commercial
financing for real estate, equipment and working capital to automobile
dealerships, GM suppliers and customers of GM affiliates. The Company also
provides commercial financing and factoring services for companies in the
apparel, textile, automotive supplier and numerous other industries. GMAC's
other financial services include insurance and mortgage banking. The Company had
27,383 and 23,619 employees worldwide, as of December 31, 1999 and 1998,
respectively.
The Company operates directly and through its subsidiaries and affiliates
(including joint ventures) in which the Company or GM has equity investments. In
its principal markets, GMAC offers automotive financing and other services as
described below. The Company operates its automotive financing services outside
of the United States ("U.S.") in a similar manner, subject to local laws or
other circumstances that may cause it to modify its procedures accordingly. The
Company's policies and internal controls are designed to ensure compliance with
applicable laws and regulations.
The automotive financing industry is highly competitive. The Company's principal
competitors for retail financing and leasing are a large number of banks,
commercial finance companies, savings and loan associations and credit unions.
Wholesale and lease financing competitors are primarily comprised of other
manufacturers' affiliated finance companies, independent commercial finance
companies and banks. Neither the Company nor any of its competitors are
considered to be a dominant force in the industry when analyzed individually.
The Company's ability to offer competitive financing rates, the primary basis of
competition, is directly affected by its access to capital markets. The Company
applies a strategy of constantly reviewing funding alternatives to foster
continued success. The quality of integrated GM and GMAC products and services
provided to automotive dealerships and their customers contributes to the
Company's competitive advantages.
In the North American automotive business, seasonal retail sales fluctuations
cause production levels to vary from month to month. In addition, the changeover
period related to the annual new model introduction traditionally occurs in the
third quarter of each year, causing an unfavorable impact on the operating
results of automobile manufacturers. These factors produce minor fluctuations in
financing volume, with the second and third quarters of each year generally
experiencing the strongest activity. However, seasonal variations in vehicle
deliveries do not have a material impact on the Company's interim results.
Quarterly financing revenue remains relatively consistent throughout the year,
primarily due to the use of the straight-line method for recognition of
operating lease revenue and the interest method for recognition of income from
retail and lease financing transactions as well as consistent dealer inventory
levels.
As the financing of GM manufactured vehicles comprises a substantial portion of
the Company's business, any protracted reduction or suspension of GM's
production or sales resulting from a decline in demand, work stoppage,
governmental action, adverse publicity, or other event, could have a substantial
unfavorable effect on the Company's results of operations. Information about
GM's production and sales can be found in GM's Annual Report on Form 10-K for
the year ended December 31, 1999, filed separately with the Securities and
Exchange Commission.
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ITEM 1. BUSINESS (CONTINUED)
RETAIL FINANCING
GMAC conducts its U.S. and Canadian retail automotive financing business under
the trade name GMAC Financial Services. The Company provides financial services
to customers through dealers who have established relationships with GMAC.
Retail installment obligations for new and used products that meet GMAC's credit
standards are purchased directly from dealers.
Outside the U.S. and Canada, GMAC conducts its retail automotive financing
business under various trade names, such as Opel Bank, Vauxhall Finance, and
Holden Financial Services, primarily depending upon General Motors activity in
the country while also considering local customs and requirements. Retail
automotive financing is provided in a similar manner as in the U.S., but in some
cases, GMAC enters into an installment obligation directly with the customer.
GMAC also provides subprime retail automotive financing and servicing to
customers in the U.S. and Europe. Subprime financing in the U.S. is provided
through Nuvell Financial Services ("Nuvell"), a wholly-owned subsidiary. In
addition to subprime financing, Nuvell provides private-label servicing for SAAB
Financial Services Corporation in the U.S. In Europe, On:Line Financing
Holdings, Ltd., a majority-owned subsidiary, provides subprime as well as
standard rate used vehicle financing.
Retail obligations are generally secured by lien notation on vehicle titles
and/or other forms of security interest in the vehicles financed. After
satisfying local requirements, GMAC is generally able to repossess the vehicle
if the installment buyer fails to meet the obligations of the contract. The
interests of both GMAC and the retail buyer are usually protected by automobile
physical damage insurance.
General Motors may elect to sponsor retail finance programs by supporting
special retail finance rates and/or guaranteeing residual values in excess of
those established by independently published residual value guidebooks used by
GMAC.
WHOLESALE FINANCING
Using GMAC's wholesale financing, qualifying dealers are able to finance new and
used vehicles held in inventory pending sale or lease to retail or fleet buyers.
When a dealer uses GMAC's Wholesale Finance Plan to acquire vehicles from a
manufacturer or other vehicle sources, GMAC is ordinarily granted a security
interest in those vehicles. GMAC is generally able to repossess the vehicle if
the dealer does not pay the amount advanced or fails to comply with other
conditions specified in the security agreement.
TERM LOANS
GMAC provides term loans for real estate, equipment and working capital to
automobile dealerships, GM suppliers and customers of GM affiliates. The Company
generally secures the loans with liens on real estate, other dealership assets
and/or the personal guarantee of the dealer.
LEASING
In the U.S. and Canada, GMAC offers leasing plans to retail customers as well as
dealers or other companies that rent or lease vehicles to others. GMAC also
offers various lease products in 23 other countries.
OPERATING LEASES
GMAC's most successful leasing program, called SmartLease in the U.S. and
Canada, is a plan in which dealers originate the leases and offer them for
purchase by GMAC. In Europe and Asia-Pacific, GMAC also offers full-service
individual and fleet leasing products. In addition to the maintenance management
services directly associated with the full-service lease, the Company offers
services including fleet management, accident management, fuel programs, title
and licensing services and short-term vehicle rental.
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ITEM 1. BUSINESS (CONTINUED)
LEASING (CONCLUDED)
OPERATING LEASES (CONCLUDED)
As GMAC assumes ownership of the vehicles from the dealers, these leases are
accounted for as operating leases with the capitalized cost of the vehicles
recorded as depreciable assets (net investment in operating leases). In the U.S.
and Canada, dealers are not responsible for customers' performances during the
lease periods nor for the values of the vehicles at the time of lease
maturities. Credit standards for these programs are similar to those applied to
retail financing contracts. The SmartLease program encourages shorter customer
trading cycles.
General Motors may elect to sponsor retail leasing programs by supporting
special lease rates and/or guaranteeing residual values in excess of those
established by independently published residual value guidebooks used by GMAC.
FINANCE LEASES
GMAC also offers other leasing plans directly to individual customers and other
entities. Under these plans, the leases are accounted for as finance leases and
the receivables from the customers are recorded as finance receivables. GMAC
does not assume ownership of the vehicles. These leasing receivables essentially
represent installment sales of vehicles, with the vehicles usually being
acquired by the customers at the end of the lease contracts.
LEASE FINANCING
Dealers, their affiliates and other companies may obtain GMAC financing to buy
vehicles, which they lease or rent to others. These leases, sometimes referred
to as fleet leases, are categorized as finance receivables. GMAC generally has a
security interest in these vehicles and in the rental payments. However,
competitive factors occasionally result in a limited security interest in this
collateral. Approximately 47% of GMAC's fleet financing receivables are covered
by General Motors programs which provide a limited payment guarantee to
participating financing institutions as consideration for extending credit to a
fleet customer. Under these programs, General Motors will reimburse the
financing institution, subject to certain limitations, for losses on the sales
of vehicles that are returned to the selling dealers or repossessed.
COMMERCIAL FINANCING
Through operations in the U.S., United Kingdom and Canada, the Company provides
secured financing to companies in the apparel, textile, automotive supplier and
numerous other industries. Financing is provided to clients through revolving
lines of credit, term loans and the purchase of accounts receivable owed to
clients from their customers (known as "factoring"). The Company also provides
receivable/collection management products as well as guarantees amounts due
under letters of credit issued by the clients to their suppliers. Accounts
receivable and inventories are the primary security for commercial financing and
factoring products and services.
INSURANCE
GMAC Insurance Holdings, Inc. ("GMACI"), a holding company formed in 1997,
conducts insurance operations primarily in the U.S., Canada and Europe through
its subsidiaries, Motors Insurance Corporation ("MIC"), Integon Corporation
("Integon"), and GMAC RE Corp. ("GMAC RE"). GMACI insures and reinsures extended
warranty, personal insurance coverages ranging from preferred to non-standard
risks and selected commercial insurance coverages. GMACI acquired Integon on
October 17, 1997 for $523 million plus the assumption of $250 million in
long-term debt.
Commercial lines coverages include insurance for dealer vehicle inventories as
well as other dealer property and casualty coverages. MIC also provides
collateral protection coverage to GMAC on certain vehicles securing GMAC retail
installment contracts. Additionally, GMAC RE underwrites diverse property and
casualty risks, primarily in the U.S. market.
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ITEM 1. BUSINESS (CONTINUED)
INSURANCE (CONCLUDED)
Personal lines coverages, which include automobile, homeowners and umbrella
liability insurance, are offered on a direct response and agency basis.
Integon's non-standard automobile insurance is offered by approximately 15,000
independent agents in 35 states. The non-standard auto insurance market offers
insurance to individuals that do not meet the underwriting criteria of most
standard insurance companies.
The property casualty insurance industry is highly competitive. Competition in
the property casualty markets in which GMACI operates consists of large
multi-line companies and smaller specialty carriers. None of these companies,
including GMACI, holds a dominant position in these markets.
There are no material seasonal factors that affect the quarterly results of
GMACI.
MORTGAGE BANKING
GMAC Mortgage Group, Inc. and its subsidiaries ("GMACMG") perform a wide array
of real estate financial services including the origination, purchase, financing
and servicing of residential, commercial and multifamily mortgage loans as well
as the issuing, purchasing and selling of mortgage-backed securities. In
addition, GMACMG actively pursues the acquisition of mortgage servicing rights
from other mortgage bankers and financial institutions. Operations of GMACMG's
various mortgage banking subsidiaries are conducted through its three primary
businesses: GMAC Residential Holding Corp. ("GMACM"); GMAC Commercial Holding
Corp. ("GMACCM"); and Residential Funding Corporation ("RFC").
GMACM originates first and second lien residential mortgage loans through a
nationwide retail network and direct lending centers, including its Family First
program. Family First is a custom mortgage service program offered to GM
employees, dealers and stockholders. In addition to selling its originated loans
in the secondary market while retaining the right to service the loans, GMACM
actively acquires servicing rights from other mortgage bankers and financial
institutions. GMACM has diversified its operations to include trustee services
and mortgage-related insurance products. GMACM also operates a national real
estate franchise network and provides relocation services. During 1999, GMACM
expanded operations through various acquisitions that increased the capacity of
direct lending operations, added consumer-direct advertising expertise and
established GMACM's presence in the internet mortgage origination market.
GMACCM is the nation's largest commercial and multifamily mortgage loan servicer
based on dollar volume of commercial and multifamily mortgages serviced for
third party investors as of December 31,1999. It is a direct lender and
correspondent for life insurance companies and pension funds. GMACCM provides a
wide range of innovative financial products and services including long-term,
interim and construction financing, appraisal services and specialized financing
and marketing services. During 1998, GMACCM diversified its operations through
various acquisitions, most notably, an investment banking firm/licensed
broker/dealer which specializes in the financing of real estate related projects
and two software development companies which specialize in mortgage banking
software.
RFC is engaged in several interrelated business lines including mortgage
securitization, investing, origination and lending operations. RFC is the
number-one issuer of private-label mortgage-backed securities in the U.S. based
on dollar volume of private-label mortgage-backed securities issued as of
December 31, 1999. RFC purchases non-conforming, single-family residential
mortgages from mortgage lenders throughout the U.S., securitizes such mortgages
into mortgage pass-through certificates, sells the certificates to investors and
performs master servicing of these securities on behalf of investors. In
addition to prime residential mortgages, RFC also purchases and securitizes
subprime residential mortgages, home equity lines of credit and home improvement
loans. RFC also provides warehouse lending facilities to certain mortgage
banking customers secured principally by mortgage collateral as well as
long-term secured lines of credit to construction lending project managers and
national and regional homebuilders. In addition, Residential Money Centers, a
GMACMG subsidiary, offers a variety of first- and second-mortgage loans to
homeowners who do not meet the credit standards normally required for purchase
by government-sponsored enterprises.
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ITEM 1. BUSINESS (CONCLUDED)
MORTGAGE BANKING (CONCLUDED)
The mortgage banking business is highly competitive. GMACMG competes with other
mortgage banking companies, commercial banks, savings associations, credit
unions and other financial institutions in every aspect of its business,
including funding and purchasing loans from mortgage brokers, purchasing loans
from correspondents, securitizing and selling loans to investors and acquiring
loan servicing rights and origination capabilities.
Residential mortgage volume is generally subject to seasonal trends. These
trends reflect the general national pattern of sales and resales of homes, which
typically peak during the spring and summer seasons and decline to lower levels
from mid-November through February. However, the seasonal trends do not have a
material impact on GMACMG's interim results. Refinancings tend to be less
seasonal and more closely related to changes in interest rates. In addition to
having an effect on refinancing, changes in interest rates affect the volume of
loan originations and acquisitions, the interest rate spread on mortgage-related
investments and loans held for sale, the amount of gain or loss on the sale of
loans and the value of GMACMG's servicing portfolio.
FINANCIAL INFORMATION
Financial information regarding operating segments and operations by geographic
area is set forth in Note 1 and Note 15 in the Notes to Consolidated Financial
Statements.
ITEM 2. PROPERTIES
The Company and its subsidiaries have 277 automotive financial services offices,
18 commercial financial services offices, 103 insurance offices and 522 mortgage
offices. Of the number of financial services offices, 214 are in the United
States and Puerto Rico, 18 in Canada and 45 in other countries. Of the number of
commercial financial services offices, 10 are located in the United States, 2 in
Canada and 6 in the United Kingdom. There are 94 insurance offices in the United
States, 5 in Europe, 2 in Canada and 2 in Latin America. Of the number of
mortgage offices, 513 are located in the United States, 1 in Canada, 2 in
Mexico, 1 in Japan, 1 in France and 4 in the United Kingdom. Substantially all
premises are occupied under lease. Automobiles, office equipment and real estate
properties owned and in use by the Company are not significant in relation to
the total assets of the Company.
ITEM 3. LEGAL PROCEEDINGS
GMAC is subject to potential liability under government regulations and various
claims and legal actions which are pending or may be asserted against them. Some
of the pending actions purport to be class actions. The aggregate ultimate
liability of GMAC under these government regulations and under these claims and
actions, was not determinable at December 31, 1999. After discussion with
counsel, it is the opinion of management that such liability is not expected to
have a material adverse effect on the Company's consolidated financial condition
or results of operations.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company is a wholly-owned subsidiary of General Motors and, accordingly, all
shares of the Company's common stock are owned by General Motors. There is no
market for the Company's common stock.
The Company paid cash dividends to General Motors of $75 million in 1999, $300
million in 1998 and $750 million in 1997.
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS
1999 1998 1997 1996 1995
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INCOME AND NET INCOME RETAINED FOR USE (in millions of dollars)
IN THE BUSINESS
Financing revenue and other income $ 20,218.0 $ 17,913.9 $ 16,595.4 $ 15,973.7 $ 14,863.2
-------------- -------------- -------------- -------------- --------------
Interest and discount 6,526.2 5,786.9 5,255.5 4,937.5 4,936.3
Depreciation on operating leases 4,891.7 4,692.4 4,677.5 4,627.0 4,304.8
Operating expenses 4,518.9 3,565.1 2,852.2 2,690.3 2,391.8
Insurance losses and loss adjustment
expenses 1,389.9 1,469.4 1,073.5 972.2 998.3
Provision for credit losses 403.8 463.1 522.7 669.0 448.8
-------------- -------------- -------------- -------------- --------------
Total expenses 17,730.5 15,976.9 14,381.4 13,896.0 13,080.0
-------------- -------------- -------------- -------------- --------------
Income before income taxes 2,487.5 1,937.0 2,214.0 2,077.7 1,783.2
United States, foreign and other
income taxes 960.2 611.7 912.9 837.2 752.2
-------------- -------------- -------------- -------------- --------------
Net income 1,527.3 1,325.3 1,301.1 1,240.5 1,031.0
Cash dividends 75.0 300.0 750.0 1,200.0 950.0
============== ============== ============== ============== ==============
Net income retained in the year $ 1,452.3 $ 1,025.3 $ 551.1 $ 40.5 $ 81.0
============== ============== ============== ============== ==============
TOTAL ASSETS $ 148,789.2 $ 131,760.4 $ 109,685.9 $ 99,852.6 $ 96,269.4
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DEBT
Short-term debt $ 50,838.5 $ 49,491.2 $ 41,464.5 $ 36,496.3 $ 34,437.8
Long-term debt 70,319.7 56,682.0 45,436.8 42,300.9 40,484.6
-------------- -------------- -------------- -------------- --------------
TOTAL DEBT $ 121,158.2 $ 106,173.2 $ 86,901.3 $ 78,797.2 $ 74,922.4
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Certain amounts for the 1995 through 1998 periods have been reclassified to
conform with 1999 classifications.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management
believes to be relevant to an understanding of the Company's consolidated
results of operations and financial condition. The discussion should be read in
conjunction with the consolidated financial statements and the notes thereto.
RESULTS OF OPERATIONS
GMAC earned consolidated net income of $1,527.3 million, up 15% from the
$1,325.3 million earned in 1998. These earnings represent a record for GMAC and
1999 is the fifth straight year of increased earnings. The following table
summarizes the most recent earnings of GMAC's automotive financing, insurance
and mortgage operations on a year-to-year basis:
Net Income
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1999 1998 1997
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(in millions of dollars)
Automotive and other financing operations $ 1,056.9 $ 984.4 $ 909.9
Insurance operations * 209.9 225.9 224.6
Mortgage operations** 260.5 115.0 166.6
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Consolidated total $ 1,527.3 $ 1,325.3 $ 1,301.1
=============== =============== ================
* GMAC Insurance Holdings, Inc.
