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EX-31.1 - EXHIBIT 31.1 - General Motors Financial Company, Inc.gmfexhibit311q32015.htm
EX-32.1 - EXHIBIT 32.1 - General Motors Financial Company, Inc.gmfexhibit321q32015.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
(Mark One)
ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________ to ________________
Commission file number 1-10667
______________________________________________ 
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
Texas
 
75-2291093
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant’s telephone number, including area code) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  Q    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  Q    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
ý
Smaller Reporting Company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  Q 
As of October 21, 2015, there were 505 shares of the registrant’s common stock, par value $1.00 per share, outstanding. All of the registrant’s common stock is owned by General Motors Holdings, LLC.





GENERAL MOTORS FINANCIAL COMPANY, INC.
INDEX TO FORM 10-Q
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Part I.
FINANCIAL INFORMATION
Item 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts) 
(Unaudited)
 
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
 
Cash and cash equivalents
 
$
1,602

 
$
2,974

Finance receivables, net (Note 3; Note 8 VIEs)
 
35,074

 
33,000

Leased vehicles, net (Note 4; Note 8 VIEs)
 
16,915

 
7,060

Restricted cash (Note 5; Note 8 VIEs)
 
1,928

 
2,071

Goodwill
 
1,243

 
1,244

Equity in net assets of non-consolidated affiliates (Note 6)
 
978

 

Property and equipment, net of accumulated depreciation of $81 and $59
 
207

 
172

Deferred income taxes
 
236

 
341

Related party receivables
 
589

 
384

Other assets
 
774

 
478

Total assets
 
$
59,546

 
$
47,724

Liabilities and Shareholder's Equity
 
 
 
 
Liabilities
 
 
 
 
Secured debt (Note 7; Note 8 VIEs)
 
$
28,284

 
$
25,214

Unsecured debt (Note 7)
 
19,975

 
12,217

Accounts payable and accrued expenses
 
1,094

 
1,002

Deferred income
 
1,205

 
392

Deferred income taxes
 
84

 
20

Related party taxes payable
 
649

 
636

Related party payables
 
527

 
433

Other liabilities
 
324

 
418

Total liabilities
 
52,142

 
40,332

Commitments and contingencies (Note 11)
 

 

Shareholder's equity
 
 
 
 
Common stock, $1.00 par value per share, 1,000 shares authorized and 505 shares issued
 

 

Additional paid-in capital
 
5,819

 
5,799

Accumulated other comprehensive loss (Note 14)
 
(956
)
 
(433
)
Retained earnings
 
2,541

 
2,026

Total shareholder's equity
 
7,404

 
7,392

Total liabilities and shareholder's equity
 
$
59,546

 
$
47,724

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In millions) 
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenue
 
 
 
 
 
 
 
 
Finance charge income
 
$
842

 
$
883

 
$
2,544

 
$
2,595

Leased vehicle income
 
797

 
297

 
1,827

 
735

Other income
 
68

 
81

 
205

 
219

Total revenue
 
1,707

 
1,261

 
4,576

 
3,549

Costs and expenses
 
 
 
 
 
 
 
 
Salaries and benefits
 
185

 
158

 
531

 
448

Other operating expenses
 
135

 
139

 
414

 
398

Total operating expenses
 
320

 
297

 
945

 
846

Leased vehicle expenses
 
629

 
228

 
1,423

 
563

Provision for loan losses
 
144

 
160

 
440

 
408

Interest expense
 
412

 
368

 
1,183

 
1,037

Total costs and expenses
 
1,505

 
1,053

 
3,991

 
2,854

Equity income (Note 6)
 
29

 

 
85

 

Income before income taxes
 
231

 
208

 
670

 
695

Income tax provision
 
52

 
50

 
155

 
217

Net income
 
179

 
158

 
515

 
478

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Defined benefit plans, net
 

 

 
1

 

Foreign currency translation adjustment
 
(282
)
 
(272
)
 
(524
)
 
(218
)
Other comprehensive loss, net
 
(282
)
 
(272
)
 
(523
)
 
(218
)
Comprehensive (loss) income
 
$
(103
)
 
$
(114
)
 
$
(8
)
 
$
260

The accompanying notes are an integral part of these condensed consolidated financial statements.


2


GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2015
 
2014
Net cash provided by operating activities
 
$
2,167

 
$
1,400

Cash flows from investing activities:
 
 
 
 
Purchases of consumer finance receivables, net
 
(13,099
)
 
(10,850
)
Principal collections and recoveries on consumer finance receivables
 
8,718

 
8,124

Net funding of commercial finance receivables
 
(179
)
 
(408
)
Purchases of leased vehicles, net
 
(11,258
)
 
(3,227
)
Proceeds from termination of leased vehicles
 
662

 
395

Acquisition of international operations
 
(1,049
)
 
(46
)
Disposition of equity interest
 
125

 

Purchases of property and equipment
 
(64
)
 
(37
)
Change in restricted cash
 
(236
)
 
(187
)
Change in other assets
 
24

 
(2
)
Net cash used in investing activities
 
(16,356
)
 
(6,238
)
Cash flows from financing activities:
 