** GMAC Mortgage Group, Inc.
On a consolidated basis, GMAC's return on average equity capital was 14.7% in
1999, compared to 14.3% in 1998 and 15.3% in 1997. Total cash dividends paid to
General Motors in 1999 were $75 million compared with $300 million in 1998 and
$750 million in 1997.
In 1999, net income from automotive and other financing operations totaled
$1,056.9 million, which is 7.4% and 16.2% higher than 1998 and 1997,
respectively. Earnings in 1999 were higher due to increased financing volumes
and reduced credit losses, partially offset by a higher effective tax rate. The
increase in 1998 from 1997 was primarily attributable to retail asset growth,
reduced credit losses and a lower effective income tax rate, partially offset by
lower net interest margins and lower wholesale volume.
Net income from insurance operations totaled $209.9 million in 1999, 7.1% and
6.5% lower than 1998 and 1997 earnings, respectively. The decrease was primarily
attributable to pricing pressure in the personal lines insurance business. Net
income was relatively unchanged from 1997 to 1998.
Net income from mortgage operations totaled $260.5 million in 1999, 126.5% and
56.4% higher than 1998 and 1997 earnings, respectively. The strong
year-over-year performance reflects improvement across all sectors. The
unusually low earnings in 1998 were largely due to reduced mortgage asset values
from higher prepayment levels.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
UNITED STATES NEW PASSENGER CAR AND TRUCK DELIVERIES
U.S. deliveries of new GM vehicles during 1999 were higher than 1998 levels
primarily as a result of an overall increase in the number of vehicles produced
in the industry. Additionally, production in 1998 was reduced by an estimated
545,000 units due to a 54-day work stoppage from June 5, 1998 through July 28,
1998 at GM. The decline in financing penetration in 1999 from 1998 was primarily
the result of competitive market conditions. The increase in 1998 over 1997
resulted from GMAC's special rate financing and lease incentive programs
sponsored by GM.
For the Years Ended December 31,
----------------------------------------
1999 1998 1997
----------- ---------- ----------
(in millions of units)
Industry 17.4 16.0 15.5
General Motors 5.0 4.6 4.8
U.S. new GM vehicle deliveries financed by GMAC
Retail (installment sale contracts and
operating leases) 40.5% 41.3% 33.1%
Fleet transactions (lease financing) 1.6% 2.1% 2.9%
Total 32.7% 33.3% 27.1%
FINANCING VOLUME
The number of new vehicle deliveries financed for GM and other dealers are
summarized below:
For the Years Ended December 31,
----------------------------------------
1999 1998 1997
----------- ---------- ----------
(in thousands of units)
UNITED STATES
Retail installment sale contracts 867 929 846
Operating leases 774 598 430
Leasing 24 26 35
=========== ========== ==========
New deliveries financed 1,665 1,553 1,311
=========== ========== ==========
OTHER COUNTRIES
Retail installment sale contracts 470 410 327
Operating leases 291 308 303
Leasing 66 61 82
=========== ========== ==========
New deliveries financed 827 779 712
=========== ========== ==========
WORLDWIDE
Retail installment sale contracts 1,337 1,339 1,173
Operating leases 1,065 906 733
Leasing 90 87 117
=========== ========== ==========
New deliveries financed 2,492 2,332 2,023
=========== ========== ==========
The number of new vehicles financed in the U.S. in 1999 was higher than 1998,
primarily as a result of an overall increase in the number of units financed in
the industry as well as the impact of the 1998 work stoppage mentioned earlier.
Additionally, continued operating lease incentive programs sponsored by GM in
the U.S. contributed to the 1999 increase over 1998. The increase in the number
of vehicles financed in the U.S. during 1998, compared to 1997, was primarily a
result of increased incentive programs sponsored by GM. Outside of the U.S.,
retail volume in Europe, Canada and Asia-Pacific and operating lease volume in
Canada increased as a result of similar incentive plans offered by GM during
1999. These increases were partially offset by lower operating lease volume in
Europe and Latin America.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCING VOLUME (CONCLUDED)
The average new vehicle retail finance contract purchased by GMAC in the United
States during 1999 was $22,300 compared to $20,800 in 1998 and $20,100 in 1997.
The average term for new vehicle retail finance contracts purchased was 54
months in 1999, compared to 52 months in 1998 and 56 months in 1997, while the
monthly payment on such contracts purchased in 1999 averaged $412, compared to
$401 in 1998 and $359 in 1997. The increases in the average amount of retail
finance contract purchased and the average monthly payment were primarily the
result of a reduction in the average customer downpayment and an increase in the
average customer finance rate. This was partially offset by an increase in the
average term.
During 1999, the average capitalized cost for new vehicle retail operating lease
contracts entered into in the United States was $23,700 compared to $24,400 in
1998 and $25,600 in 1997. The average term of such new vehicle retail leases was
36 months in 1999, 34 months in 1998 and 33 months in 1997. The average monthly
retail lease payments on such contracts were $340 in 1999, $352 in 1998 and $379
in 1997. The changes in average cost, term and monthly payment during 1999 were
mainly attributable to a more diverse mix of vehicles within the leasing
portfolio and a shift to longer term incentivized leases sponsored by GM.
GMAC also provides wholesale financing for GM and other dealers' new and used
vehicle inventories. In the United States, wholesale inventory financing was
provided for 3.5 million, 2.8 million and 3.3 million new GM vehicles,
representing 67.7%, 64.1% and 67.2% of all GM sales to U.S. dealers during 1999,
1998 and 1997, respectively. The increase was attributable to marketing
initiatives and competitive pricing strategies offered by the Company.
ASSETS
Cash and cash equivalents totaled $704.3 million at December 31, 1999, compared
with $618.1 million held at December 31, 1998.
At the end of 1999, the Company owned assets and serviced automotive receivables
totaling $162.3 billion, an increase of $23.2 billion over year-end 1998. Total
consolidated assets of the Company at December 31, 1999 were $148.8 billion,
$17.0 billion above the previous year. The year-to-year increases were primarily
the result of higher commercial and other loan receivables, serviced retail and
wholesale loan receivables, operating lease assets, intangible assets, and
receivables due from GM. These increases were partially offset by a decline in
real estate mortgage inventory held for sale.
Consolidated automotive and commercial finance receivables serviced by the
Company, including sold receivables, amounted to $97.0 billion and $79.9 billion
at December 31, 1999 and 1998, respectively. The year-to-year increase was
primarily a result of a $7.4 billion increase in commercial and other loan
receivables, a $5.1 billion increase in serviced retail receivables and a $4.7
billion increase in serviced wholesale receivables. The change in commercial and
other loan receivables was due to the acquisition of Bank of New York Financial
Corporation ("BNYFC") in July 1999 and increases in secured notes. The increase
in wholesale receivable balances over the prior year was a result of an overall
increase in the number of units financed in the industry as well as the impact
of the 1998 work stoppages previously mentioned and higher penetration.
Continued retail financing incentives sponsored by GM contributed to the
increase in serviced retail receivables. Principal balances of active trusts of
sold wholesale receivables (including retained subordinated interests) during
1999 increased $5.1 billion, due to the completion of two sales in 1999. There
were no sales of wholesale receivables during 1998. Additionally, outstanding
principal balances of sold retail automotive receivables (including retained
subordinated interests) increased by $1.6 billion due to the completion of three
sales during 1999 compared with one sale in 1998.
Operating lease assets, net of depreciation, acquired principally under the GMAC
SmartLease program, totaled $30.2 billion at year-end 1999, an increase of $2.3
billion over year-end 1998. The growth from year-end 1998 was primarily
attributable to continued GM sponsored lease incentive programs in the U.S.
11
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ASSETS (CONCLUDED)
The increase in receivables due from GM relates to additional loans from GMAC of
Canada, Limited, a wholly-owned subsidiary, to GM of Canada Limited ("GMCL"), a
wholly-owned subsidiary of GM. The loans are used to fund GMCL's vehicle leasing
program.
The real estate mortgage inventory held for sale amounted to $5.7 billion at
December 31, 1999, $2.3 billion below the prior year-end level. The lower
year-end balance reflected a 6.5% decline in loan origination activities.
Other assets totaled $9.6 billion at December 31, 1999, $2.7 billion above the
prior year-end, primarily resulting from an increase in intangible assets
related to the 1999 acquisitions of various subsidiaries.
LIQUIDITY
The Company's liquidity as well as its ability to profit from ongoing
acquisition activity is in large part dependent upon its timely access to
capital and the costs associated with raising funds in different segments of the
capital markets. In this regard, GMAC regularly accesses the short-term,
medium-term, and long-term debt markets, principally through commercial paper,
notes and underwritten transactions.
As of December 31, 1999, GMAC's total borrowings were $121.2 billion compared
with $106.2 billion at December 31, 1998. Approximately 79% of this debt
represented funding for operations in the United States, and the remaining 21%
represented borrowings for operations in Canada (9%), Germany (3%) and other
countries (9%). The 1999 year-end ratio of consolidated debt to total
stockholder's equity was 10.9:1 compared to 10.8:1 for year-end 1998. The higher
year-to-year debt balances were principally used to fund increased asset levels.
Total short-term debt outstanding at December 31, 1999, amounted to $50.8
billion compared with $49.5 billion at year-end 1998.
Intermediate and long-term funding is provided through the issuance of
underwritten debt and medium-term notes, which are offered by prospectus,
offering circular or private placement worldwide on a continuous basis. GMAC
sells medium-term notes worldwide through dealer agents in book-entry form for
any maturity ranging from nine months to thirty years. Sales of medium-term
notes for U.S. operations totaled $12.1 billion in 1999 compared to $11.6
billion in 1998. Outstanding medium-term notes for U.S. operations totaled $32.1
billion at December 31, 1999, an increase of $5.7 billion from the prior-year
period. During 1999, underwritten debt issues totaling $8.7 billion were
completed for use in the U.S., compared with $6.0 billion in 1998. Underwritten
debt issues outstanding in the U.S. at December 31, 1999 totaled $25.2 billion,
an increase of $4.8 billion from year-end 1998. As of December 31, 1999, the
Company had unissued debt securities available under effective shelf
registrations with the U.S. Securities and Exchange Commission totaling $18.8
billion.
The Company and its subsidiaries maintain substantial bank lines of credit which
totaled $46.2 billion at December 31, 1999, compared to $42.9 billion at
year-end 1998. The unused portion of these credit lines totaled $35.6 billion at
December 31, 1999, $2.4 billion higher than December 31, 1998. Included in the
unused credit lines at December 31, 1999, is a $14.7 billion syndicated
multi-currency global credit facility available for use in the U.S. by GMAC and
in Europe, by GMAC International Finance B.V. and GMAC (UK) plc. At December 31,
1998, syndicated revolving credit facilities of $11.2 billion were available for
use by these entities. The entire $14.7 billion is available to GMAC in the
U.S., $0.9 billion is available to GMAC (UK) plc and $0.8 billion is available
to GMAC International Finance B.V. The syndicated credit facilities serve
primarily as back-up for GMAC's unsecured commercial paper programs. Also
included in the unused credit lines is a $12.0 billion U.S. asset-backed
commercial paper liquidity and receivables facility for New Center Asset Trust
("NCAT"), a non-consolidated limited purpose business trust established to issue
asset-backed commercial paper.
12
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY (CONTINUED)
In June 1999, GMAC modified its existing syndicated revolving credit facilities
to combine the U.S. and certain European facilities into one syndicated
multi-currency global facility. Modified terms consisted of five years on
one-half of the facility, with a 364-day term (including a provision that allows
GMAC to draw down a one year term loan on the termination date) on the remaining
facility. Additionally, there is a leverage covenant restricting the ratio of
consolidated debt to total stockholder's equity to no greater than 11.0:1. This
covenant is only applicable under certain conditions. Those conditions are not
in effect now and were not in effect during the year ended December 31, 1999.
Outside the United States, funding needs are met primarily by a combination of
short-term and medium-term loans from banks and other financial institutions.
Where it is cost-effective, the Company also issues commercial paper as well as
medium-term and long-term debt in both the Euro and local markets to fund
certain non-U.S. operations.
Credit facilities supporting operations of the Company's international
subsidiaries totaled $17.5 billion at December 31, 1999, of which $9.8 billion
were unused. As of December 31, 1999, the committed and uncommitted portion of
such credit facilities totaled $4.9 billion and $12.6 billion, respectively.
As discussed in Note 3 in the Notes to Consolidated Financial Statements, the
Company's asset securitization program is utilized as an alternative funding
source through which retail and wholesale finance receivables are sold to
special purpose bankruptcy-remote subsidiaries. The Company continues to service
the sold receivables for a fee and earns other related ongoing income.
GMAC's ability to access the capital markets for unsecured debt is linked to
both its term debt and commercial paper ratings. This is particularly true with
respect to the Company's commercial paper ratings. These ratings are intended to
provide guidance to investors in determining the credit risk associated with
particular securities based on current information obtained by the rating
organizations from the Company or other sources that such organizations consider
to be reliable. Lower ratings generally result in higher borrowing costs as well
as reduced access to capital markets. A security rating is not a recommendation
to buy, sell, or hold securities and is subject to revision or withdrawal at any
time by the assigning rating organization. Each rating should be evaluated
independently of any other rating.
Substantially all of the Company's short-term, medium-term and long-term debt
has been rated by four nationally recognized statistical rating organizations.
As of March 10, 2000, all of the latest ratings assigned were within the
investment grade category.
Senior Commercial
Rating Agency Debt Paper
--------- ---------------
Duff & Phelps Credit Rating Co. A- D-1
Fitch Investors Service, Inc. A F-1
Moody's Investor's Service, Inc. A2 Prime-1
Standard & Poor's Ratings Services A A-1
Duff & Phelps Credit Rating Co. ("D&P") has assigned a rating of A- to the
senior debt of the Company, the seventh highest among ten investment grade
ratings available, indicating adequate likelihood of timely payment of principal
and interest. The Company's commercial paper has received a rating of D-1 from
D&P, the second highest of five investment grade ratings available, signifying a
very high certainty of timely payment based on excellent liquidity factors and
good fundamental protection factors. D&P reaffirmed these ratings in January
1998.
13
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY (CONCLUDED)
Fitch Investors Service, Inc. ("Fitch") has assigned ratings of A and F-1 to the
Company's senior debt and commercial paper, the sixth and second highest among
ten and four investment grade ratings available, respectively. The A rating is
assigned by Fitch to bonds considered to be of high credit quality with the
obligor's ability to pay interest and repay principal considered to be strong.
The F-1 rating is assigned to short-term issues which possess a very strong
credit quality based primarily on the existence of liquidity necessary to meet
the obligations in a timely manner. Fitch upgraded the senior debt rating from
A- to A and reaffirmed the F-1 commercial paper rating in June 1997.
Moody's Investors Service, Inc. ("Moody's") has assigned a rating of A2 to the
Company's senior debt, the sixth highest among ten investment grade ratings
available, indicating favorable investment attributes and strong ability to
repay principal plus interest. The Company's commercial paper has received a
rating of Prime-1 from Moody's, the highest of three such ratings, reflecting
superior ability for repayment of senior short-term debt obligations and assured
ability to access alternative sources of liquidity. Additional repayment
characteristics of commercial paper issues receiving this premium rating include
leading market position in a well-established industry, high rates of return on
funds employed, and broad margins in earnings coverage of fixed financial
charges. The senior debt rating was upgraded from A3 to A2 in April 1998,
whereas the commercial paper rating was assigned by Moody's in May 1995.
Standard & Poor's Ratings Services, a division of McGraw-Hill Companies, Inc.
("S&P") has assigned a rating of A to the Company's senior debt, sixth highest
among ten investment grade ratings available. The A rating is assigned to bonds
considered to have a strong capacity to pay interest and repay principal. The
Company's commercial paper has received a rating of A-1, second highest of the
four investment grade ratings available, indicating a strong capacity for timely
payment determined by significant safety characteristics. S&P upgraded these
ratings from A- and A-2 in January 1998.
As of March 10, 2000, GMAC is not under review by any of the above rating
agencies.
In managing the interest rate and foreign exchange exposures of a multinational
finance entity, the Company and its subsidiaries utilize a variety of interest
rate and currency derivative financial instruments. As an end-user of such
instruments, GMAC is in a better position to expand its investor base and to
minimize its funding costs, enhancing its ability to offer attractive,
competitive financing rates to its customers. The portfolio consists primarily
of interest rate swaps, futures and options; currency swaps and forwards which
are matched to offset a companion asset or funding obligation; and hedges
related to mortgage operations.
These instruments involve, to varying degrees, elements of credit risk in the
event a counterparty should default, and market risk, as the instruments are
subject to rate and price fluctuations. Credit risk is managed through the
periodic monitoring and approval of financially sound counterparties and
limiting the potential exposure to individual counterparties to predetermined
notional and exposure limits. Market risk is inherently limited by the fact that
the Company holds offsetting asset or liability positions. Market risk is also
managed on an ongoing basis by determining and monitoring the fair value of each
transaction in the portfolio. GMAC employs a variety of internal swap and option
models, using mid-market rates, to calculate mark-to-market values of its
derivative positions and also obtains valuations from its counterparties for
reporting purposes.
The aggregate fair value of the Company's derivatives portfolio represents a
nominal percentage of its $11.1 billion equity base at December 31, 1999. The
total notional amount of the derivatives portfolio was $77.6 billion and $107.7
billion at December 31, 1999 and 1998, respectively. The decrease in 1999
year-end notional outstandings was primarily attributable to a decrease in
financial instruments associated with mortgage servicing.
14
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CASH FLOWS
Cash provided by operating activities during 1999 totaled $10.2 billion, an
increase from the $3.9 billion and $2.9 billion provided during the comparable
1998 and 1997 periods, respectively. The additional operating cash flow in 1999
over 1998 was primarily the result of an increase in proceeds from sales of
mortgage loans and mortgage related securities held for trading and a reduction
in originations/purchases of mortgage loans and acquisitions of mortgage-related
securities held for trading. These increases were partially offset by a decline
in the payables due to GM and affiliated companies and other liabilities. The
increase in 1998 over 1997 was primarily the result of increased other
liabilities related to mortgage operations, partially offset by increased net
purchases of mortgage loans.
Cash used for investing activities during 1999 totaled $21.4 billion, compared
with $23.0 billion and $11.3 billion during the same periods in 1998 and 1997,
respectively. Cash usage decreased in 1999 from 1998 primarily as a result of
increased proceeds from sales of receivables, largely offset by net increases in
acquisitions of finance receivables and net acquisitions of subsidiaries. The
increase in 1998 from 1997 was primarily attributable to greater net finance
receivable acquisitions and a decrease in sales of retail receivables proceeds.
Additionally, increases in receivables due from GM and mortgage servicing rights
acquisitions, partially offset by increased net liquidations of investments in
securities, contributed to the change.
Cash provided by financing activities during 1999 totaled $11.3 billion,
compared with $18.9 billion and $8.4 billion during 1998 and 1997, respectively.
The decrease in 1999 from 1998 is primarily the result of a reduction in
short-term debt, partially offset by a net increase in long-term debt. The
increase in 1998 over 1997 was primarily the result of increases in short- and
long-term debt and lower dividends paid to GM.
COLLECTION RESULTS AND ASSET QUALITY
The following statistics, which include owned and sold automotive assets,
summarize the Company's delinquency, repossession and loss experience:
For the Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
Retail - Worldwide
Accounts past due over 30 days (average) 1.8% 3.0% 3.6%
Repossessions of new vehicles 1.4% 1.5% 1.8%
Repossessions of used vehicles 2.9% 3.4% 3.9%
Net retail losses as a percent of
total average serviced receivables 0.63% 0.78% 1.18%
Net retail losses as a percent of liquidations
Retail serviced - Worldwide 1.17% 1.53% 1.90%
New retail serviced - United States 0.93% 1.27% 1.58%
Retail sold - United States 0.78% 0.98% 0.78%
Charge-offs - Worldwide (in millions of dollars)
Total serviced receivables, net of recoveries $ 295.6 $ 351.0 $ 533.4
Total owned receivables, net of recoveries 262.7 307.1 496.9
Allowance for credit losses as a percent of
total net serviced receivables - Worldwide 1.20% 1.32% 1.29%
Operating lease portfolio - United States (average)
Accounts past due over 30 days 1.30% 1.44% 1.64%
Early terminations by default as a percent of units outstanding 1.09% 1.29% 1.88%
As a result of tightened credit standards and continued collection efforts,
repossessions and losses in the retail portfolio and early terminations as a
percent of operating lease units outstanding have decreased since 1997.
15
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COLLECTION RESULTS AND ASSET QUALITY (CONCLUDED)
Revenue recognition was suspended on approximately 0.31% and 0.33% of gross
retail finance receivables as of December 31, 1999 and 1998, respectively.
Revenue recognition was suspended on approximately 0.01% and 0.04% of gross
non-retail finance receivables as of December 31, 1999 and 1998, respectively.
Collateral with a net book value of $109.5 million and $93.6 million has been
acquired in satisfaction of retail loans and leases outstanding as of December
31, 1999 and 1998, respectively. For non-retail finance receivables, collateral
with a net book value $1.4 million has been acquired in satisfaction of loans
outstanding for both December 31, 1999 and 1998.
BORROWING COSTS
The Company's worldwide cost of borrowing, including the effects of derivatives,
averaged 5.67% for 1999, a decrease of 32 and 63 basis points from the
comparable periods of 1998 and 1997, respectively. Total borrowing costs for
U.S. operations averaged 5.66% for 1999, compared to 5.89% and 6.39% for 1998
and 1997, respectively. The lower average borrowing costs since 1997 were
largely a result of lower short-term market interest rates.
The benefits of these lower average borrowing costs were evident when comparing
the Company's 21% increase in average outstanding debt balances in 1999 over
1998, with an accompanying increase of only 13% in interest and discount expense
from 1998 to 1999.
AUTOMOTIVE FINANCING REVENUES AND OTHER INCOME
Financing revenue totaled $13.8 billion in 1999, compared to $12.7 billion and
$12.6 billion for 1998 and 1997, respectively. The increases were mainly due to
higher average retail, operating lease and other loan receivable balances which
resulted from continued retail financing incentives sponsored by GM.
Retail and lease financing revenue totaled $4,303.0 million for 1999, which was
$434.2 million and $732.5 million above 1998 and 1997, respectively. The
increase in 1999 over 1998 and 1997 was mainly due to higher average outstanding
retail balances which resulted from continued retail financing incentives
sponsored by GM.
Wholesale, commercial and other loan financing revenue amounted to $2,045.7
million, compared with $1,628.9 million and $1,745.6 million in 1998 and 1997,
respectively. The increase in 1999 from 1998 was mainly attributable to
increased commercial loan receivables due to the acquisition of Bank of New York
Financial Corporation in July 1999 and increases in other secured notes. The
decrease in 1998 from 1997 was attributed to the GM work stoppages mentioned
previously.
Operating lease revenue, net of depreciation, totaled $2,537.5 million in 1999,
compared to $2,540.6 million and $2,583.0 million in 1998 and 1997,
respectively.
Other income, including gains and fees related to sold finance receivables,
totaled $1,663.9 million for 1999, compared to $1,294.9 million and $1,159.7
million during the comparable 1998 and 1997 periods, respectively. The increase
in 1999 over 1998 was primarily the result of increased sales of wholesale and
retail finance receivables and increased interest earned on receivables due from
GM. The increase in 1998 over 1997 was primarily the result of higher capital
gains and investment income at GMACI, and increased interest earned on
receivables due from GM, partially offset by lower income and gains from sales
of retail finance receivables.
16
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
AUTOMOTIVE FINANCING REVENUES AND OTHER INCOME (CONCLUDED)
Pre-tax gains on sold retail receivables, excluding the related limited recourse
loss provision established at loan origination, totaled $64.2 million during
1999 compared with $31.0 million in 1998 and $84.8 million in 1997. Retail
receivables sales generally accelerate the recognition of income on retail
contracts, net of servicing fees and other related deferrals, into the period
the receivables are sold. The amount of such gains is affected by a number of
factors and may create variability in quarterly earnings depending on the type
and amount of receivables sold and the structure used to effect the sale, as
well as the prevailing financial market conditions.
This acceleration results in the pre-tax gains reflected above and can create
variability in annual earnings depending on the amount, timing and the net
margin between the average yield and all-in-cost of the sold receivables. The
acceleration also reduces profit potential in future periods. Although this
acceleration can significantly impact quarterly or year-to-year comparisons, it
should be noted that the Company generally recognizes approximately 70% of
interest and discount revenue in the first two years of a retail contract
(reflecting the term of the underlying contracts, revenue recognition methods
and historical prepayment experience). As such, depending on the timing of
receivables sales in a given year, the net impact on annual earnings may be
substantially less than the gains indicated.
EXPENSES
Consolidated salaries and benefits increased in 1999 to $1,591.9 million from
$1,231.0 million and $1,050.4 million in 1998 and 1997, respectively. The
increase in salaries since 1997 primarily reflected continued growth at GMACMG.
Consolidated other operating expenses totaled $2,927.0 million, $2,334.1 million
and $1,801.8 million in 1999, 1998 and 1997, respectively. The increases since
1997 primarily reflected continued growth and acquisitions at GMACMG. The
increase in 1999 over 1998 also includes an increase in goodwill amortization
related to GMAC acquisitions.
As noted earlier, net retail losses as a percentage of total average serviced
automotive receivables was 0.63%, 0.78% and 1.18% in 1999, 1998 and 1997,
respectively. The decrease since 1997 was primarily the result of a 7% and 17%
decline in the number of new and used vehicles repossessed in 1999 and 1998,
respectively. These decreases in repossessions and losses resulted in the $403.8
million provision for credit losses for 1999, which was $59.3 million and $118.9
million below the 1998 and 1997 provisions, respectively.
INCOME TAXES
Consolidated United States, foreign and other income taxes totaled $960.2
million, $611.7 million and $912.9 million for 1999, 1998 and 1997,
respectively. The effective income tax rate for 1999 was 38.6%, compared to
31.6% in 1998 and 41.2% in 1997. The increase in the 1999 effective tax rate can
be attributed to a decrease in U.S. and foreign taxes assessed on foreign source
income during 1998.
INSURANCE OPERATIONS
Gross premiums written by GMACI and its subsidiaries totaled $2,231.8 million,
$2,250.4 million and $1,594.1 million in 1999, 1998 and 1997, respectively. Net
premiums earned totaled $1,793.9 million in 1999, a decrease of $64.5 million
from 1998 and an increase of $433.5 million over 1997. The decrease from 1998
was primarily the result of declines in new and renewal personal auto policies
outstanding, partially offset by increases in the mechanical protection and
property and casualty reinsurance lines of business. The increase over 1997 was
mainly attributable to the inclusion of Integon's non-standard automobile
coverages since its acquisition in October 1997 as well as increases in the
volume of mechanical lines and property and casualty reinsurance.
17
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INSURANCE OPERATIONS (CONCLUDED)
Pre-tax capital gains at GMACI, which are included in other income, totaled
$158.8 million for 1999, a decrease of $7.0 million from 1998 and an increase of
$28.6 million over 1997. Fluctuations in realized capital gains are primarily
due to the timing of sales of individual securities and overall market
conditions.
Insurance losses and loss adjustment expenses totaled $1,389.9 million for 1999,
a decrease of $79.5 million from 1998 and an increase of $316.4 million over
1997. The decline in 1999 when compared to 1998 is largely due to lower
non-standard personal auto policies in force and the non-renewal of certain
passenger auto policies that had yielded adverse results in 1998, partially
offset by a higher frequency of claims in mechanical coverages and increased
property and casualty reinsurance volume. The increases since 1997 are primarily
due to the inclusion of Integon's non-standard automobile coverages since its
acquisition in October 1997.
MORTGAGE OPERATIONS
GMACMG continued to maintain its position as a leading real estate financial
services company in the United States. Loan origination, mortgage servicing
acquisitions and correspondent loan volume totaled $91.6 billion, $152.0 billion
and $53.9 billion for the years ended December 31, 1999, 1998 and 1997,
respectively. The decrease from 1998 was attributed to increased interest rates
in 1999 causing a sharp decline in refinancing activity as well as decreased
levels of bulk loan purchases from institutional clients. The increase in 1998
over 1997 represents growth from commercial operations, diversification of its
mortgage securitization and lending operations, and participation in the market
for residential and commercial servicing rights. Reflecting stronger business
activities and acquisitions, the GMACMG servicing portfolio at December 31,
1999, excluding $3.2 billion and $2.5 billion of GMAC term loans at December 31
1999 and 1998 respectively, was $292.2 billion, 19% above the $245.0 billion at
December 31, 1998. During 1999, GMACMG acquired servicing portfolios totaling
$12.0 billion and $9.0 billion from Mellon Bank and Chase Manhattan Mortgage,
respectively. GMACMG maintained its ranking among the top six residential
mortgage servicers at December 31, 1999.
Mortgage revenue totaled $2,982.3 million, $2,029.9 million and $1,498.7 million
for the years ended December 31, 1999, 1998 and 1997, respectively. The increase
in 1999 over 1998 was primarily attributed to the significant increase in the
servicing portfolio; the GMACMG DiTech acquisition, which increased lending
capacity by $4.4 billion; and also the result of continued growth in investment
revenues as well as revenues generated from new product lines.
Net income from mortgage operations totaled $260.5 million, $115.0 million and
$166.6 million for 1999, 1998 and 1997, respectively. Earnings in 1999 were
favorably impacted by continued growth in origination volumes and the mortgage
servicing portfolio and business diversification. In addition, 1999 earnings
reflect an unusually strong first quarter, where one time gains were realized
from the sales of certain assets that were acquired in the fourth quarter of
1998 when the capital markets were less liquid. The decrease in 1998 earnings
was largely the result of reduced mortgage asset values due to higher prepayment
levels.
ACCOUNTING STANDARDS
In October 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 134, Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise, effective for the first fiscal
quarter beginning after December 15, 1998. The new standard requires that after
the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed security or
other retained interests based on its ability and intent to sell or hold those
investments. The Company adopted this accounting standard in the first quarter
of 1999, as required. The effect of adopting this new accounting standard was
not material to the Company's consolidated financial statements.
18
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ACCOUNTING STANDARDS (CONCLUDED)
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 1999. During the second quarter of 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133, which delayed implementation until
fiscal years beginning on or after June 15, 2000. The new standard requires that
all companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
the impact of SFAS No. 133 on the financial statements of the Company. The
Company will adopt this accounting standard on January 1, 2001, as required.
ACQUISITIONS AND MERGERS
On March 9, 1999, the acquisition of the majority interest in On:Line Finance
Holdings and its subsidiaries was completed. On:Line Finance is one of the
largest independent retail used car finance providers in the United Kingdom. The
acquisition expanded GMAC's range of finance products available through dealers
to automotive customers.
The acquisition of the asset-based lending and factoring business of The Bank of
New York closed on July 22, 1999 for consideration of approximately $1.8
billion. This purchase expands GMAC's existing asset-based lending
internationally and enables them to enter the factoring business in a
substantial way. BNYFC was one of the leading asset-based lending and factoring
operations in North America and the United Kingdom. The name of the new GMAC
subsidiary is GMAC Commercial Credit LLC.
On July 30, 1999, the acquisition of Arriva Automotive Solutions Limited (AAS)
was finalized. The transaction, including debt refinancing, was valued at pound
sterling 483.5 million (approximately $774.7 million at the July 30, 1999
exchange rate). AAS was a leading contract leasing provider in the United
Kingdom. The name of the new GMAC subsidiary is Interleasing (UK) Limited.
GMACMG continued its growth through the acquisition of a variety of operations
and servicing portfolios during the year, none of which were individually
significant.
YEAR 2000
During 1999, GMAC successfully completed its comprehensive, worldwide program to
address the Year 2000 issue. Final preparations included deployment of GMAC
command centers around the world to monitor the transition to the new
millennium. As expected, the Company did not experience any material adverse
effects on its business, products, results of operations or financial condition
as a result of the Year 2000 issue.
GMAC will continue to monitor its own operations, and the operations of third
parties that are critical to GMAC's operations, for potential Year 2000-related
problems. However, the Company does not anticipate that it will discover any
future Year 2000 issues that will have a material effect on its business,
products, results of operations or financial condition.
19
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONCLUDED)
The Company's direct Year 2000 program cost was expensed as incurred with the
exception of capitalizable replacement hardware. Total incremental spending was
not material to the Company's operations, liquidity or capital resources.
In addition to the work for which the Company has direct financial
responsibility, Electronic Data Systems Corporation ("EDS") provided Year
2000-related services to GMAC, as required under the Master Service Agreement.
EDS provided these services as part of normal fixed price services and other
ongoing payments to EDS.
GMAC's current forecast of total direct expenditures, including the value of
services performed by EDS attributable to GMAC's Year 2000 program, will
approximate $90 million. This amount includes the following:
- - An estimated $75 million in direct GMAC expenditures. This estimate
includes GMAC's additional payment to EDS of approximately $12 million
(part of GM's overall additional payment to EDS of approximately $62
million) at the end of the first quarter of 2000, since the systems
remediated by EDS under the Master Service Agreement did not cause a
significant business disruption resulting in material financial loss to
GMAC due to the millennium change; and
- - An estimated $15 million representing the value of Year 2000 services that
EDS provided to the Company as part of normal fixed price services and
other ongoing payments to EDS under the Sector Service Agreement between
GMAC and EDS, as well as the Master Service Agreement between GM and EDS.
This estimate does not include the $12 million additional payment from GMAC
to EDS at the end of the first quarter of 2000 mentioned above.
Of the total estimated $75 million in direct expense, GMAC incurred
approximately $35 million of Year 2000 expense through 1998 and an additional
$25 million during 1999.
EURO CONVERSION
On January 1, 1999, eleven of fifteen member countries of the European Monetary
Union established fixed conversion rates between their existing currencies and
adopted the euro as their new common currency. The euro trades on currency
exchanges and the legacy currencies remain legal tender in the participating
countries for a transition period until January 1, 2002. Beginning on January 1,
2002, euro denominated bills and coins will be issued and legacy currencies will
be withdrawn from circulation.
The Company has established plans to assess and address the potential impact to
GMAC that may result from the euro conversion. These issues include, but are not
limited to: 1) the technical challenges to adapt information systems to
accommodate euro transactions; 2) the competitive impact of cross-border price
transparency; 3) the impact on currency exchange rate risks; 4) the impact on
existing contracts; and 5) tax and accounting implications. The Company expects
that the euro conversion will not have a material adverse impact on its
financial condition or results of operations.
20
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains various forward-looking statements within the
meaning of applicable federal securities laws and are based upon GMAC's current
expectations and assumptions concerning future events, which are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those anticipated.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
GMAC is exposed to market risk from changes in interest rates, foreign currency
exchange rates and certain equity security prices. In order to manage the risk
arising from these exposures, GMAC enters into a variety of foreign currency and
interest rate contracts and options.