 
 
 
Net change in debt (original maturities less than three months)
 
539

 
(913
)
Borrowings and issuance of secured debt
 
15,095

 
15,847

Payments on secured debt
 
(10,903
)
 
(13,568
)
Borrowings and issuance of unsecured debt
 
9,559

 
5,403

Payments on unsecured debt
 
(1,195
)
 
(1,339
)
Debt issuance costs
 
(124
)
 
(107
)
Net cash provided by financing activities
 
12,971

 
5,323

Net (decrease) increase in cash and cash equivalents
 
(1,218
)
 
485

Effect of foreign exchange rate changes on cash and cash equivalents
 
(154
)
 
(42
)
Cash and cash equivalents at beginning of period
 
2,974

 
1,074

Cash and cash equivalents at end of period
 
$
1,602

 
$
1,517

Supplemental cash flow information:
 
 
 
 
Subvention receivable from GM
 
$
405

 
$
164

Commercial loan funding payable to GM
 
$
498

 
$
597

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


GENERAL MOTORS FINANCIAL COMPANY, INC.
Notes to Condensed Consolidated Financial Statements

Note 1.
Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including certain special-purpose financing entities utilized in secured financing transactions, which are considered variable interest entities ("VIEs"). All intercompany transactions and balances have been eliminated in consolidation.
The interim period consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States of America. These interim period condensed consolidated financial statements should be read in conjunction with the consolidated financial statements that are included in our Annual Report on Form 10-K filed on February 4, 2015 ("Form 10-K"). Certain prior period amounts were reclassified to conform to our current year presentation.
The condensed consolidated financial statements at September 30, 2015, and for the three and nine months ended September 30, 2015 and 2014, are unaudited and, in management’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. The results for interim periods are not necessarily indicative of results for a full year.
Segment Information
We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: North America (the "North America Segment") and international (the "International Segment"). The North America Segment includes our operations in the U.S. and Canada. The International Segment includes our operations in all other countries. For additional financial information regarding our business segments, see Note 13 - "Segment Reporting."
Related Party Transactions
We are the wholly-owned captive finance subsidiary of General Motors Company ("GM"). We offer loan and lease finance products through GM-franchised dealers to consumers purchasing new and certain used vehicles manufactured by GM and make commercial loans directly to GM-franchised dealers and their affiliates. Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on consumer loan and lease finance products. In addition, GM makes payments to us to cover certain interest payments on commercial loans. In our International Segment, we provide limited funding to GM for new and used vehicles awaiting delivery to dealers. At September 30, 2015 and December 31, 2014, we had related party receivables from GM in the amount of $589 million and $384 million, primarily related to subvention.
At September 30, 2015 and December 31, 2014, we had $186 million and $176 million in commercial loans outstanding to dealers that are consolidated by GM. Prior to January 1, 2015, we provided financing to certain GM subsidiaries through factoring and other wholesale financing arrangements. At December 31, 2014, $289 million was outstanding under such arrangements, and was included in commercial finance receivables. No amounts were outstanding at September 30, 2015. At September 30, 2015 and December 31, 2014, we had $527 million and $433 million of related party payables due to GM, primarily for commercial finance receivables originated but not yet funded. These payables typically settle within 30 days.
We have a tax sharing agreement with GM for our U.S. operations. Under our tax sharing arrangement with GM, payments related to our U.S. operations for the tax years 2012 through 2014 were deferred for four years from their original due date. At September 30, 2015 and December 31, 2014, $649 million and $636 million was due to GM under the related party tax sharing agreement.
We have a Support Agreement with GM (the "Support Agreement"), which provides that, if our earning assets leverage at the end of any calendar quarter is higher than thresholds set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage to within the appropriate threshold. In determining our earning assets leverage (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time. At September 30, 2015, our earning assets leverage ratio was 8.4, which is below the applicable ratio of 9.5.