A discussion of GMAC's accounting policies for derivative instruments is
included in Note 1 to the consolidated financial statements and further
disclosure is provided in Notes 8, 13 and 14 to the consolidated financial
statements.
GMAC maintains risk management control systems to monitor interest rate, foreign
currency exchange rate and equity price risks and related hedge positions.
Positions are monitored using a variety of analytical techniques including
market value, sensitivity analysis and value-at-risk models. The following
analyses are based on sensitivity analysis tests that assume instantaneous,
parallel shifts in exchange rates, interest rate yield curves and equity prices.
For options and instruments with non-linear returns, models appropriate to the
instrument are utilized to determine the impact of sensitivity shifts.
Interest Rate Risk
GMAC is subject to market risk from exposure to changes in interest rates based
on its financing, investing and cash management activities. GMAC enters into
various financial instrument transactions to maintain the desired level of
exposure to the risk of interest rate fluctuations and to minimize interest
expense. More specifically, GMAC and its affiliates have entered into contracts
to provide automotive financing, to retain mortgage servicing rights and to
retain various assets related to mortgage securitization. Automotive financing
activities are primarily funded by debt obligations. These debt obligations are
frequently hedged to manage exposure to fluctuations in interest rate risk.
Certain exchange traded future and option contracts and interest rate caps and
floors, along with various other investments, have been entered into to manage
the interest rate risk related to mortgage activities and manage potential
prepayment activity associated with mortgage servicing rights.
GMACMG manages prepayment risk associated with its capitalized mortgage
servicing rights with interest rate caps and floors, futures, options on futures
contracts, interest rate swaps, swaptions and forwards. Since the derivative
instruments do not have identical characteristics to the underlying mortgage
servicing rights, GMAC is exposed to basis risk. GMACMG mitigates this risk
through a historical review of value changes in various interest rate scenarios
when establishing and maintaining its hedge program. GMACMG manages the interest
rate risk associated with its mortgage loans held for sale with option contracts
on U.S. Treasury instruments and mortgage-backed securities. Additionally,
GMACMG uses options and futures contracts on U.S. Treasury instruments and euros
as well as interest rate swap agreements to manage the interest rate risk
associated with its mortgage-related securities.
The net fair value liability of all financial instruments held for purposes
other than trading with exposure to interest rate risk was approximately $19.5
billion and $14.6 billion at December 31, 1999 and 1998, respectively. The
potential loss in fair value resulting from a hypothetical 10% increase in
interest rates would be approximately $408.9 million for 1999 and $407.5 million
for 1998. The net fair value asset of all financial instruments held for trading
purposes with exposure to interest rate risk was approximately $2.7 billion and
$3.2 billion at December 31, 1999 and 1998, respectively. The potential loss in
fair value resulting from a hypothetical 10% decrease in interest rates would be
approximately $68.5 million and $84.2 million for 1999 and 1998, respectively.
21
22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
Interest Rate Risk (concluded)
There are certain shortcomings inherent to the sensitivity analyses presented.
The model assumes interest rate changes are instantaneous, parallel shifts in
the yield curve. In reality, changes are rarely instantaneous or parallel.
Although certain assets and liabilities may have similar maturities or periods
to repricing, they may not react correspondingly to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate with changes in market interest rates, while interest rates on other
types of assets may lag behind changes in market rates. Finance receivables are
less susceptible to prepayments when interest rates change, while prepayments on
many mortgage-related instruments are directly affected by a change in interest
rates. As such, GMAC's model does not address prepayment risk for automotive
related finance receivables, but does consider prepayment risk for
mortgage-related instruments that are highly sensitive to prepayment risk.
However, in the event of a change in interest rates, actual loan prepayments may
deviate significantly from assumptions used in the model. Further, certain
assets, such as adjustable rate loans, have features, such as annual and
lifetime caps, that restrict changing the interest rates both on a short-term
basis and over the life of the asset. Finally, the ability of certain borrowers
to make scheduled payments on their adjustable rate loans may decrease in the
event of an interest rate increase.
Foreign Currency Exchange Rate Risk
GMAC is exposed to foreign currency risk arising from the possibility that
fluctuations in foreign exchange rates will impact future earnings or assets and
liability values from normal operations in foreign countries and various
financial instruments that are denominated in foreign currencies. GMAC's most
significant foreign currency exposures relate to the Canadian dollar, euro,
United Kingdom pound sterling and Australian dollar. As of December 31, 1999 and
1998, the net fair value liability of financial instruments held for purposes
other than trading with exposure to foreign currency risk was approximately $7.6
billion and $3.5 billion, respectively. The potential loss in fair value for
such financial instruments from a hypothetical 10% increase in quoted foreign
currency exchange rates would be approximately $755.6 million and $348.4 million
at December 31, 1999 and 1998, respectively. The net fair value asset of all
financial instruments held for trading purposes with exposure to currency risk
was approximately $37.1 million at December 31, 1999. At December 31, 1998 there
were not any financial instruments held for trading purposes with exposure to
currency risk. The potential loss in fair value resulting from a hypothetical
10% increase in quoted foreign currency exchange rates would be approximately
$3.7 million for 1999.
The model assumes an instantaneous, parallel shift in the foreign currency
exchange rates. Exchange rates rarely move in the same direction. The assumption
that exchange rates change in an instantaneous or parallel fashion may overstate
the impact of changing exchange rates on assets and liabilities denominated in a
foreign currency.
Equity Price Risk
GMAC holds investments in various available for sale equity securities that are
subject to price risk. The fair value of such investments was approximately $1.3
billion and $1.2 billion at December 31, 1999 and 1998, respectively. The
potential loss in the fair value of these investments, assuming a 10% decrease
in underlying equity prices, would be approximately $126.1 million and $121.0
million at December 31, 1999 and 1998, respectively.
Overall Limitations and Forward-Looking Statements
Operating leases are not required to be included in the sensitivity analysis and
as a result, have not been presented as part of this analysis. This limitation
is significant to the analysis presented. While the sensitivity analysis will
show a fair market value change for the debt which funds GMAC's operating lease
portfolio, a corresponding change for GMAC's operating lease portfolio, which
has a book value of $30.2 billion and $27.9 billion at December 31, 1999 and
1998, respectively, was not considered by the model. As a result, the overall
impact to the fair market value of financial instruments from hypothetical
changes in interest and foreign currency exchange rates may be overstated.
22
23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONCLUDED)
Overall Limitations and Forward-Looking Statements (concluded)
The Company has developed the fair value estimates by utilization of available
market information or other appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop
estimates of fair value, so the estimates are not necessarily indicative of the
amounts that could be realized or would be paid in a current market exchange.
The effect of using different market assumptions and/or estimation methodologies
may be material to the estimated fair market value amounts. In addition, the
above discussion and the estimated amounts generated from the sensitivity
analyses referred to above include forward-looking statements of market risk
which assume for analytical purposes that certain adverse market considerations
may occur. Actual future market conditions may differ materially from such
assumptions because the amounts noted previously are the result of analyses used
for the purpose of assessing possible risks and the mitigation thereof.
Accordingly, the forward-looking statements should not be considered projections
by GMAC of future events or losses.
23
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors Acceptance
Corporation and subsidiaries were prepared by management, which is responsible
for their integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and, as such, include
amounts based on judgments of management.
Management is further responsible for maintaining internal control designed to
provide reasonable assurance that the books and records reflect the transactions
of the companies and that established policies and procedures are carefully
followed. Perhaps the most important feature of internal control is that it is
continually reviewed for effectiveness and is augmented by written policies and
guidelines, the careful selection and training of qualified personnel and a
strong program of internal audit.
Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the
consolidated financial statements of General Motors Acceptance Corporation and
subsidiaries and issue reports thereon. The audits are conducted in accordance
with generally accepted auditing standards that comprehend the consideration of
internal control and tests of transactions to the extent necessary to form an
independent opinion on the financial statements prepared by management. The
Independent Auditors' Report appears on the next page.
The Board of Directors, through the Audit Committee (the "Committee"), is
responsible for assuring that management fulfills its responsibilities in the
preparation of the consolidated financial statements. The Committee selects the
independent auditors annually. In addition, the Committee reviews the scope of
the audits and the accounting principles being applied in financial reporting.
The independent auditors, representatives of management and the internal
auditors meet regularly (separately and jointly) with the Committee to review
the activities of each, to ensure that each is properly discharging its
responsibilities, and to assess the effectiveness of internal control. It is
management's conclusion that internal control at December 31, 1999 provides
reasonable assurance that the books and records reflect the transactions of the
companies and that established policies and procedures are complied with. To
ensure complete independence, Deloitte & Touche LLP has full and free access to
meet with the Committee, without management representatives present, to discuss
the results of the audits, the adequacy of internal control and the quality of
the financial reporting.
s\ John D. Finnegan s\ William F. Muir
- --------------------------------------- ------------------------------------
John D. Finnegan William F. Muir
President and Chief Executive Officer Executive Vice President and
Principal Financial Officer
24
25
INDEPENDENT AUDITORS' REPORT
General Motors Acceptance Corporation:
We have audited the accompanying Consolidated Balance Sheet of General Motors
Acceptance Corporation and subsidiaries as of December 31, 1999 and 1998 and the
related Consolidated Statement of Income, Consolidated Statement of Changes in
Stockholder's Equity and Consolidated Statement of Cash Flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of General Motors Acceptance
Corporation and subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
s\ DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
Detroit, Michigan
January 20, 2000
25
26
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEET
December 31,
------------------------------------
1999 1998
----------------- -----------------
(in millions of dollars)
ASSETS
- ------
Cash and cash equivalents $ 704.3 $ 618.1
Investments in securities (Note 5) 8,984.7 8,681.9
Finance receivables, net (Notes 2 and 3) 81,288.9 71,101.2
Investment in operating leases, net (Note 4) 30,242.4 27,925.8
Notes receivable from General Motors Corporation (Note 11) 4,025.0 2,270.5
Real estate mortgages - held for sale 5,678.4 7,969.7
- held for investment 1,497.4 1,296.7
- lending receivables 1,800.6 2,063.6
Factored receivables 764.9 0.0
Due and deferred from receivable sales, net (Note 3) 742.2 454.3
Mortgage servicing rights, net (Note 13) 3,421.8 2,434.6
Other (Notes 6 and 11) 9,638.6 6,944.0
----------------- -----------------
TOTAL ASSETS $148,789.2 $131,760.4
================= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
LIABILITIES
General Motors Corporation and affiliated companies, net (Note 11) 216.0 929.6
Interest 1,550.8 1,264.2
Insurance losses and loss expenses (Note 12) 1,861.9 2,062.7
Unearned insurance premiums 1,949.5 1,855.6
Deferred income taxes (Note 9) 3,496.7 2,842.9
United States and foreign income and other taxes payable (Note 9) 521.9 570.7
Other postretirement benefits (Note 10) 704.3 685.3
Other 6,207.5 5,584.6
Debt (Note 8) 121,158.2 106,173.2
----------------- -----------------
Total liabilities 137,666.8 121,968.8
----------------- -----------------
Commitments and contingencies (Notes 4, 14 and 16)
STOCKHOLDER'S EQUITY
Common stock, $.10 par value (authorized 10,000 shares, outstanding
10 shares) and paid-in capital 2,200.0 2,200.0
Retained earnings 8,803.9 7,351.6
Net unrealized gains on securities (Note 5) 356.8 381.5
Unrealized accumulated foreign currency translation adjustment (238.3) (141.5)
----------------- -----------------
Accumulated other comprehensive income 118.5 240.0
----------------- -----------------
Total stockholder's equity 11,122.4 9,791.6
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $148,789.2 $131,760.4
================= =================
Reference should be made to the Notes to Consolidated Financial Statements.
26
27
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For The Years Ended December 31,
--------------------------------------------------
1999 1998 1997
---------------- -------------- ---------------
(in millions of dollars)
FINANCING REVENUE
Retail and lease financing (Note 2) $ 4,303.0 $ 3,868.8 $ 3,570.5
Operating leases (Note 4) 7,429.2 7,233.0 7,260.5
Wholesale, commercial, and other loans (Note 2) 2,045.7 1,628.9 1,745.6
---------------- -------------- ---------------
Total financing revenue 13,777.9 12,730.7 12,576.6
Interest and discount (Note 8) (6,526.2) (5,786.9) (5,255.5)
Depreciation on operating leases (Note 4) (4,891.7) (4,692.4) (4,677.5)
---------------- -------------- ---------------
Net financing revenue 2,360.0 2,251.4 2,643.6
Insurance premiums earned 1,793.9 1,858.4 1,360.4
Mortgage revenue 2,982.3 2,029.9 1,498.7
Other income (Notes 3 and 11) 1,663.9 1,294.9 1,159.7
---------------- -------------- ---------------
Net financing revenue and other 8,800.1 7,434.6 6,662.4
---------------- -------------- ---------------
EXPENSES
Salaries and benefits 1,591.9 1,231.0 1,050.4
Other operating expenses 2,927.0 2,334.1 1,801.8
Insurance losses and loss adjustment expenses (Note 12) 1,389.9 1,469.4 1,073.5
Provision for credit losses (Note 2) 403.8 463.1 522.7
---------------- -------------- ---------------
Total expenses 6,312.6 5,497.6 4,448.4
---------------- -------------- ---------------
Income before income taxes 2,487.5 1,937.0 2,214.0
United States, foreign and other income taxes (Note 9) 960.2 611.7 912.9
================ ============== ===============
NET INCOME $ 1,527.3 $ 1,325.3 $ 1,301.1
================ ============== ===============
Reference should be made to the Notes to Consolidated Financial Statements.
27
28
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the Year Ended December 31, 1999
--------------------------------------------------------------------------
Accumulated Common
Total Other Stock and
Stockholder's Comprehensive Retained Comprehensive Paid-in
(in millions of dollars) Equity Income Earnings Income Capital
--------------------------------------------------------------------------
Beginning balance $ 9,791.6 $ 7,351.6 $ 240.0 $2,200.0
Comprehensive income
Net income 1,527.3 $ 1,527.3 1,527.3
Other comprehensive income, net of tax:
Foreign currency translation
adjustments (net of tax of $36.2) (96.8) (96.8)
Unrealized gains on securities, net of
reclassification adjustment (see (24.7) (24.7)
disclosure)
----------------
Other comprehensive income (121.5) (121.5)
----------------
Comprehensive income $ 1,405.8
================
Dividends paid (75.0) (75.0)
--------------- -------------------------------------------
Ending balance $ 11,122.4 $ 8,803.9 $ 118.5 $2,200.0
=============== ===========================================
Disclosure of reclassification amount
Unrealized holding gains arising during
period (net of tax of $46.6) $ 82.7
Less: reclassification adjustment for gains
included in net income (net of tax of $58.2) (107.4)
----------------
Net change in unrealized gains on securities $ ( 24.7)
================
For the Year Ended December 31, 1998
--------------------------------------------------------------------------
Accumulated Common
Total Other Stock and
Stockholder's Comprehensive Retained Comprehensive Paid-in
(in millions of dollars) Equity Income Earnings Income Capital
--------------------------------------------------------------------------
Beginning balance $ 8,756.1 $ 6,326.3 $ $2,200.0
229.8
Comprehensive income
Net income 1,325.3 $ 1,325.3
1,325.3
Other comprehensive income, net of tax:
Foreign currency translation
adjustments (net of tax of $2.2) (2.8) (2.8)
Unrealized gains on securities, net of
reclassification adjustment (see 13.0 13.0
disclosure)
----------------
Other comprehensive income 10.2 10.2
----------------
Comprehensive income $ 1,335.5
================
Dividends paid (300.0) (300.0)
--------------- -------------------------------------------
Ending balance $ 9,791.6 $ 7,351.6 $ 240.0 $2,200.0
=============== ===========================================
Disclosure of reclassification amount
Unrealized holding gains arising during
period (net of tax of $62.9) $
120.8
Less: reclassification adjustment for gains
included in net income (net of tax of $58.1) (107.8)
================
Net change in unrealized gains on securities $
13.0
================
28
29
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (CONCLUDED)
For the Year Ended December 31, 1997
--------------------------------------------------------------------------
Accumulated Common
Total Other Stock and
Stockholder's Comprehensive Retained Comprehensive Paid-in
(in millions of dollars) Equity Income Earnings Income Capital
--------------------------------------------------------------------------
Beginning balance $ 8,267.6 $ 5,775.2 $ 292.4 $2,200.0
Comprehensive income
Net income 1,301.1 $ 1,301.1 1,301.1
Other comprehensive income, net of tax:
Foreign currency translation
adjustments (net of tax of $99.6) (154.4) (154.4)
Unrealized gains on securities, net of
reclassification adjustment (see 91.8 91.8
disclosure)
-------------
Other comprehensive income (62.6) (62.6)
-------------
Comprehensive income $ 1,238.5
=============
Dividends paid (750.0) (750.0)
-------------- -----------------------------------------
Ending balance $ 8,756.1 $ 6,326.3 $ 229.8 $2,200.0
============== =========================================
Disclosure of reclassification amount
Unrealized holding gains arising during
period (net of tax of $94.9) $ 176.5
Less: reclassification adjustment for gains
included in net income (net of tax of $45.5) (84.7)
=============
Net change in unrealized gains on securities $ 91.8
=============
Reference should be made to the Notes to Consolidated Financial Statements.
29
30
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31,
--------------------------------------------------
1999 1998 1997
--------------- ---------------- ----------------
(in millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,527.3 $ 1,325.3 $ 1,301.1
Depreciation 5,025.4 4,782.0 4,734.2
Provision for credit losses 403.8 463.1 522.7
Gains on sales of finance receivables (64.2) (31.0) (84.8)
Gains on sales of available-for-sale investment securities (165.6) (169.7) (130.2)
Mortgage loans - originations/purchases (53,006.3) (54,432.5) (30,877.8)
- proceeds on sale 55,776.8 51,582.3 28,543.3
Mortgage-related securities held for trading
- acquisitions (1,309.2) (2,237.1) (2,515.8)
- liquidations 1,544.5 848.9 1,448.5
Changes in the following items:
Due to General Motors Corporation and affiliated companies (687.2) 223.0 3.2
Taxes payable and deferred 574.0 518.1 511.2
Interest payable 282.7 166.4 47.1
Other assets 225.3 (253.9) (308.0)
Other liabilities (307.6) 815.5 (498.3)
Other 371.0 349.0 228.3
--------------- ---------------- ----------------
Net cash provided by operating activities 10,190.7 3,949.4 2,924.7
--------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables - acquisitions (185,794.7) (155,213.9) (163,613.6)
- liquidations 129,720.0 114,420.7 129,614.8
Notes receivable from General Motors Corporation (1,669.6) (1,768.7) (361.2)
Operating leases - acquisitions (16,750.1) (17,128.3) (15,392.8)
- liquidations 10,065.3 10,388.8 8,715.6
Investments in available for sale securities:
- acquisitions (20,707.6) (20,526.1) (17,436.9)
- maturities 17,564.9 17,682.5 13,775.4
- proceeds from sales 2,927.0 3,636.3 2,684.1
Investments in held to maturity securities - acquisitions (166.7) -- --
Mortgage servicing rights - acquisitions (1,424.3) (1,861.8) (478.5)
- liquidations 35.1 80.0 23.4
Proceeds from sales of receivables - wholesale 43,658.1 26,165.1 26,091.9
- retail 4,520.2 1,515.6 5,098.7
Net increase in short-term factored receivables (32.0) -- --
Due and deferred from receivable sales (298.0) 609.6 1,259.7
Acquisitions of subsidiaries, net of cash acquired (2,402.0) (173.4) (422.4)
Other (624.5) (851.0) (860.9)
--------------- ---------------- ----------------
Net cash used in investing activities (21,378.9) (23,024.6) (11,302.7)
--------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 26,471.1 21,097.8 14,690.5
Principal payments on long-term debt (13,078.2) (11,376.5) (11,310.8)
Change in short-term debt, net (2,043.7) 9,510.4 5,764.1
Dividends paid (75.0) (300.0) (750.0)
--------------- ---------------- ----------------
Net cash provided by financing activities 11,274.2 18,931.7 8,393.8
--------------- ---------------- ----------------
Effect of exchange rate changes on cash and cash equivalents 0.2 2.4 1.1
--------------- ---------------- ----------------
Net increase/(decrease) in cash and cash equivalents 86.2 (141.1) 16.9
Cash and cash equivalents at the beginning of the year 618.1 759.2 742.3
=============== ================ ================
Cash and cash equivalents at the end of the year $ 704.3 $ 618.1 $ 759.2
=============== ================ ================
SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid $ 6,122.1 $ 5,528.6 $ 5,138.6
Income taxes paid 207.3 113.5 338.2
30
31
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONCLUDED)
SUPPLEMENTARY CASH FLOWS INFORMATION (CONCLUDED)
During 1999, 1998 and 1997 assets acquired, liabilities assumed and
consideration paid for the acquisitions of businesses were as follows:
1999 1998 1997
------------- ------------- -------------
Fair value of assets acquired $ 6,981.4 $ 211.9 $ 1,850.2
Cash acquired (44.8) -- (142.6)
Liabilities assumed (4,534.6) (38.5) (1,285.2)
============= ============= =============
Net acquisitions $ 2,402.0 $ 173.4 $ 422.4
============= ============= =============
Reference should be made to the Notes to Consolidated Financial Statements.
32
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
General Motors Acceptance Corporation (the "Company" or "GMAC"), a wholly-owned
subsidiary of General Motors Corporation ("General Motors" or "GM"), was
incorporated in 1997 under Delaware General Corporation Law. On January 1, 1998,
the Company merged with its predecessor, which was originally incorporated in
New York in 1919.
The Company is a financial services organization that principally provides
consumer and dealer vehicle financing. GMAC also provides commercial financing
to the apparel, textile, automotive supplier and numerous other industries. The
principal markets for the Company's automotive financial products and services
are North America, Europe, Latin America and Asia-Pacific. The principal markets
for the commercial financing products are North America and Europe. The Company
conducts insurance operations primarily in the United States, Canada and Europe.
In addition, the Company's mortgage banking subsidiaries operate principally in
the U.S. and during 1999 and 1998, expanded into Mexico, Japan, Europe and
Canada.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its domestic and foreign subsidiaries. All significant intercompany balances and
transactions are eliminated in consolidation.
Certain prior period amounts have been reclassified to conform with the 1999
presentation.
Segment Reporting
GMAC's reportable operating segments include GMAC North American Financing
Operations ("GMAC-NAO"), GMAC International Financing Operations ("GMAC-IO"),
Insurance Operations ("GMACI") and Mortgage Operations ("GMACMG"). GMAC-NAO
consists of automotive financing in the United States and Canada as well as the
commercial financing operations and GMAC-IO consists of automotive financing in
all other countries and Puerto Rico. GMAC-NAO and GMAC-IO offer a wide variety
of automotive financial services to and through franchised General Motors
dealers in many countries throughout the world. Additionally, GMAC-NAO and
GMAC-IO offer financial services to other automobile dealerships and to the
customers of those dealerships. GMAC-NAO also offers commercial financing and
factoring services to companies in various industries. The Company operates its
international automotive financing services in a similar manner as in the U.S.,
subject to local laws or other circumstances that may cause it to modify its
procedures accordingly.
The accounting policies of the operating segments are the same as those
described in this summary of significant accounting policies. Revenues are
attributed to geographic areas based on the location of the assets producing the
revenues.
Cash Equivalents
Cash equivalents are defined as short-term, highly liquid investments with
original maturities of 90 days or less.
Investments in Securities
The Company's portfolio of securities includes bonds, equity securities,
mortgage-backed securities, notes, interests in trusts and other investments.
Investments in securities are classified as held to maturity, trading, or
available for sale. Held to maturity investments are debt securities that the
Company has the positive intent and ability to hold to maturity. These
investments are carried at amortized cost unless a decline in value is deemed
other than temporary, in which case the carrying value is reduced. The Company
determines cost on the specific identification basis.
Mortgage-backed securities held for sale in conjunction with mortgage banking
activities are classified as trading securities and are carried at fair value.
For mortgage-related trading securities, unrealized gains and losses are
included in income. The fair value of the mortgage-related trading securities is
based on estimated market value.
32
33
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments in Securities (concluded)
Investments in securities not categorized as trading or held to maturity are
classified as available for sale securities and are carried at fair value. For
available for sale investments, the aggregate excess of market value over cost,
net of related income taxes, is included within a separate component of
stockholder's equity. The Company determines cost on the specific identification
basis. The fair value of the investments, except for the interests in trusts, is
based on quoted market prices. The fair value of the interests in trusts is
based on estimated market value.
Revenue Recognition
Financing revenue is recorded over the terms of the receivables using the
interest method. Certain loan origination costs are deferred and amortized to
financing revenue over the life of the related loans using the interest method.
Recognition of non-retail finance revenue is generally suspended when a loan
becomes contractually delinquent for 90 days. Beginning in 1998, recognition of
retail finance revenue is generally suspended when a loan becomes contractually
delinquent for 120 days. This change in policy did not have a material impact on
the consolidated financial statements. Finance revenue recognition is resumed
when the loan becomes contractually current, at which time all past due finance
revenue is recognized.
Income from operating lease assets is recognized on a straight-line basis over
the scheduled lease term. Certain operating lease origination costs are deferred
and amortized to financing revenue over the life of the related operating leases
using the straight-line method.
Investments in Operating Leases, Net
The Company has significant investments in the residual values of its leasing
portfolios. The residual values represent an estimate of the values of the
assets at the end of the lease contracts and are initially recorded based on
appraisals and estimates. Realization of the residual values is dependent on the
Company's future ability to market the vehicles under then prevailing market
conditions. Management reviews residual values periodically to determine that
recorded amounts are appropriate.
Allowance for Credit Losses
An allowance for credit losses is generally established during the period in
which receivables are acquired and is maintained at a level deemed appropriate
by management based on historical and other factors that affect collectibility.
Losses arising from the sale of repossessed collateral are charged to the
allowance for credit losses. Where repossession has not taken place, receivables
are charged off as soon as it is determined that the collateral cannot be
repossessed, generally not more than 150 days after default.
Repossessed Property and Impaired Loans
Losses arising from the repossession of collateral supporting impaired accounts
and property supporting defaulted operating leases are recognized upon
repossession. Repossessed assets are recorded at the lower of historical cost or
fair value and are reclassified from finance receivables or operating leases to
other assets with the related adjustments to the valuation allowance included in
other operating expenses.
Non-retail finance receivables are reduced to the lower of book value or the
estimated fair value of collateral when determined to be impaired. A loan is
considered impaired when it is determined that the Company will be unable to
collect all amounts due according to the original terms of the loan agreement.
The Company's policy is to recognize interest income related to impaired loans
on a cash basis.
Sales of Receivables
The Company sells retail and wholesale receivables through consolidated special
purpose subsidiaries which absorb all losses related to sold receivables to the
extent of their subordinated investments and certain segregated restricted cash
reserves. Appropriate limited recourse loss allowances associated with sold
receivables are transferred from the allowance for credit losses and are
included in due and deferred from receivable sales, net. The Company continues
to service these receivables for a fee, which is considered to be adequate
compensation and earns other related ongoing income. Normal servicing fees on
sold receivables are earned over the estimated remaining life of the sold
receivables.
33
34
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sales of Receivables (concluded)
Pre-tax gains on sold receivables are recorded in other income. In determining
the gain or loss for each qualifying sale of retail receivables, the investment
in the sold receivable pool is allocated between the portion sold and the
portion retained based on their relative fair values on the date of sale. The
receivables sold are removed from finance receivables and the subordinated
securities retained by the Company are included in investments in securities and
are classified as available for sale.
Interest-only strip receivables are recorded at estimated fair value. The
difference between market value and cost for interest-only strip receivables is
recorded within comprehensive income, net of related income taxes.
Depreciation
The Company and its subsidiaries provide for depreciation of vehicles and other
equipment on operating leases or in company use generally on a straight-line
basis over a period of time consistent with the term of the underlying operating
lease agreement or the estimable useful life for property in company use. The
provision for depreciation is adjusted for the difference between the net book
value and the proceeds of sale or salvage on disposal of the assets. The Company
evaluates its depreciation policy for leased vehicles on a regular basis.
Intangible Assets
Intangible assets, principally the excess of cost over the fair value of
identifiable net assets of purchased businesses, are amortized using the
straight-line method over periods ranging from 15 to 40 years. Goodwill in
excess of associated expected operating cash flows is considered to be impaired
and is written down to fair value. Fair value is determined based on
undiscounted future cash flows.
Software Costs
Other assets include certain software costs capitalized in accordance with
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. The capitalized software is generally
amortized on a straight-line basis over its useful life for a period not to
exceed three years. Capitalized software that is not expected to provide
substantive service potential or for which the costs of developing the software
significantly exceed the amount originally expected is considered impaired and
is written down to fair value.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at year-end exchange rates. Income and expense items are translated at
average exchange rates prevailing during the year. The resulting translation
adjustments are recorded as a component of stockholder's equity.
Income Taxes
The Company and its domestic subsidiaries join with General Motors in filing a
consolidated United States federal income tax return. The portion of the
consolidated tax recorded by the Company and its subsidiaries included in the
consolidated tax return generally is equivalent to the liability that would have
been incurred on a separate return basis.
Derivative Financial Instruments
The Company is a party to derivative financial instruments with
off-balance-sheet risk that it uses in the normal course of business to reduce
its exposure to fluctuations in interest and foreign currency rates. The Company
enters into these transactions for purposes other than trading. These financial
exposures are managed in accordance with corporate policy and procedures. The
objectives of the derivative financial instruments portfolio are to manage
interest rate and currency risks by: 1) offsetting a designated asset or funding
obligation; 2) adjusting fixed and floating rate funding levels; and 3)
facilitating securitization transactions.
34
35
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Derivative Financial Instruments (continued)
As part of the approval process, GMAC management identifies the specific
financial risk that the derivative transaction will minimize and the appropriate
hedging instrument to be used to reduce the risk. If it is determined that a
high correlation between a specific transaction risk and the hedging instrument
does not exist, the transaction is generally not approved. In those infrequent
instances in which approval is received for a hedging transaction that does not
have a high correlation, the derivative is marked-to-market for accounting
purposes with related gains and losses recognized in other income on a current
basis.
The primary classes of derivatives used by the Company in the automotive
financing operations are interest rate swaps, foreign currency swaps and
forwards and interest rate options. Those instruments involve, to varying
degrees, elements of credit risk in the event a counterparty should default and
market risk as the instruments are subject to interest and foreign currency
exchange rate fluctuations. Credit risk is managed through the continual
monitoring and approval of financially sound counterparties. Market risk is
mitigated because the derivatives are generally used to hedge underlying
transactions. Structured interest rate swaps and certain financial instrument
transactions include embedded options that are either marked-to-market or
specifically matched, respectively. Cash receipts or payments on these
agreements normally occur at periodic contractually defined intervals.
Interest Rate Instruments
Interest rate swaps are contractual agreements between the Company and another
party to exchange the net difference between a fixed and floating interest rate,
or different floating interest rates, periodically over the life of the contract
without the exchange of the underlying principal amount. The Company also uses
written and purchased options (including interest rate caps and cancellation
features). Interest rate cap agreements provide the holder protection against
interest rate movements above the established rate. In exchange for assuming
this risk, the writer receives a premium at the outset of the agreement.
The Company uses swaps to alter its fixed and floating interest rate exposures.
As such, the majority of swaps are executed as an integral element of a specific
financing transaction. In a limited number of cases, swaps, matched to specific
portfolios of wholesale assets or debt, are executed to achieve specific
interest rate management objectives. Any amounts due or payable, and amounts
paid or received, are offset against the related interest income or expense. The
Company accounts for interest rate swap agreements using settlement accounting
as they alter the characteristics of assets or liabilities to which they are
matched. The cash flows from interest rate swaps are accounted for as
adjustments to interest income or expense depending on the underlying exposure.
Gains and losses from terminated swaps are deferred and amortized over the
remaining period of the original swap or the remaining term of the underlying
exposure, whichever is shorter, as either a reduction or increase of interest
expense. Open swap positions are reviewed regularly to ensure that they remain
effective in managing interest rate risk.
Written options (including related premiums) and interest rate basis swaps are
marked-to-market on a current basis with the related gains or losses included in
other income.
Foreign Currency Instruments
Currency swaps and forwards are used to hedge foreign exchange exposure on
foreign currency denominated debt by converting the funding currency to the
currency of the assets being financed. Foreign currency swaps and forwards are
legal agreements between two parties to purchase and sell a foreign currency,
for a price specified at the contract date, with delivery and settlement at both
the effective date and maturity date of the contract. Foreign currency swap
agreements are accounted for using settlement accounting as it relates to
periodic interest payments. The foreign currency gains and losses associated
with both the currency swaps and forwards offset the correlating foreign
currency gains and losses related to the designated liabilities.
35
36
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may be based upon
amounts which differ from those estimates.
36
37
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. FINANCE RECEIVABLES
The composition of finance receivables outstanding is summarized as follows:
December 31,
--------------------------------------
1999 1998
------------------ ------------------
(in millions of dollars)
United States
Retail $ 35,607.9 $ 33,320.9
Wholesale 17,716.5 17,721.7
Commercial 2,382.7 71.4
Leasing and lease financing 627.3 631.8
Other (1) 8,841.4 4,919.0
------------------ ------------------
Total United States 65,175.8 56,664.8
------------------ ------------------
Europe
Retail 5,684.6 5,282.0
Wholesale 3,904.9 4,422.5
Commercial 997.2 0.0
Leasing and lease financing 452.9 483.3
Other 490.9 473.6
------------------ ------------------
Total Europe 11,530.5 10,661.4
------------------ ------------------
Canada
Retail 2,344.5 1,747.2
Wholesale 2,086.8 1,935.7
Commercial 169.5 0.0
Leasing and lease financing 771.6 806.0
Other 170.9 119.1
------------------ ------------------
Total Canada 5,543.3 4,608.0
------------------ ------------------
Other Countries
Retail 2,398.9 2,308.2
Wholesale 1,011.6 1,017.7
Leasing and lease financing 693.5 583.3
Other 202.8 258.2
------------------ ------------------
Total Other Countries 4,306.8 4,167.4
------------------ ------------------
Total finance receivables 86,556.4 76,101.6
Deductions
Unearned income 4,153.1 3,979.8
Allowance for credit losses 1,114.4 1,020.6
------------------ ------------------
Total deductions 5,267.5 5,000.4
================== ==================
Finance receivables, net $ 81,288.9 $ 71,101.2
================== ==================
(1) Includes secured notes to a non-consolidated affiliated entity that leases
vehicles totaling $5,135.5 million and $1,707.8 million at December 31, 1999 and
1998, respectively.
The aggregate amount of total finance receivables maturing in each of the five
years following December 31, 1999, is as follows: 2000 - $46,800.7 million; 2001
- - $15,469.5 million; 2002 - $13,264.5 million; 2003- $6,404.1 million; 2004 -
$2,880.7 million; 2005 and thereafter - $1,736.9 million.