4


Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding and that GM will use its commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower on $4.0 billion under GM’s corporate revolving credit facilities. GM also agreed to certain provisions intended to ensure that we maintain adequate access to liquidity. Pursuant to these provisions, GM provided us with a $1.0 billion unsecured intercompany revolving credit facility (the “Junior Subordinated Revolving Credit Facility”). There were no advances outstanding under the Junior Subordinated Revolving Credit Facility at September 30, 2015 or December 31, 2014.
Accounting Standards Not Yet Adopted
In May 2014 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09, "Revenue Recognition - Revenue from Contracts with Customers" ("ASU 2014-09") which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires expanded disclosures. ASU 2014-09 was originally effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein. In July 2015 the FASB issued a deferral of ASU 2014-09 of one year, making it effective for annual reporting periods beginning on or after December 15, 2017 while also providing for early adoption, but not before the original effective date. We are currently assessing the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.
In April 2015 the FASB issued Accounting Standards Update 2015-03, "Interest - Imputation of Interest" ("ASU 2015-03") which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual reporting periods beginning on or after December 15, 2015 and interim periods within fiscal years beginning after December 15, 2016. In August 2015 the FASB issued an amendment pursuant to an SEC staff announcement at the June 18, 2015 Emerging Issues Task Force ("EITF") meeting on ASU 2015-03, which addresses the presentation and subsequent measurement of debt issuance costs associated with line of credit arrangements. We are currently assessing the impact the adoption of ASU 2015-03 will have on our consolidated financial statements.
Note 2.    Acquisition of Ally Financial International Operations
In November 2012, we entered into a definitive agreement with Ally Financial to acquire the outstanding equity interests in the top-level holding companies of its automotive finance and financial services operations in Europe and Latin America and a separate agreement to acquire Ally Financial's non-controlling equity interest in SAIC-GMAC Automotive Finance Company Limited ("SAIC-GMAC"), which conducts auto finance operations in China.
During 2013, we completed the acquisition of Ally Financial's European and Latin American auto finance and financial services operations. The aggregate consideration for these acquisitions was $3.3 billion. In addition, we repaid debt of $1.4 billion that was assumed as part of the acquisitions. We recorded the fair value of the assets acquired and liabilities assumed on the acquisition date.
On January 2, 2015, we completed the acquisition of Ally Financial's 40% equity interest in SAIC-GMAC. The aggregate purchase price was $1.0 billion. Also on January 2, 2015, we sold a 5% equity interest in SAIC-GMAC to Shanghai Automotive Group Finance Company Ltd. (“SAIC FC”), a current shareholder of SAIC-GMAC, for proceeds of $125 million. As a result of these transactions, we own a 35% equity interest in SAIC-GMAC. We account for our ownership interest in SAIC-GMAC using the equity method of accounting. The difference between the carrying amount of our investment and our share of the underlying net assets of SAIC-GMAC at the time of acquisition was $371 million, which was primarily related to goodwill. We determined the acquisition date fair values of the identifiable assets acquired and liabilities assumed in accordance with ASC 805, "Business Combinations" ("ASC 805").
Income resulting from the equity investment in SAIC-GMAC is included in our results beginning January 2, 2015. Equity income from SAIC-GMAC recorded in the three and nine months ended September 30, 2015 was $29 million and $85 million. If the acquisition had occurred on January 1, 2014, our consolidated net income for the three and nine months ended September 30, 2014 would have been $183 million and $561 million.

5


Note 3.
Finance Receivables
Our pre-acquisition and post-acquisition consumer finance portfolios are now reported on a combined basis, due to the diminished size of the pre-acquisition portfolio, which was $189 million at September 30, 2015 and $459 million at December 31, 2014.
The finance receivables portfolio consists of the following (in millions): 
 
 
September 30, 2015
 
December 31, 2014
 
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
Consumer finance receivables, collectively evaluated for impairment, net of fees(a)
 
$
15,479

 
$
10,993

 
$
26,472

 
$
12,127

 
$
12,262

 
$
24,389

Consumer finance receivables, individually evaluated for impairment, net of fees
 
1,515

 

 
1,515

 
1,234

 

 
1,234

Total consumer finance receivables(b)
 
16,994

 
10,993

 
27,987

 
13,361

 
12,262

 
25,623

Less: allowance for loan losses - collective
 
(408
)
 
(95
)
 
(503
)
 
(405
)
 
(78
)
 
(483
)
Less: allowance for loan losses - specific
 
(215
)
 

 
(215
)
 
(172
)
 

 
(172
)
Total consumer finance receivables, net
 
16,371

 
10,898

 
27,269

 
12,784

 
12,184

 
24,968

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial finance receivables, collectively evaluated for impairment, net of fees
 
3,498

 
4,295

 
7,793

 
3,180

 
4,803

 
7,983

Commercial finance receivables, individually evaluated for impairment, net of fees
 
5

 
47

 
52

 

 
89

 
89

Total commercial finance receivables
 
3,503

 
4,342

 
7,845

 
3,180

 
4,892

 
8,072

Less: allowance for loan losses - collective
 
(20
)
 
(13
)
 
(33
)
 
(21
)
 
(14
)
 
(35
)
Less: allowance for loan losses - specific
 
(1
)
 
(6
)
 
(7
)
 

 
(5
)
 
(5
)
Total commercial finance receivables, net
 
3,482

 
4,323

 
7,805

 
3,159

 
4,873

 
8,032

Total finance receivables, net
 
$
19,853

 
$
15,221

 
$
35,074

 
$
15,943

 
$
17,057

 
$
33,000

________________
(a) Amounts reported in the International Segment include $1.1 billion and $1.0 billion of direct-financing leases at September 30, 2015 and December 31, 2014.
(b) Net of unamortized premiums and discounts, and deferred fees and costs of $167 million and $245 million at September 30, 2015 and December 31, 2014.
Consumer Finance Receivables
Following is a summary of activity in our consumer finance receivables portfolio (in millions): 
 
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Consumer finance receivables, net of fees - beginning of period
 
$
13,361

 
$
12,262

 
$
25,623

 
$
11,388

 
$
11,742

 
$
23,130

Loans purchased
 
8,070

 
5,037

 
13,107

 
4,874

 
6,255

 
11,129

Principal collections and other
 
(3,818
)
 
(4,318
)
 
(8,136
)
 