37
38
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. FINANCE RECEIVABLES (CONCLUDED)
The following table presents an analysis of the allowance for credit losses on
finance receivables:
1999 1998 1997
------------- ------------- --------------
(in millions of dollars)
Balance at beginning of the year $ 1,020.6 $ 903.0 $ 921.8
Provisions charged to income 403.8 463.1 522.7
Charge-offs
United States (318.9) (359.7) (521.9)
Other countries (100.4) (80.7) (82.2)
------------- ------------- --------------
Total charge-offs (419.3) (440.4) (604.1)
Recoveries and other
United States 152.8 111.3 110.0
Other countries 3.8 22.0 (2.8)
------------- ------------- --------------
Total recoveries and other 156.6 133.3 107.2
Transfers to sold receivables allowance (47.3) (38.4) (44.6)
------------- ------------- --------------
Balance at end of the year $ 1,114.4 $ 1,020.6 $ 903.0
============= ============= ==============
The following table presents a summary of the allowance for credit losses on
non-retail automotive impaired loans:
1999 1998 1997
----------- ----------- ----------
(in millions of dollars)
Balance at beginning of the year $ 70.7 $ 88.5 $ 78.9
Additions/(subtractions) 0.3 (11.0) 24.2
Net charge-offs (11.7) (6.8) (14.6)
=========== =========== ==========
Balance at end of the year $ 59.3 $ 70.7 $ 88.5
=========== =========== ==========
The total investments in these impaired loans were $197.4 million and $166.6
million at December 31, 1999 and 1998, respectively. The average recorded
investments during 1999 and 1998 were $167.2 million and $148.9 million,
respectively.
NOTE 3. SALE OF FINANCE RECEIVABLES
The Company participates in various sales of receivables programs and has sold
retail finance receivables through special purpose subsidiaries with principal
aggregating $5.1 billion in 1999, $1.6 billion in 1998 and $5.4 billion in 1997.
These subsidiaries generally retain a subordinated investment of no greater than
7.0% of the total receivables pool and market the remaining portion. Net pre-tax
gains relating to such sales amounted to $64.2 million in 1999, $31.0 million in
1998 and $84.8 million in 1997. The Company's sold retail finance receivable
servicing portfolio amounted to $5.6 billion and $4.0 billion at December 31,
1999 and 1998, respectively.
The Company has sold wholesale receivables on a revolving basis resulting in
decreases in wholesale outstandings of $8.4 billion and $3.3 billion at December
31, 1999 and 1998, respectively. The Company is committed to sell eligible
wholesale receivables arising in certain dealer accounts.
38
39
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SALE OF FINANCE RECEIVABLES (CONCLUDED)
The Company's interest-only strip receivables cash flows, cash deposits and
other related amounts are generally restricted assets and subject to limited
recourse provisions. The following is a summary of amounts included in due and
deferred from receivable sales, net.
December 31,
-------------------------------
1999 1998
------------- --------------
(in millions of dollars)
Interest-only strip receivables $ 186.4 $ 120.0
Other restricted amounts:
Cash deposits held for trusts 556.0 328.3
Other restricted amounts 48.4 40.2
Allowance for estimated credit losses on
sold receivables (48.6) (34.2)
============= ==============
Total due and deferred from receivable sales $ 742.2 $ 454.3
============= ==============
Included in other liabilities are amounts payable to trustees of $415.2 million
and $342.8 million at December 31, 1999 and 1998, respectively.
The following table presents a summary of the allowance for estimated credit
losses on sold receivables:
1999 1998 1997
--------- ---------- ----------
(in millions of dollars)
Balance at beginning of the year $ 34.2 $ 39.7 $ 31.6
Transfers from allowance for credit losses 47.3 38.4 44.6
Charge-offs (32.9) (43.9) (36.5)
========= ========== ==========
Balance at end of the year $ 48.6 $ 34.2 $ 39.7
========= ========== ==========
NOTE 4. INVESTMENT IN OPERATING LEASES
Investments in operating leases were as follows:
December 31,
----------------------------------
1999 1998
-------------- ---------------
(in millions of dollars)
Vehicles and other equipment, at cost $ 38,217.5 $ 34,802.1
Less: accumulated depreciation 7,975.1 6,876.3
============== ===============
Investment in operating leases, net $ 30,242.4 $ 27,925.8
============== ===============
The lease payments applicable to equipment on operating leases maturing in each
of the five years following December 31, 1999, are as follows: 2000 - $6,042.0
million; 2001 - $4,173.1 million; 2002 - $1,804.2 million; 2003 - $198.1
million; and 2004 - $27.0 million.
NOTE 5. INVESTMENTS IN SECURITIES
The Company's portfolio of securities includes bonds, equity securities,
mortgage-related securities, notes, retained interests in securitizations and
other investments. The book and fair values of mortgage-related securities held
to maturity at December 31, 1999 were $166.7 million and $168.7 million,
respectively. The gross unrealized gains on held to maturity securities at
December 31, 1999 were $2.0 million. There were no held to maturity securities
outstanding at December 31, 1998. The fair value of mortgage-related trading
securities at December 31, 1999 and 1998 was $2,722.1 million and $3,172.7
million, respectively. The unrealized (losses)/gains on trading securities
included in income were $(89.6) million, $(313.3) million and $16.1 million for
the years ended December 31, 1999, 1998 and 1997, respectively.
39
40
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. INVESTMENTS IN SECURITIES (CONTINUED)
The cost, fair value and unrealized gains and losses on available for sale
securities were as follows:
December 31, 1999
------------------------------------------------------------------
Fair Unrealized Unrealized
Type of Security Cost Value Gains Losses
- ---------------- ------------- -------------- ------------- --------------
Bonds, notes and other securities: (in millions of dollars)
United States government and
governmental agencies and authorities $ 488.1 $ 475.6 $ 0.4 $ (12.9)
States, municipalities and political
subdivisions 1,534.5 1,540.5 47.0 (41.0)
Mortgage-related securities 480.4 452.8 10.0 (37.6)
Interests in trusts 1,030.4 1,032.3 2.0 (0.1)
Corporate debt securities 1,102.1 1,081.5 26.2 (46.8)
Other 256.6 252.2 10.8 (15.2)
------------- -------------- ------------- --------------
Total debt securities available for sale 4,892.1 4,834.9 96.4 (153.6)
Equity securities available for sale 685.1 1,261.0 634.0 (58.1)
============= ============== ============= ==============
Total available for sale securities $ 5,577.2 $ 6,095.9 $ 730.4 $ (211.7)
============= ============== ============= ==============
December 31, 1998
------------------------------------------------------------------
Fair Unrealized Unrealized
Type of Security Cost Value Gains Losses
- ---------------- ------------- -------------- ------------- --------------
Bonds, notes and other securities: (in millions of dollars)
United States government and
governmental agencies and authorities $ 445.5 $ 456.5 $ 11.5 $ (0.5)
States, municipalities and political
subdivisions 1,494.7 1,599.5 117.1 (12.3)
Mortgage-related securities 414.9 383.4 6.2 (37.7)
Interests in trusts 416.9 414.8 0.0 ( 2.1)
Corporate debt securities 1,220.1 1,257.6 58.8 (21.3)
Other 192.1 187.3 6.9 (11.7)
------------- -------------- ------------- --------------
Total debt securities available for sale 4,184.2 4,299.1 200.5 (85.6)
Equity securities available for sale 778.6 1,210.1 534.3 (102.8)
============= ============== ============= ==============
Total available for sale securities $ 4,962.8 $ 5,509.2 $ 734.8 $ (188.4)
============= ============== ============= ==============
The distribution of maturities of available for sale debt securities outstanding
is summarized as follows:
December 31, 1999
-------------------------------
Fair
Cost Value
-------------- -------------
Maturity (in millions of dollars)
- --------
Due in one year or less $ 814.5 $ 814.2
Due after one year through five years 1,533.0 1,527.1
Due after five years through ten years 1,139.4 1,130.2
Due after ten years 924.8 910.6
Mortgage-related securities 480.4 452.8
============== =============
Total available for sale debt securities $ 4,892.1 $ 4,834.9
============== =============
40
41
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. INVESTMENTS IN SECURITIES (CONCLUDED)
The following table summarizes proceeds, gains and losses realized from the sale
of available for sale securities:
1999 1998 1997
------------- ------------- -------------
Debt Securities: (in millions of dollars)
- ----------------
Sale proceeds $2,359.3 $3,272.9 $2,318.7
Gross realized gains 78.6 70.0 54.7
Gross realized losses 83.0 17.7 18.3
Equity Securities:
- ------------------
Sale proceeds $ 567.7 $ 363.4 $ 365.4
Gross realized gains 212.9 148.4 121.1
Gross realized losses 42.9 31.0 27.3
NOTE 6. OTHER ASSETS
Other assets consisted of:
December 31,
---------------------------------
1999 1998
--------------- --------------
(in millions of dollars)
Property and equipment at cost $ 811.9 $ 580.6
Accumulated depreciation (311.3) (181.7)
--------------- --------------
Net property and equipment 500.6 398.9
Non-performing assets (net of valuation reserves) 270.7 324.9
Ceded loss and loss adjustment expense reserve /
reinsurance receivable 784.2 739.6
Insurance premiums receivable 350.2 327.7
Investment in used vehicles held for sale 499.8 509.7
Deferred policy acquisition cost 337.2 327.2
Intangible assets, net of accumulated amortization 2,897.8 854.6
Rental car buyback 712.0 658.4
Equity investments in real estate ventures 628.7 178.7
Other mortgage-related assets 1,290.9 1,105.4
Other assets 1,366.5 1,518.9
=============== ==============
Total other assets $ 9,638.6 $ 6,944.0
=============== ==============
NOTE 7. LINES OF CREDIT WITH BANKS
The Company and its subsidiaries maintain substantial bank lines of credit which
totaled $46.2 billion at December 31, 1999, compared to $42.9 billion at
year-end 1998. The unused portion of these credit lines totaled $35.6 billion at
December 31, 1999, $2.4 billion higher than December 31, 1998.
Included in the unused credit lines at December 31, 1999, is a $14.7 billion
syndicated multi-currency global credit facility available for use in the U.S.
by GMAC and in Europe, by GMAC International Finance B.V. and GMAC (UK) plc. At
December 31, 1998, syndicated revolving credit facilities of $11.2 billion were
available for use by these entities. The entire $14.7 billion is available to
GMAC in the U.S., $0.9 billion is available to GMAC (UK) plc and $0.8 billion is
available to GMAC International Finance B.V. The syndicated credit facilities
serve primarily as back-up for GMAC's unsecured commercial paper programs. Also
included in the unused credit lines is a $12.0 billion U.S. asset-backed
commercial paper liquidity and receivables facility for New Center Asset Trust
("NCAT"), a non-consolidated limited purpose business trust established to issue
asset-backed commercial paper.
41
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GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. LINES OF CREDIT WITH BANKS (CONCLUDED)
In June 1999, GMAC modified its existing syndicated revolving credit facilities
to combine the U.S. and certain European facilities into one syndicated
multi-currency global facility. Modified terms consisted of five years on
one-half of the facility, with a 364-day term (including a provision that allows
GMAC to draw down a one year term loan on the termination date) on the remaining
facility. Additionally, there is a leverage covenant restricting the ratio of
consolidated debt to total stockholder's equity to no greater than 11.0:1. This
covenant is only applicable under certain conditions. Those conditions are not
in effect now and were not in effect during the year ended December 31, 1999. At
December 31, 1999 and 1998, GMAC's consolidated debt to total stockholder's
equity was 10.9:1 and 10.8:1, respectively.
GMAC Mortgage Group had $3.7 billion of bank lines of credit at December 31,
1999, compared with $2.3 billion at December 31, 1998, which are utilized in the
normal course of business. Of these lines, $0.7 billion and $0.8 billion were
unused at December 31, 1999 and 1998, respectively.
Inclusive of the $1.7 billion of the syndicated multi-currency global credit
facility, operations in Canada, Europe, Latin America and Asia-Pacific were
supported by credit facilities totaling $17.5 billion at December 31, 1999 and
$18.6 billion at December 31, 1998, of which $9.8 billion and $10.4 billion were
unused at December 31, 1999 and 1998, respectively. As of December 31, 1999, the
committed and uncommitted portion of such credit facilities totaled $4.9 billion
and $12.6 billion, respectively. As of December 31, 1998, the committed and
uncommitted portion of such credit facilities totaled $4.6 billion and $14.0
billion, respectively.
NOTE 8. DEBT
December 31,
Weighted Average ---------------------------------
Interest Rate (1) 1999 1998
------------------------- -------------- --------------
(in millions of dollars)
SHORT-TERM DEBT
Commercial paper (2) $ 33,224.0 $ 32,138.8
Demand notes 4,301.3 6,445.5
Master notes and other 4,503.9 2,821.4
Bank loans and overdrafts (3) 9,010.0 8,213.0
-------------- --------------
Total principal amount 51,039.2 49,618.7
Unamortized discount (200.7) (127.5)
-------------- --------------
Total short-term debt (4) 5.5% 50,838.5 49,491.2
-------------- --------------
LONG-TERM DEBT
Current portion of long-term debt 6.6% 14,995.9 11,328.1
United States
2000 -- -- 10,195.4
2001 6.2% 12,656.0 7,795.8
2002 6.0% 12,074.4 7,039.2
2003 6.2% 7,225.7 6,929.3
2004 6.8% 4,449.8 997.2
2005 to 2049 7.5% 9,235.2 4,722.7
-------------- --------------
Total United States 45,641.1 37,679.6
Other countries
2000 - 2008 5.4% 10,310.5 8,347.6
-------------- --------------
Total United States and other countries 70,947.5 57,355.3
Unamortized discount (627.8) (673.3)
-------------- --------------
Total long-term debt 70,319.7 56,682.0
-------------- --------------
Total debt $ 121,158.2 $ 106,173.2
============== ==============
42
43
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. DEBT (CONCLUDED)
(1) The 1999 weighted average interest rates include the effects of
interest rate swap agreements.
(2) The weighted average maturities of commercial paper was 41 days at December
31, 1999 and 28 days at December 31, 1998.
(3) Bank loans and overdrafts include $3,040.1 million and $1,669.9 million in
the United States and $5,969.9 million and $6,543.1 million in other
countries for the years ended December 31, 1999 and 1998, respectively.
(4) The 1998 weighted average interest rate for short-term debt was 5.30%.
After consideration of foreign currency swaps, the above maturities denominated
in currencies other than the U.S. dollar primarily consist of the Canadian
dollar ($10,080.8 million), euro ($6,025.1 million), United Kingdom pound
sterling ($4,392.7 million) and Australian dollar ($1,708.1 million). The
Company and its subsidiaries have entered into foreign currency swap agreements
to hedge exposures related to debt payable in currencies other than the local
currency of the issuing entity.
Debt issues totaling $3,872.4 million are redeemable, at par or slightly above,
at the Company's option. The debt issues are redeemable anytime prior to their
maturity dates with the latest maturity date in November 2049.
The Company has issued warrants to subscribe for up to $300 million aggregate
principal amount of 6.5% notes due October 15, 2009. The warrants are
exercisable up to and including October 15, 2007.
The Company's debt includes $925.0 million in notes with fixed rates and $425.0
million in notes with variable rates which provide investors with the option to
cause GMAC to repurchase them at specific dates prior to their maturity.
Generally, the probability of exercising such option would increase in the event
that one or more of the Company's security ratings is reduced or an increase in
market interest rates occurs and the notes are subject to fixed interest rates.
For purposes of the above maturities, it is assumed that no repurchase will
occur.
In addition, the Company's debt includes $3,349.9 million in notes with fixed
rates that contain a survivor's option which provides the survivor with the
option to cause GMAC to repurchase them at par prior to maturity in December
2014.
To achieve its desired balance between fixed and variable rate debt, the Company
has entered into interest rate swap and interest rate cap agreements. The
breakdown between the fixed and variable interest rate amounts (excluding
discount) based on contractual terms (predominately based on London Interbank
Offering Rate ("LIBOR")) and after the effect of interest rate derivatives is as
follows:
December 31,
-----------------------------------
1999 1998
--------------- ----------------
Debt balances based on contractual terms: (in millions of dollars)
Fixed amount $87,946.3 $78,121.0
Variable amount 34,040.4 28,853.0
Debt balances after effect of derivatives:
Fixed amount $77,963.3 $72,282.5
Variable amount 44,023.4 34,691.5
43
44
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. UNITED STATES, FOREIGN AND OTHER INCOME TAXES
Provisions are made for estimated United States and foreign income taxes, less
available tax credits and deductions, which may be incurred on remittance of the
Company's share of its subsidiaries' undistributed earnings not deemed to be
indefinitely reinvested. Taxes have not been provided on foreign subsidiaries'
earnings, which are deemed indefinitely reinvested of approximately $1,121.8
million at December 31, 1999 and $958.6 million at December 31, 1998.
Quantification of the deferred tax liability, if any, associated with
permanently reinvested earnings is not practicable.