(3,102
)
 
(4,622
)
 
(7,724
)
Charge-offs
 
(609
)
 
(101
)
 
(710
)
 
(543
)
 
(102
)
 
(645
)
Foreign currency translation
 
(10
)
 
(1,887
)
 
(1,897
)
 
(2
)
 
(672
)
 
(674
)
Balance at end of period
 
$
16,994

 
$
10,993

 
$
27,987

 
$
12,615

 
$
12,601

 
$
25,216


6


A summary of the activity in the allowance for consumer loan losses is as follows (in millions):
 
 
Three Months Ended September 30,
 
 
2015
 
2014
 
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Balance at beginning of period
 
$
627

 
$
94

 
$
721

 
$
515

 
$
60

 
$
575

Provision for loan losses
 
106

 
35

 
141

 
119

 
43

 
162

Charge-offs
 
(221
)
 
(35
)
 
(256
)
 
(194
)
 
(36
)
 
(230
)
Recoveries
 
111

 
13

 
124

 
96

 
10

 
106

Foreign currency translation
 

 
(12
)
 
(12
)
 

 
(5
)
 
(5
)
Balance at end of period
 
$
623

 
$
95

 
$
718

 
$
536

 
$
72

 
$
608

 
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Balance at beginning of period
 
$
577

 
$
78

 
$
655

 
$
468

 
$
29

 
$
497

Provision for loan losses
 
334

 
103

 
437

 
312

 
109

 
421

Charge-offs
 
(609
)
 
(101
)
 
(710
)
 
(543
)
 
(102
)
 
(645
)
Recoveries
 
321

 
36

 
357

 
299

 
41

 
340

Foreign currency translation
 

 
(21
)
 
(21
)
 

 
(5
)
 
(5
)
Balance at end of period
 
$
623

 
$
95

 
$
718

 
$
536

 
$
72

 
$
608



7


Consumer Credit Quality
We use proprietary scoring systems in the underwriting process that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score), and contract characteristics. In addition to our proprietary scoring system, we consider other individual consumer factors, such as employment history, financial stability, and capacity to pay. At the time of loan origination, substantially all of the consumers in our International Segment have the equivalent of prime credit scores. In the North America Segment, while we historically focused on consumers with lower than prime credit scores, we are expanding our prime and near-prime lending programs. A summary of the credit risk profile by FICO score band, determined at origination, of the consumer finance receivables in the North America Segment is as follows (dollars in millions):
 
 
September 30, 2015
 
December 31, 2014
 
 
Amount
 
Percent
 
Amount
 
Percent
Prime - FICO Score 680 and greater
 
$
3,245

 
19.1
%
 
$
596

 
4.4
%
Near-prime - FICO Score 620 to 679
 
2,747

 
16.2
%
 
1,691

 
12.7

Sub-prime - FICO Score less than 620
 
11,002

 
64.7
%
 
11,074

 
82.9

Balance at end of period
 
$
16,994

 
100.0
%
 
$
13,361

 
100.0
%
In addition, we review the credit quality of all of our consumer finance receivables based on consumer payment activity. A consumer account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Consumer finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. The following is a summary of the contractual amounts of delinquent consumer finance receivables, which is not significantly different than recorded investment, that are (i) more than 30 days delinquent, but not yet in repossession and (ii) in repossession, but not yet charged off (dollars in millions): 
 
 
September 30, 2015
 
September 30, 2014
 
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
31 - 60 days
 
$
1,039

 
$
98

 
$
1,137

 
4.0
%
 
$
865

 
$
114

 
$
979

 
3.9
%
Greater than 60 days
 
362

 
92

 
454

 
1.6

 
305

 
120

 
425

 
1.7

 
 
1,401

 
190

 
1,591

 
5.6

 
1,170

 
234

 
1,404

 
5.6

In repossession
 
47

 
6

 
53

 
0.2

 
44

 
5

 
49

 
0.2

 
 
$
1,448

 
$
196

 
$
1,644

 
5.8
%
 
$
1,214

 
$
239

 
$
1,453

 
5.8
%
The accrual of finance charge income has been suspended on $726 million and $682 million of consumer finance receivables (based on contractual amount due) at September 30, 2015 and December 31, 2014.
Impaired Consumer Finance Receivables - TDRs
Consumer finance receivables that become classified as troubled debt restructurings ("TDRs") are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. The financial effects of the accounts that become classified as TDRs result in an impairment charge recorded as part of the provision for loan losses. Accounts that become classified as TDRs because of a payment deferral still accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer; therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in the U.S. in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs.
At September 30, 2015 and December 31, 2014, the outstanding balance of consumer finance receivables in the International Segment determined to be TDRs was insignificant; therefore, the following information is presented with regard to the TDRs in the North America Segment only (in millions):

8


 
 
September 30, 2015

 
December 31, 2014
Outstanding recorded investment
 
$
1,515

 
$
1,234

Less: allowance for loan losses
 
(215
)
 
(172
)
Outstanding recorded investment, net of allowance
 
$
1,300

 
$
1,062

Unpaid principal balance
 
$
1,543

 
$
1,255

Additional information about loans classified as TDRs is presented below (in millions, except for number of loans):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Average recorded investment
 
$
1,403

 
$
1,057

 
$
1,361

 
$
937

Finance charge income recognized(a)
 
$
41

 
$
33

 
$
122

 
$
92

Number of loans classified as TDRs during the period
 
16,122

 
13,543

 
42,246

 
35,748

Recorded investment of loans classified as TDRs during the period
 
$
270

 
$
232

 
$
716

 
$
598

 _________________
(a)
Amounts presented for the three and nine months ended September 30, 2014 have been corrected from amounts previously presented.
A redefault is when an account meets the requirements for evaluation under our charge-off policy (See Note 1 - "Summary of Significant Accounting Policies" in our Form 10-K for additional information). The unpaid principal balance, net of recoveries, of loans that redefaulted during the reporting period and were within 12 months of being modified as a TDR was insignificant for the three and nine months ended September 30, 2015 and 2014.
Commercial Finance Receivables
Following is a summary of activity in our commercial finance receivables portfolio (in millions): 
 
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Commercial finance receivables, net of fees - beginning of period
 
$
3,180

 
$
4,892

 
$
8,072

 
$
1,975

 
$
4,725

 
$
6,700

Net funding (collections) of commercial finance receivables
 
373

 
(81
)
 
292

 
551

 
144

 
695

Charge-offs
 

 

 

 

 

 

Foreign currency translation
 
(50
)
 
(469
)
 
(519
)
 
(13
)
 
(231
)
 
(244
)
Balance at end of period
 
$
3,503

 
$
4,342

 
$
7,845

 
$
2,513

 
$
4,638

 
$
7,151


Commercial Credit Quality
We extend wholesale credit to dealers primarily in the form of approved lines of credit to purchase new vehicles as well as used vehicles. Each commercial lending request is evaluated, taking into consideration the borrower's financial condition and the underlying collateral for the loan. We use proprietary models to assign each dealer a risk rating. These models use historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer's ability to meet its financial obligations. We also consider numerous other financial and qualitative factors including, but not limited to, capitalization and leverage, liquidity and cash flow, profitability and credit history. 
We regularly review our models to confirm the continued business significance and statistical predictability of the factors and update the models to incorporate new factors or other information that improves statistical predictability. In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher risk (i.e., Groups III, IV, V and VI) dealers. We perform a credit review of each dealer at least annually and adjust the dealer's risk rating, if necessary. The credit lines for Group VI dealers are typically suspended and no further funding is extended to these dealers. 

9


Performance of our commercial finance receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables is generally not required until the dealer has sold the vehicle inventory. All receivables from the same dealer customer share the same risk rating.
A summary of the credit risk profile by dealer grouping of the commercial finance receivables is as follows (in millions): 
 
 
 
 
September 30, 2015
 
December 31, 2014
Group I
-
Dealers with superior financial metrics
 
$
1,191

 
$
1,062

Group II
-
Dealers with strong financial metrics
 
2,354

 
2,090

Group III
-
Dealers with fair financial metrics
 
2,571

 
2,856

Group IV
-
Dealers with weak financial metrics
 
1,114

 
1,250

Group V
-
Dealers warranting special mention due to potential weaknesses
 
409

 
559

Group VI
-
Dealers with loans classified as substandard, doubtful or impaired
 
206

 
255

Balance at end of period
 
$
7,845

 
$
8,072

At September 30, 2015 and December 31, 2014 substantially all of our commercial finance receivables were current with respect to payment status and none were classified as TDRs. Activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30, 2015 and 2014.
Note 4.
Leased Vehicles
Our operating lease program is offered primarily in the North America Segment. The following information regarding our leased vehicles is presented on a consolidated basis (in millions):
 
 
September 30, 2015
 
December 31, 2014
Leased vehicles
 
$
22,913

 
$
9,747

Manufacturer incentives
 
(3,764
)
 
(1,479
)
 
 
19,149

 
8,268

Less: accumulated depreciation
 
(2,234
)
 
(1,208
)
Leased vehicles, net
 
$
16,915

 
$
7,060

At September 30, 2015 and December 31, 2014, our Canadian subsidiary was servicing $32 million and $110 million of leased vehicles for a third party.
The following table summarizes minimum rental payments due to us as lessor under operating leases (in millions):
 
 
Years Ending December 31,
 
 
2015
 
2016
 
2017
 
2018
 
2019
Minimum rental payments under operating leases
 
$
720

 
$
2,749

 
$
2,219

 
$
1,001

 
$
86

Note 5.    Restricted Cash
The following table summarizes the components of restricted cash (in millions):
 
 
September 30, 2015
 
December 31, 2014
Revolving credit facilities
 
$
378

 
$
326

Securitization notes payable - consumer
 
1,452

 
1,330

Securitization notes payable - commercial
 
56

 
65

Other
 
42

 
350

Total restricted cash
 
$
1,928

 
$
2,071

Restricted cash for securitization notes payable and revolving credit facilities is comprised of funds deposited in restricted cash accounts as collateral required to support securitization transactions or to provide additional collateral for borrowings under revolving credit facilities. Additionally, these funds include monthly collections from borrowers that have not yet been used for repayment of debt.