The temporary differences, which comprise the Company's deferred tax assets and
liabilities, were as follows:
December 31, 1999 December 31, 1998
--------------------------------------------------------------
Asset Liability Asset Liability
--------------- -------------- --------------- ---------------
(in millions of dollars)
Lease transactions $ -- $ 3,590.7 $ -- $ 3,244.1
Provisions for credit losses 449.0 -- 414.4 --
Debt transactions -- 337.8 -- 338.2
Unrealized gains on securities -- 199.4 -- 226.0
State and local taxes -- 251.8 -- 204.9
Foreign tax credits 139.0 -- 170.3 --
Insurance loss reserve discount 128.3 -- 131.5 --
Unearned insurance premiums 155.7 -- 145.8 --
Other postretirement benefits 249.8 -- 244.4 --
Foreign net operating losses 120.2 -- 128.7 --
Other 267.1 626.1 267.6 332.4
=============== ============== =============== ===============
Total deferred income taxes $ 1,509.1 $ 5,005.8 $ 1,502.7 $ 4,345.6
=============== ============== =============== ===============
The significant components of income tax expense were as follows:
For the Years Ended December 31,
---------------------------------------------
1999 1998 1997
------------ ------------- ------------
Income taxes estimated to be currently (in millions of dollars)
payable:
United States federal $ 103.4 $ 216.5 $ 71.0
Foreign 131.2 141.2 279.9
United States state and local 24.0 (12.0) 138.6
------------ ------------- ------------
Total income taxes currently payable 258.6 345.7 489.5
------------ ------------- ------------
Deferred income taxes:
United States federal 522.7 136.0 553.6
Foreign 106.5 56.9 (77.0)
United States state and local 72.4 73.1 (53.2)
------------ ------------- ------------
Total deferred income taxes 701.6 266.0 423.4
------------ ------------- ------------
Income tax expense $ 960.2 $ 611.7 $ 912.9
============ ============= ============
44
45
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. UNITED STATES, FOREIGN AND OTHER INCOME TAXES (CONCLUDED)
Income tax provisions recorded by the Company differ from the computed amounts
developed by applying the statutory United States federal income tax rate to
income before income taxes. The following schedule reconciles the U.S. statutory
income tax rate to the actual income tax rate recorded by the Company:
For the Years Ended December 31,
-------------------------------------------
1999 1998 1997
----------- ----------- -------------
United States federal statutory income tax rate 35.0% 35.0% 35.0%
Effect of:
State and local income taxes 2.6 1.9 3.1
Tax exempt interest and dividends received
which are not fully taxable (1.1) (1.4) (1.4)
Adjustment to U.S. taxes on foreign income (0.7) (5.4) 1.8
Foreign income tax rate differential 1.6 0.5 0.8
Other 1.2 1.0 1.9
----------- ----------- -------------
Effective tax rate 38.6% 31.6% 41.2%
=========== =========== =============
NOTE 10. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries participate in various pension plans
of General Motors and its domestic and foreign subsidiaries, which cover
substantially all of their employees. Benefits under the plans are generally
related to an employee's length of service, salary and where applicable,
contributions. GMAC Mortgage Group, Inc., GMAC Commercial Credit LLC and certain
subsidiaries of GMAC Insurance Holdings, Inc. have separate retirement plans
which provide for pension payments to their eligible employees upon retirement.
The Company and certain of its subsidiaries participate in various
postretirement medical, dental, vision and life insurance plans of General
Motors. These benefits are funded as incurred from the general assets of the
Company. The Company accrues postretirement benefit costs over the active
service period of employees to the date of full eligibility for such benefits.
The Company has provided for certain amounts associated with estimated future
postretirement benefits other than pensions and characterized such amounts as
other postretirement benefits. Notwithstanding the recording of such amounts and
the use of these terms, the Company does not admit or otherwise acknowledge that
such amounts or existing postretirement benefit plans of the Company (other than
pensions) represent legally enforceable liabilities of the Company.
The total pension and other postretirement benefits expense of the Company
amounted to $96.5 million, $65.1 million and $75.3 million in 1999, 1998 and
1997, respectively.
NOTE 11. TRANSACTIONS WITH AFFILIATES
The Company is wholly-owned by GM and as such, may receive support from GM to
maintain competitive leverage levels and its fixed charges coverage ratio. No
such payments were received during 1999, 1998 or 1997.
Retail installment and lease contracts acquired by GMAC-NAO that included
interest rate subvention from GM, payable directly or indirectly to GM dealers,
were 81.6%, 80.0% and 78.0% of total retail installment and lease contracts
acquired during 1999, 1998 and 1997, respectively. GMAC-IO rate subvented
programs for 1999, 1998 and 1997 were not significant in relationship to the
GMAC consolidated rate subvented programs.
Agreements with GM provide for payment to the Company for residual value support
on certain retail leasing transactions. Amounts included in income for these
transactions totaled $450.3 million, $643.0 million and $428.0 million in 1999,
1998 and 1997, respectively.
45
46
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. TRANSACTIONS WITH AFFILIATES (CONCLUDED)
On occasion, the Company may also extend loans to GM, its subsidiaries and
affiliates. Outstanding loans to GM and affiliates totaled $4,025.0 million and
$2,270.5 million at December 31, 1999 and December 31, 1998, respectively. Total
interest income from these loans is included in other income and amounted to
$225.8 million, $126.3 million and $38.0 million in 1999, 1998 and 1997,
respectively.
GMAC of Canada, Limited administers operating lease receivables on behalf of GM
of Canada Limited ("GMCL") and receives a servicing fee. Included in income were
service fees from GMCL totaling $39.3 million, $9.8 million and $5.7 million in
1999, 1998 and 1997, respectively.
The Company purchases certain vehicles which GM acquired from its fleet and
rental customers. The cost of these vehicles held for resale, which is included
in other assets, was $712.0 million at December 31, 1999, compared with $658.4
million at December 31, 1998. Included in other income were service fees
received from GM on these vehicles amounting to $35.4 million, $32.2 million and
$31.0 million in 1999, 1998 and 1997, respectively.
Beginning in 1997, an agreement with GM provides for the reimbursement of
certain selling expenses incurred by GMAC on off-lease vehicles sold by GM at
auction. Included as a reduction of other operating expenses were reimbursements
totaling $50.6 million, $48.5 million and $29.8 million in 1999, 1998 and 1997,
respectively.
The net amounts due GM and its affiliated companies at the balance sheet dates
relate principally to current wholesale financing of sales of GM products. The
settlement terms related to the wholesale financing of certain GM products are
at shipment date. To the extent that wholesale settlements with GM are made
prior to the expiration of transit, interest is received from GM. Interest
received on this arrangement is included in other income and totaled $105.2
million, $91.6 million and $70.3 million in 1999, 1998 and 1997, respectively.
The Company receives technical and administrative advice and services from GM
and also occupies office space furnished by GM. Costs of such services, which
are included in other operating expenses, amounted to $40.0 million, $36.3
million and $33.8 million in 1999, 1998 and 1997, respectively.
The Company and GM have agreed to enter into a lease arrangement in 2000. The
transaction is expected to close in the first quarter of 2000 with the initial
transfer of three properties located in Michigan totaling $429.0 million treated
as an equity contribution. As part of the lease arrangement, the Company will
fund and capitalize improvements to these properties totaling $1.1 billion over
the next four years. The lease arrangement also provides for the properties to
be leased to GM for fifteen years.
Insurance premiums earned by GMACI on certain coverages provided to GM totaled
$455.1 million, $432.5 million and $387.6 million in 1999, 1998 and 1997,
respectively.
46
47
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INSURANCE OPERATIONS
GMAC Insurance Holdings, Inc. and its subsidiaries (collectively "GMACI")
perform a wide array of insurance underwriting including personal, mechanical
and commercial coverages. GMACI conducts insurance and reinsurance operations
primarily in the United States, Canada and Europe. GMACI insures selected
personal, commercial and extended warranty coverages for individuals, auto
dealerships, GMAC and GM. In the U.S., property and casualty risks are assumed
from other insurers. Outside the U.S., property, casualty and mechanical risks
are assumed from local insurance companies. GMACI cedes a portion of its
insurance business and retrocedes a portion of its reinsurance business to
outside reinsurers to protect the Company against certain types of loss
activity. Premiums are earned on a basis related to coverage provided over the
terms of the policies or reinsurance assumed contracts. Commissions, premium
taxes and other costs that vary with, and are primarily related to acquiring new
business are deferred and amortized over the terms of the related policies on
the same basis as premiums are earned or over the average life of related
policies, including renewals. The liability for losses and loss expenses
includes amounts relating to reinsurance agreements and represents the
accumulation of estimates for reported losses and a provision for losses
incurred but not reported. Estimates for salvage and subrogation recoverable are
recognized at the time losses are incurred. Insurance liabilities are
necessarily based on estimates and the ultimate liability may vary from such
estimates. The estimates are regularly reviewed and adjustments are included in
income.
Unpaid Insurance Losses and Loss Adjustment Expenses
Activity in the reserves for losses and loss adjustment expenses ("LAE") is
summarized as follows:
For the Years Ended December 31,
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
(in millions of dollars)
Balance at beginning of the year $ 2,062.7 $ 2,125.3 $ 1,581.9
Less: reinsurance recoverables 582.5 552.1 356.9
Add: Integon net reserves at acquisition date -- -- 382.5
-------------- -------------- --------------
Net balance at beginning of the year 1,480.2 1,573.2 1,607.5
Incurred related to:
Current year 1,442.1 1,487.2 1,053.1
Prior years (52.2) (17.8) 20.4
-------------- -------------- --------------
Total incurred 1,389.9 1,469.4 1,073.5
Paid related to:
Current year (961.0) (950.2) (761.5)
Prior years (599.9) (612.2) (346.3)
-------------- -------------- --------------
Total paid (1,560.9) (1,562.4) (1,107.8)
Net balance at end of the year 1,309.2 1,480.2 1,573.2
Add: reinsurance recoverables 552.7 582.5 552.1
-------------- -------------- --------------
Balance at end of the year $ 1,861.9 $ 2,062.7 $ 2,125.3
============== ============== ==============
As a result of changes in estimates of insured events, the reserves for losses
and LAE decreased in 1999 and 1998 primarily due to the continued runoff of the
product liability program and a reduction in personal lines business.
47
48
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. MORTGAGE BANKING
GMAC Mortgage Group, Inc. and its subsidiaries (collectively "GMACMG") conduct
mortgage banking operations in the United States, Mexico, Japan, Europe and
Canada. GMACMG originates and markets single-family and commercial mortgage
loans, and securities backed by such loans, to investors and services these
loans on behalf of investors. In addition to offering other consumer products
including home equity loans, insurance services and trustee services, GMACMG
packages securities backed by home equity loans and subprime mortgages. GMACMG
also actively pursues the acquisition of mortgage servicing rights from other
mortgage bankers and financial institutions. Operations of GMACMG's various
mortgage banking subsidiaries are conducted through its three primary
businesses: GMAC Residential Holding Corp. ("GMACM"); GMAC Commercial Holding
Corp. ("GMACCM"); and Residential Funding Corporation ("RFC").
Loan Originations and Servicing Acquisitions
The following summarizes GMACMG's originations and purchases of mortgage loans
and the principal balances of acquisitions of mortgage servicing rights:
For the Years Ended December 31,
----------------------------------------
1999 1998
------------------ ------------------
(in millions of dollars)
Loans originated/brokered:
Residential $21,532.6 $18,904.0
Commercial 9,443.5 8,654.1
Loan purchases $22,763.4 $29,900.5
Bulk servicing acquisitions:
Residential $22,220.1 $82,546.4
Commercial 15,673.0 12,038.7
Sales of Loans
GMACMG sells a majority of its originated loans into various governmental agency
(FHLMC, FNMA and GNMA) mortgage-backed securities and whole loans to private
investors while maintaining the right to service such mortgage loans. GMACMG
generally packages its purchased mortgage loans into private mortgage-backed
securities for sale to investment bankers and private mortgage investors.
Allowance for Losses
As part of its conduit mortgage banking activities, GMACMG retains subordinated
and stripped mortgage-backed securities which are classified as trading
securities and held at estimated fair value. On certain transactions, GMACMG
will retain full or limited recourse for credit or other losses incurred by the
purchaser of the loans sold. GMACMG establishes allowances for estimated future
losses related to the outstanding recourse obligations, which management
considers adequate. In addition, GMACMG provides appropriate loss allowances on
warehouse lines and other loans held as investments.
Mortgage Servicing Rights
The right to service loans is contracted under primary or master servicing
agreements. Under primary servicing agreements, GMACMG collects monthly
principal, interest and escrow payments from individual mortgagors and performs
certain accounting and reporting functions on behalf of the mortgage investors.
As master servicer, GMACMG collects monthly payments from various sub-servicers
and performs certain accounting and reporting functions on behalf of the
mortgage investors. For such servicing activities, GMACMG earns a servicing fee,
which is considered to be adequate compensation. With the exception of serviced
mortgages owned by GMACMG, the servicing portfolio principal amount is not
reflected in the Company's financial statements. Mortgage servicing rights, net
of valuation allowances, totaled $3,421.8 million and $2,434.6 million at
December 31, 1999 and 1998, respectively. The fair value of the mortgage
servicing rights at December 31, 1999 and 1998 was $3,532.4 million and $2,559.7
million, respectively.
48
49
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. MORTGAGE BANKING (CONTINUED)
Mortgage Servicing Rights (concluded)
GMACMG has stratified its mortgage servicing rights by predominant risk
characteristics, primarily loan type and interest rate interval, for purposes of
recording amortization expense and measuring impairment. Amortization expense is
recorded for each stratum in proportion to and over the period of the projected
net servicing income. Impairment is evaluated for each stratum by comparing fair
value as estimated using projected discounted cash flows with current market
assumptions to the net book value of the related stratum, adjusted for deferred
hedge results. Impairment is recorded through a valuation allowance and charged
to amortization expense in the period it is determined. At December 31, 1999 and
1998, the valuation allowance totaled $69.4 million and $52.7 million,
respectively.
Servicing Portfolio
The following is a summary of GMACMG's servicing portfolios:
December 31,
------------------------------------
1999 1998
---------------- ----------------
Servicing portfolio (in millions of dollars)
Residential $ 151,557.4 $ 139,873.3
Commercial (1) 78,158.0 52,104.7
Master servicing 68,193.0 58,433.6
GMACMG intracompany servicing (2,467.7) (2,918.0)
--------------- --------------
Total $ 295,440.7 $ 247,493.6
=============== ==============
Number of serviced loans 2,313,340 2,053,091
=============== ==============
(1) Includes $3,228.0 million and $2,492.1 million of term loans serviced on
behalf of GMAC at December 31, 1999 and 1998, respectively.
Allowance for Loan Losses and Valuation Reserves
The following table presents an analysis of the allowance for mortgage loan
losses and valuation reserves:
1999 1998 1997
------------ ----------- ----------
(in millions of dollars)
Balance at beginning of year $138.5 $202.0 $138.0
Provisions charged to income 85.4 51.9 107.2
Net charge-offs and reductions (45.8) (115.4) (43.2)
====== ======= =========
Balance at end of the year $178.1 $138.5 $202.0
====== ======= =========
The allowance for loan losses and valuation reserves includes GMACMG's accrual
for losses on loans sold with recourse totaling $29.7 million, $42.5 million and
$86.3 million as of December 31, 1999, 1998 and 1997, respectively.
Loans Sold with Recourse
Information regarding GMACMG's loans sold with recourse is as follows:
December 31,
---------------------------------
1999 1998
-------------- ---------------
(in millions of dollars)
Loans sold with recourse $ 10,905.7 $ 9,572.8
=========== ==========
Maximum exposure on loans sold:
Full recourse $ 132.5 $ 177.0
Limited recourse 638.3 949.7
----------- ----------
Total $ 770.8 $ 1,126.7
=========== ==========
49
50
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. MORTGAGE BANKING (CONTINUED)
Loans Sold with Recourse (concluded)
The maximum recourse exposure shown above is net of amounts reinsured with third
parties which totaled $98.5 million and $135.5 million at December 31, 1999 and
1998, respectively.
Mortgage Derivative Financial Instruments
GMACMG uses various off-balance sheet financial instruments in the normal course
of business to manage inherent risk. The derivative financial instruments are
held for purposes other than trading and consist primarily of interest rate
floors and caps, written and purchased option contracts, futures contracts and
individually tailored swap products.
GMACMG utilizes option contracts on U.S. Treasury instruments and
mortgage-backed securities, interest rate swaps and total rate of return swaps
to hedge interest rate and price risk associated with its mortgage loans held
for sale. At December 31, 1999 and 1998, the notional amount of such instruments
totaled $6,254.5 million and $5,011.0 million, respectively. Realized and
unrealized gains and losses associated with these instruments are considered in
the lower of cost or market valuation of the mortgage loans.
GMACMG uses options and futures contracts on U.S. Treasury instruments and
euros, and interest rate swap agreements to hedge price and interest rate risk
associated with its mortgage-related securities. At December 31, 1999 and 1998,
the notional amount of such instruments totaled $7,535.0 million and $9,717.6
million, respectively. Realized and unrealized gains and losses associated with
these instruments are recognized in the current period on a mark-to-market
basis.
GMACMG enters into interest rate swap contracts in an effort to stabilize
short-term borrowing costs and maintain a minimum return on certain loans held
for investment. At December 31, 1999 and 1998, the notional amount of these
instruments totaled $314.7 million and $638.2 million, respectively. The
contracts involve the delivery of fixed payments to a counterparty in return for
variable payments based upon a published index. The contracts' values fluctuate
inversely to the values of the related loan portfolio. The contracts have
maturities ranging from two to five years. Amounts paid or received under such
contracts are recorded as an adjustment to interest expense.
GMACMG uses interest rate caps and floors, futures, options on futures
contracts, swaps, swaptions and forwards to manage potential prepayment activity
associated with mortgage servicing rights. At December 31, 1999 and 1998, the
notional amount of such instruments totaled $17,161.1 million and $65,177.2
million, respectively. The maturities of these instruments range between four
months and five years. These instruments are carried at fair value, with
adjustments recorded to the basis of mortgage servicing rights.