10


At December 31, 2014, other restricted cash was primarily comprised of interest-bearing cash in Brazil held in escrow pending resolution of tax and civil litigation. At September 30, 2015, these amounts are classified as deposits and are included in other assets on the condensed consolidated balance sheet.
Note 6.
Equity in Net Assets of Non-consolidated Affiliates
Non-consolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used due to the ability to exert significant influence over decisions relating to their operating and financial affairs.
In January 2015, we completed the acquisition of Ally Financial's equity interest in SAIC-GMAC. See Note 2 - "Acquisition of Ally Financial International Operations" for additional information.
The income of SAIC-GMAC is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income. At September 30, 2015, we had undistributed earnings of $85 million related to SAIC-GMAC.
Note 7.
Debt
Debt consists of the following (in millions): 
 
 
September 30, 2015
 
December 31, 2014
 
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Secured Debt
 
 
 
 
 
 
 
 
 
 
 


Revolving credit facilities
 
$
3,353

 
$
4,502

 
$
7,855

 
$
1,701

 
$
5,327

 
$
7,028

Securitization notes payable - consumer
 
15,498

 
2,825

 
18,323

 
13,253

 
2,868

 
16,121

Securitization notes payable - commercial
 
1,250

 
856

 
2,106

 
500

 
1,565

 
2,065

Total secured debt
 
$
20,101

 
$
8,183

 
$
28,284

 
$
15,454

 
$
9,760

 
$
25,214

 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 

Senior notes
 
$
15,111

 
$
1,283

 
$
16,394

 
$
7,846

 
$
604

 
$
8,450

Credit facilities
 

 
2,344

 
2,344

 

 
2,974

 
2,974

Other unsecured debt
 

 
1,237

 
1,237

 

 
793

 
793

Total unsecured debt
 
$
15,111

 
$
4,864

 
$
19,975

 
$
7,846

 
$
4,371

 
$
12,217

Secured Debt
Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged finance receivables and leases. Refer to Note 8 - "Variable Interest Entities" for additional information relating to our involvement with VIEs. During the nine months ended September 30, 2015, we issued securitization notes payable of $9.4 billion through securitization transactions, and we entered into new credit facilities or renewed credit facilities with a total additional net borrowing capacity of $4.5 billion.
Unsecured Debt
In January 2015, our top-tier holding company issued $2.25 billion in senior notes comprised of $1.0 billion of 3.15% notes due in January 2020, $1.0 billion of 4.0% notes due in January 2025 and $250 million in floating rate notes due in January 2020. All of these notes are guaranteed by our principal operating subsidiary, AmeriCredit Financial Services, Inc. ("AFSI").
In February 2015, a European subsidiary issued €650 million of 0.85% notes under our Euro medium term notes program. These notes are due in February 2018. All of these notes are guaranteed by our top-tier holding company and by AFSI.
In April 2015, our top-tier holding company issued $2.4 billion in senior notes comprised of $850 million of 2.4% notes due in April 2018, $1.25 billion of 3.45% notes due in April 2022 and $300 million of floating rate notes due in April 2018. All of these notes are guaranteed by AFSI.
In May 2015, our primary Canadian operating subsidiary issued CAD$500 million of 3.08% notes due in May 2020. The notes are guaranteed by our top-tier holding company and by AFSI.

11


In July 2015, our top-tier holding company issued $2.3 billion in senior notes comprised of $1.5 billion of 3.2% notes due in July 2020 and $800 million of 4.3% notes due in July 2025. All of these notes are guaranteed by AFSI.
Subsequent to September 30, 2015, our top-tier holding company issued an additional $1.75 billion in senior notes comprised of $1.5 billion of 3.1% notes due in January 2019 and $250 million of floating rate notes due in January 2019. All of these notes are guaranteed by AFSI.
The International Segment utilizes unsecured credit facilities with banks as well as non-bank funding sources. During the nine months ended September 30, 2015, we increased borrowing capacity on unsecured committed credit facilities by $246 million. During the three months ended September 30, 2015, we began accepting deposits from retail banking customers in Germany. At September 30, 2015, the outstanding balance of these deposits was $611 million.
Note 8.    Variable Interest Entities
Securitizations and credit facilities

We use special purpose entities ("SPEs") that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred by us to the VIEs ("Securitized Assets"). We hold variable interests in the VIEs that could potentially be significant to the VIEs. We determined that we are the primary beneficiary of the SPEs because: (1) the servicing responsibilities for the Securitized Assets give us the power to direct the activities that most significantly impact the performance of the VIEs; and (2) the variable interests in the VIEs give us the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets of the VIEs serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to us or our other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that we provide as the servicer. We are not required and do not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in our condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to our creditors.
We recognize finance charge, lease vehicle and fee income on the securitized assets and interest expense on the secured debt issued in a securitization transaction, and record a provision for loan losses to recognize probable loan losses inherent in the Securitized Assets.
The following table summarizes the assets and liabilities of our consolidated VIEs related to securitization and credit facilities (in millions):
 