Mortgage Commitments
GMACMG enters into various commitments to purchase or originate mortgage loans
in the normal course of business. Commitments to purchase or originate mortgage
loans totaled $4,821.3 million and $5,165.5 million at December 31, 1999 and
1998, respectively. These commitment obligations are considered in conjunction
with the lower of cost or market valuation of mortgage inventory held for sale.
Commitments to sell mortgage loans totaled $1,096.2 million and $2,380.7 million
at December 31, 1999 and 1998, respectively. Commitments to sell securities
totaled $537.9 million and $3,835.6 million at December 31, 1999 and 1998,
respectively. These commitment obligations are considered in conjunction with
the lower of cost or market valuation of mortgage loans held for sale.
50
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GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. MORTGAGE BANKING (CONCLUDED)
Mortgage Commitments (concluded)
Warehouse lending involves the extension of short-term secured lines of credit
to mortgage originators to finance mortgage loans until such loans are purchased
by a permanent investor. Advances under the lines of credit are fully secured by
the underlying mortgages and bear interest at a rate that is tied to a
short-term index. At December 31, 1999 and 1998, unused warehouse lending
commitments totaled $3,589.0 million and $2,021.9 million, respectively. GMACMG
enters into foreign currency contracts to hedge foreign exchange risks
associated with overseas lending. At December 31, 1999 and 1998, the notional
amounts of such instruments totaled $437.1 million and $206.2 million,
respectively. Construction lending involves the extension of long-term secured
lines of credit to construction project managers. At December 31, 1999 and 1998,
unused construction lending commitments totaled $1,206.6 million and $1,397.9
million, respectively. In addition, GMACMG also has outstanding commitments to
lend on available credit lines, primarily home equity lines of credit. At
December 31, 1999 and 1998, unused lending commitments on these lines totaled
$1,112.4 million and $671.2 million, respectively.
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has developed the following fair value estimates by utilization of
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value, so the estimates are not necessarily indicative
of the amounts that could be realized or would be paid in a current market
exchange. The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts.
Fair value information presented herein is based on information available at
December 31, 1999 and 1998. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts, such amounts have
not been updated since those dates and, therefore, the current estimates of fair
value at dates subsequent to December 31, 1999 and 1998 may differ significantly
from these amounts.
The estimated fair value of financial instruments held by the Company, for which
it is practicable to estimate that value, were as follows:
Balance sheet financial instruments:
December 31, 1999 December 31, 1998
----------------------------------- -----------------------------------
Book Estimated Book Estimated
Value Fair Value Value Fair Value
---------------- ---------------- ----------------- ----------------
Assets (in millions of dollars)
- ------
Cash and cash equivalents $ 704.3 $ 704.3 $ 618.1 $ 618.1
Investments in securities 8,984.7 8,986.7 8,681.9 8,681.9
Finance receivables, net 81,288.9 80,936.1 71,101.2 71,300.4
Factored receivables 764.9 764.9 -- --
Notes receivable from GM 4,025.0 3,948.9 2,270.5 2,261.5
Real estate mortgages
-held for sale 5,678.4 5,702.7 7,969.7 7,990.0
-held for investment 1,497.4 1,498.4 1,296.7 1,299.8
-lending receivables 1,800.6 1,800.6 2,063.6 2,063.6
Due and deferred from receivable
sales, net 742.2 742.2 454.3 454.3
Liabilities
- -----------
Debt $121,158.2 $119,756.0 $106,173.2 $107,462.2
51
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GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Off-balance sheet financial instruments:
December 31, 1999 December 31, 1998
--------------------------------------- --------------------------------------
Contract/ (3) Contract/ (3)
Notional Gain Loss Notional Gain Loss
Amount(3) Position Position Amount(3) Position Position
--------- -------- -------- --------- -------- --------
(in millions of dollars)
Commitments to originate/purchase
mortgages/securities $ 4,821.3 $ 5.5 $ (29.0) $ 5,165.5 $ 15.1 $ (3.7)
Commitments to sell
mortgages/securities 1,634.1 6.9 (3.6) 6,216.3 1.6 (4.5)
Unused mortgage lending
commitments 5,907.9 -- -- 4,091.0 -- --
Unused revolving credit lines 2,193.6 -- -- 291.1 -- --
Interest rate instruments (1) 63,243.2 165.2 (692.9) 98,029.0 507.0 (152.1)
Foreign currency instruments (2) 13,266.7 385.1 (861.7) 7,885.0 486.3 (161.3)
Mortgage-related futures 1,060.4 9.8 -- 1,810.6 0.9 (6.0)
(1) The 1999 and 1998 notional balances include $38,892.5 million and $84,428.6
million, respectively, in financial instruments that are recorded at fair value
on the balance sheet. The net fair value recorded on the balance sheet for these
financial instruments totaled $22.7 million and $290.1 million at December 31,
1999 and 1998, respectively. The loss position includes deferred gains of $44.8
million and $36.8 million for December 31, 1999 and 1998, respectively. The
gain/loss positions presented exclude accrued interest.
(2) Includes $5,212.9 million and $3,373.0 million in combined interest rate and
currency swaps with unrealized losses of $367.8 million and unrealized gains of
$153.8 million at December 31, 1999 and 1998, respectively. The unrealized gain
or loss in the fair value of the foreign currency instruments in 1999 and 1998
was offset by the unrealized loss or gain in the fair value of the related
underlying debt instruments. The gain/loss positions presented exclude accrued
interest.
(3) Contract/notional amounts of off-balance sheet financial instruments do not
represent credit risk exposures. Credit risk is limited to the current cost of
replacing instruments in a gain position.
Cash and cash equivalents
The book value approximates fair value because of the short maturity of these
instruments.
Investments in securities
Bonds, equity securities, notes and other available for sale investments in
securities are carried at fair value, which is based on quoted market prices.
The fair value of mortgage-related trading securities is based on market quotes,
discounted using market prepayment assumptions and discount rates. The held to
maturity investments in securities are carried at historical cost. The fair
value of the held to maturity investments in securities is based on quoted
market prices. The retained interests in securitizations are carried at fair
value based on discounted expected cash flows using current market rates.
Finance receivables, net
The fair value is estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to each category of
finance receivables. The carrying value of wholesale receivables and other
receivables whose interest rates adjust on a short-term basis with applicable
market indices (generally the prime rate) are assumed to approximate fair value
either due to their short maturities or due to the interest rate adjustment
feature.
Factored receivables
The book value approximates the fair value because of the short duration of such
receivables.
Notes receivable from GM
The fair value is estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to certain categories
of other financing assets.
52
53
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Real estate mortgages
The fair value of mortgage loans held for sale is based upon actual prices
received on recent sales of mortgage loans and securities to investors and
projected prices obtained through investor indications considering interest
rates, mortgage loan type and credit quality. The fair values of loans held for
investment is determined through a review of published market information
associated with similar instruments. Due to the short-term floating rates on
lending receivables, book values are assumed to approximate fair values.
Due and deferred from receivable sales, net
The fair value of interest-only strip receivables is derived by discounting
expected cash flows using current market rates.
Debt
The fair value of debt is determined by using quoted market prices for the same
or similar issues, if available, or based on the current rates offered to the
Company for debt with similar remaining maturities. Commercial paper, master
notes and demand notes have an original term of less than 270 days and,
therefore, the carrying amount of these liabilities is considered fair value.
Commitments to originate/purchase mortgages/securities
The fair value of commitments is estimated using published market information
associated with commitments to sell similar instruments.
Commitments to sell mortgages/securities
The fair value of commitments is estimated using published market information
associated with similar instruments.
Unused mortgage lending commitments
The fair value of these commitments is considered in the overall valuation of
the underlying assets with which they are associated.
Unused revolving credit lines
The unused portion of revolving lines of credit will approximate market value
since they reprice at prevailing market rates.
Interest rate instruments
The notional balances of interest rate instruments include interest rate swaps
of $36.3 billion and $19.0 billion; options of $8.7 billion and $68.1 billion;
caps and floors of $18.0 billion and $10.4 billion; and mortgage servicing
rights hedges of $0.3 billion and $0.5 billion, at December 31, 1999 and 1998,
respectively.
The fair value of the existing interest rate swaps is estimated by discounting
expected cash flows using quoted market interest rates. The fair value of
written and purchased options is estimated using broker/dealer quoted market
prices. The fair value of mortgage-related interest rate swaps, caps and written
and purchased options is based upon broker/dealer quoted market prices.
Foreign currency instruments
The estimated fair value of the foreign currency swaps is derived by discounting
expected cash flows using market exchange rates over the remaining term of the
agreement.
Mortgage-related futures
The fair value of futures contracts is determined based upon quoted market
prices.
53
54
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONCLUDED)
Credit Risk
These aforementioned instruments contain an element of risk in the event the
counterparties are unable to meet the terms of the agreements. However, the
Company minimizes the risk exposure by limiting the counterparties to those
major banks and financial institutions who meet established credit guidelines.
Management also reduces its credit risk for unused lines of credit it extends by
applying the same credit policies in making commitments as it does for extending
loans. Management does not expect any counterparty to default on its obligations
and, therefore, does not expect to incur any cost due to counterparty default.
The Company does not require or place collateral for these financial
instruments, except for the lines of credit it extends.
Concentrations of Credit Risk
The Company's primary business is to provide vehicle financing for GM products
to GM dealers and their customers. Wholesale and dealer loan financing relates
primarily to GM dealers, with collateral primarily GM vehicles (for wholesale)
and GM dealership property (for loans). For wholesale financing, GMAC is also
provided further protection by GM factory repurchase programs. Retail contracts
and operating lease assets relate primarily to the secured sale and lease,
respectively, of vehicles (primarily GM).
In terms of geographic concentrations as of December 31, 1999, 77.6% of GMAC's
consolidated automotive servicing assets were U.S. based; 10.6% were in Europe
(of which 34.2% reside in Germany); 8.6% were in Canada; 1.6% were in
Asia-Pacific (of which Australia represents 90.4%); and 1.6% were in Latin
America. The majority of the Company's finance receivables are geographically
diversified throughout the United States.
54
55
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision makers in deciding how to allocate resources and in
assessing performance.
Financial results for GMAC's operating segments are summarized below:
Operating Segments:
(in millions of dollars)
Eliminations/
GMAC-NAO GMAC-IO GMACI GMACMG Reclassifications Total
-------------- -------------- ------------ ------------- ------------------ ---------------
1999
- ----
Total assets $123,345.3 $18,114.6 $7,107.4 $18,398.2 $(18,176.3) $148,789.2
Net financing revenue
1,413.6 905.4 -- -- 41.0 2,360.0
Other revenue 1,792.2 93.0 2,324.0 2,290.6 (59.7) 6,440.1
Tax expense 566.8 136.3 79.5 177.6 -- 960.2
Net income 861.4 195.5 209.9 260.5 -- 1,527.3
1998
- ----
Total assets $108,266.9 $17,040.1 $7,265.5 $19,093.1 $(19,905.2) $131,760.4
Net financing revenue
1,403.6 824.6 -- -- 23.2 2,251.4
Other revenue 1,396.3 48.0 2,382.1 1,389.0 (32.2) 5,183.2
Tax expense 344.5 117.7 80.1 69.4 -- 611.7
Net income 753.5 230.9 225.9 115.0 -- 1,325.3
1997
- ----
Total assets $ 88,569.6 $15,272.9 $7,088.6 $12,371.1 $(13,616.3) $109,685.9
Net financing revenue
1,825.6 834.7 -- -- (16.7) 2,643.6
Other revenue 1,168.8 24.0 1,786.6 1,036.5 2.9 4,018.8
Tax expense 616.1 112.7 77.9 106.2 -- 912.9
Net income 674.8 235.1 224.6 166.6 -- 1,301.1
55
56
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SEGMENT INFORMATION (CONCLUDED)
Information concerning principal geographic areas was as follows:
Geographic Information:
- -----------------------
(in millions of dollars)
All Other
United States Countries Total
-----------------------------------------------------------
1999
- ----
Net financing revenue and other revenue $ 7,210.9 $ 1,589.2 $ 8,800.1
Long-lived assets (1) 26,529.0 7,111.8 33,640.8
1998
- ----
Net financing revenue and other revenue $ 6,106.2 $ 1,328.4 $ 7,434.6
Long-lived assets (1) 21,961.8 7,217.5 29,179.3
1997
- ----
Net financing revenue and other revenue $ 5,356.4 $ 1,306.0 $ 6,662.4
Long-lived assets (1) 20,535.6 6,442.6 26,978.2
(1) Primarily consists of net operating leases, goodwill and net property and
equipment.
NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES
Minimum future commitments under operating leases having noncancellable lease
terms in excess of one year, primarily for real property, aggregating $177.5
million, are payable $45.8 million in 2000; $32.0 million in 2001; $22.7 million
in 2002; $18.8 million in 2003; $12.5 million in 2004; and $45.7 million in 2005
and thereafter. Certain of the leases contain escalation clauses and renewal or
purchase options. Rental expenses under operating leases were $232.5 million,
$188.1 million and $181.5 million in 1999, 1998 and 1997, respectively.
The Company and certain subsidiaries of GMACI have entered into an agreement
under which Electronic Data Systems Corporation ("EDS"), a former subsidiary of
GM, will continue to be the principal provider of information technology
services through 2002. An additional agreement has been signed for EDS to
provide support for GMAC's European information technology related activities
through 2001.
GMAC is subject to potential liability under government regulations and various
claims and legal actions which are pending or may be asserted against them. Some
of the pending actions purport to be class actions. The aggregate ultimate
liability of GMAC under these government regulations and under these claims and
actions, was not determinable at December 31, 1999. After discussion with
counsel, it is the opinion of management that such liability is not expected to
have a material adverse effect on the Company's consolidated financial condition
or results of operations.
56
57
SUPPLEMENTARY FINANCIAL DATA
SUMMARY OF CONSOLIDATED QUARTERLY EARNINGS (UNAUDITED)
1999 Quarters
--------------------------------------------------------------
First Second Third Fourth
-------------- -------------- --------------- --------------
(in millions of dollars)
Total financing revenue $3,277.1 $3,361.2 $3,480.0 $3,659.6
Interest and discount expense 1,512.9 1,538.0 1,666.9 1,808.4
Net financing revenue and other income 2,124.6 2,199.4 2,309.7 2,166.4
Provision for credit losses 119.3 110.4 97.8 76.3
Net income 392.3 391.1 392.3 351.6
1998 Quarters
--------------------------------------------------------------
First Second Third Fourth
-------------- -------------- --------------- --------------
(in millions of dollars)
Total financing revenue $3,106.8 $3,204.7 $3,150.2 $3,269.0
Interest and discount expense 1,384.5 1,454.7 1,477.5 1,470.2
Net financing revenue and other income 1,763.2 1,906.4 1,819.9 1,945.1
Provision for credit losses 107.2 121.5 93.9 140.5
Net income 349.3 364.7 313.1 298.2
57
58
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS.
Included in Part II, Item 8 of Form 10-K.
(a)(2) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted because they are inapplicable or
because the information called for is shown in the financial
statements or notes thereto.
(a)(3) EXHIBITS (Included in Part IV of this report). Page
----
12 Statement of Ratio of Earnings to Fixed Charges
for the years 1999, 1998, 1997, 1996 and 1995. 62
23.1 Consent of Independent Auditors. 63
27 Financial Data Schedule (for SEC electronic
filing information only). --
(b) REPORTS ON FORM 8-K.
The Company filed a Form 8-K on October 14, 1999 and January 20, 2000
reporting matters under Item 5, Other Events.
Items 4, 9, 10, 11, 12 and 13 are inapplicable and have been omitted.
58
59
SIGNATURES
Pursuant to the requirements of Section 13 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.
GENERAL MOTORS ACCEPTANCE CORPORATION
-------------------------------------
(Registrant)
By s/ John D. Finnegan
-------------------------------------------
Date: March 10, 2000 (John D. Finnegan, Chairman of the Board)
- --------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on the 10th day of March, 2000, by the following persons
on behalf of the Registrant and in the capacities indicated.
Signature Title
--------- -----
s\ John D. Finnegan
- -----------------------------
(John D. Finnegan) President and Chairman of the Board of
Directors
s\ William F. Muir
- -----------------------------
(William F. Muir) Executive Vice President and Director
(Signing as Principal Financial
Officer)
s\ Gerald E. Gross
- -----------------------------
(Gerald E. Gross) Comptroller
(Signing as Principal Accounting
Officer)
s\ Richard J. S. Clout
- -----------------------------
(Richard J. S. Clout) Executive Vice President and Director
s\ John E. Gibson
- -----------------------------
(John E. Gibson) Executive Vice President and Director
s\ Eric A. Feldstein
- -----------------------------
(Eric A. Feldstein) Director
59
60
SIGNATURES (CONCLUDED)
Signature Title
--------- -----
s\ J. Michael Losh
- ------------------------------------
(J. Michael Losh) Director
s\ Harry J. Pearce
- ------------------------------------
(Harry J. Pearce) Director
s\ W. Allen Reed
- ------------------------------------
(W. Allen Reed) Director
s\ John F. Smith, Jr.
- ------------------------------------
(John F. Smith, Jr.) Director
s\ G. Richard Wagoner, Jr.
- ------------------------------------
(G. Richard Wagoner, Jr.) Director
s\ Ronald L. Zarella
- ------------------------------------
(Ronald L. Zarrella) Director
60
61
EXHIBIT INDEX
Exhibit
Number Exhibit Name
------------ --------------------------------------------------
12 Ratio of Earnings to Fixed Charges
23.1 Consent of Independent Auditors, Deloitte & Touche
LLP
27 Financial Data Schedule (for SEC electronic filing
information only)
61