 
September 30, 2015
 
December 31, 2014
Restricted cash
 
$
1,886

 
$
1,721

Finance receivables, net
 
$
25,746

 
$
23,109

Leased vehicle assets
 
$
7,202

 
$
4,595

Secured debt
 
$
26,916

 
$
22,794

These amounts are related to securitization and credit facilities held by consolidated VIEs. Liabilities recognized as a result of consolidating these entities generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of these entities operations and cannot be used to satisfy our or our subsidiaries obligations.
Other VIEs
We consolidate certain operating entities that provide auto finance and financial services, which we do not control through a majority voting interest. We manage these entities and maintain a controlling financial interest in them and are exposed to the risks of ownership through contractual arrangements. The majority voting interests in these entities are indirectly wholly-owned by our parent, GM.
The following table summarizes the assets and liabilities of these entities (in millions):
 
 
September 30, 2015
 
December 31, 2014
Assets(a)
 
$
3,690

 
$
3,696

Liabilities(b)
 
$
2,969

 
$
3,184


12


_________________
(a)
Comprised primarily of finance receivables of $3.2 billion and $3.6 billion at September 30, 2015 and December 31, 2014.
(b)
Comprised primarily of debt of $2.6 billion and $2.5 billion at September 30, 2015 and December 31, 2014.
The following table summarizes the revenue and net income of these entities (in millions):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Total Revenue
 
$
41

 
$
30

 
$
122

 
$
148

Net Income
 
$
6

 
$
8

 
$
25

 
$
29

Transfers of finance receivables to non-VIEs
Under certain debt agreements, we transfer finance receivables to entities which are not considered VIEs. These transfers do not meet the criteria to be considered sales; therefore, the finance receivables and the related debt are included in our condensed consolidated financial statements, similar to the treatment of finance receivables and related debt of our consolidated VIEs.  Any collections received on the transferred receivables are available only for the repayment of the related debt.  At September 30, 2015 and December 31, 2014, $1.3 billion and $2.5 billion in finance receivables had been transferred in secured funding arrangements to such entities, to which $1.2 billion and $2.4 billion in secured debt was outstanding.
Note 9.
Derivative Financial Instruments and Hedging Activities
Derivative swap and cap agreements consist of the following (in millions): 
 
 
Fair Value Level
 
September 30, 2015
 
December 31, 2014
 
 
 
Notional
 
Fair Value
 
Notional
 
Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
(a) 
3
 
$
3,166

 
$
6

 
$
1,652

 
$
6

Interest rate caps
(b) 
2
 
4,380

 
8

 
2,123

 
6

Foreign currency swaps
(b) 
2
 
1,479

 
22

 
1,594

 
4

Total assets
(c) 
 
 
$
9,025

 
$
36

 
$
5,369

 
$
16

Liabilities
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
(a) 
3
 
$
6,775

 
$
24

 
$
5,627

 
$
39

Interest rate caps
(b) 
2
 
3,981

 
8

 
1,804

 
6

Foreign currency swaps
(b) 
2
 

 

 
1,044

 
1

Total liabilities
(d) 
 
 
$
10,756

 
$
32

 
$
8,475

 
$
46

 _________________
(a)
The fair values of the interest rate swap agreements are estimated by discounting future net cash flows expected to be settled using current risk-adjusted rates.
(b)
The fair values of the interest rate cap agreements and foreign currency swap agreements are based on observable market inputs.
(c)
Included in other assets on the condensed consolidated balance sheets.
(d)
Included in other liabilities on the condensed consolidated balance sheets.
We purchase interest rate cap agreements to limit floating rate exposures on certain of our revolving secured debt. We also utilize interest rate swap agreements to convert floating rate exposures on certain of our revolving debt or on securities issued in securitization transactions to fixed rates, thereby hedging the variability in interest expense paid. We use foreign currency swaps to hedge against valuation changes of certain financial instruments denominated in foreign currencies.

13


The following table presents information on the effect of derivative instruments on the condensed consolidated statements of income and comprehensive income (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Non-designated hedges:
 
 
 
 
 
 
 
Interest rate contracts(a)
$
(13
)
 
$
(9
)
 
$
(12
)
 
$
(18
)
Foreign currency derivatives(b)
28

 
141

 
39

 
99

 
$
15

 
$
132

 
$
27

 
$
81

 _________________
(a)
Recognized in earnings as interest expense.
(b)
Activity is substantially offset by translation activity (included in operating expenses) related to foreign currency-denominated loans.
The activity for interest rate swap agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) was insignificant for the three and nine months ended September 30, 2015 and 2014.
Note 10.
Fair Values of Financial Instruments
Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts that ultimately may be realized or paid at settlement or maturity of the financial instruments and those differences may be material. Disclosures about fair value of financial instruments exclude certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of our company.
Estimated fair values, carrying values and various methods and assumptions used in valuing our financial instruments are set forth below (in millions):
 
September 30, 2015
 
December 31, 2014
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents(a)
$
1,602

 
$
1,602

 
$
2,974

 
$
2,974

Finance receivables, net(b)
$
35,074

 
$
35,226

 
$
33,000

 
$
33,573

Restricted cash(a)
$
1,928

 
$
1,928

 
$
2,071

 
$
2,071

Financial liabilities:
 
 
 
 
 
 
 
Secured debt
 
 
 
 
 
 
 
North America(c)
$
20,101

 
$
20,150

 
$
15,454

 
$
15,497

International(d)
$
4,262

 
$
4,263

 
$
5,690

 
$
5,694

International(e)
$
3,921

 
$
3,877

 
$
4,070

 
$
4,037

Unsecured debt
 
 
 
 
 
 
 
North America(f)
$
15,111

 
$
15,051

 
$
7,846

 
$
8,092

International(g)
$
3,704

 
$
3,693

 
$
3,496

 
$
3,507

International(e)
$
1,160

 
$
1,159

 
$
875

 
$
880

_________________
(a)
Cash and cash equivalents bear interest at market rates; therefore, carrying value is considered to be a reasonable estimate of fair value.
(b)
The fair value of level 3 consumer finance receivables in the North America Segment is estimated based upon forecasted cash flows on the receivables discounted using a pre-tax weighted-average cost of capital. The fair value of level 3 consumer finance receivables in the International Segment is estimated based on forecasted cash flows on the receivables discounted using current origination rates for similar type loans. The fair value of level 2 commercial finance receivables is assumed to be carrying value, as the receivables generally have variable interest rates and maturities of one year or less.
(c)
Secured debt in the North America Segment is comprised of revolving credit facilities, publicly-issued secured debt, and privately-issued secured debt, and is valued using level 2 inputs. For the revolving credit facilities with variable rates of

14


interest and terms of one year or less, carrying value is considered to be a reasonable estimate of fair value. The fair value of the publicly-issued secured debt is based on quoted market prices of identical instruments in thinly-traded markets, when available. If quoted market prices are not available, and for determining the fair value of privately-issued secured debt, the market value is estimated using quoted market prices of similar securities.
(d)
The fair value of level 2 secured debt in the International Segment is assumed to be par value, as the debt has terms of one year or less, or has been priced within the last six months.
(e)
The fair value of level 3 secured debt and unsecured debt in the International Segment is estimated by discounting future net cash flows expected to be settled using current risk-adjusted rates.
(f)
The fair value of level 2 unsecured debt in the North America Segment is based on quoted market prices of identical instruments in thinly-traded markets.
(g)
The fair value of level 2 senior notes in the International Segment is based on quoted market prices of identical instruments in thinly-traded markets.The fair value of other unsecured level 2 debt in the International Segment is assumed to be par value, as the debt has terms of one year or less.
The fair value of our consumer finance receivables is based on observable and unobservable inputs within a discounted cash flow model. Those unobservable inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. For the North America Segment, the series of cash flows is calculated and discounted using a weighted-average cost of capital using unobservable debt and equity percentages, an unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity profile. For the International Segment, the series of cash flows is calculated and discounted using current interest rates. Macroeconomic factors could affect the credit performance of our portfolio and therefore could potentially impact the assumptions used in our cash flow model.
Note 11.
Commitments and Contingencies
Guarantees of Indebtedness
The payments of principal and interest on senior notes issued by our top-tier holding company, our primary Canadian operating subsidiary and a European subsidiary under our Euro medium term note program are guaranteed by our primary U.S. operating subsidiary, AFSI. At September 30, 2015 and December 31, 2014, the par value of these senior notes was $16.4 billion and $8.4 billion. See Note 16 - "Guarantor Condensed Consolidating Financial Statements" for further discussion.
Legal Proceedings
As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against us could take the form of class action complaints by consumers and certain legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We establish reserves for legal claims when payments associated with the claims become probable and the payments can be reasonably estimated. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters, it is generally very difficult to predict what the eventual outcome will be, and when the matter will be resolved. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for the claims. At September 30, 2015, we estimated our reasonably possible legal exposure for unfavorable outcomes to be a range of up to $86 million and have accrued $38 million.
In July 2014, we were served with a subpoena by the U.S. Department of Justice directing us to produce certain documents relating to our and our subsidiaries’ and affiliates’ origination and securitization of sub-prime automobile loans since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Among other matters, the subpoena requests information relating to the underwriting criteria used to originate these automobile loans and the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loans. We have subsequently been served with additional investigative subpoenas to produce documents from state attorneys general and other governmental offices relating to our consumer auto loan business and securitization of auto loans. In October 2014, we received a document request from the Securities and Exchange Commission in connection with its investigation into certain practices in sub-prime auto loan securitization.  We are investigating these matters internally and believe we are cooperating with all requests. Such investigations could in the future result in the imposition of damages, fines or civil or criminal claims and/or penalties. No assurance can be given that the ultimate outcome of the investigations or any resulting proceedings would not materially and adversely affect us or any of our subsidiaries and affiliates.

15


Other Administrative Tax Matters
We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.
In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to us and could require us to make expenditures for which we estimate the aggregate risk to be a range of up to $47 million.
Note 12.     Income Taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.

In the three and nine months ended September 30, 2015, income tax expense of $52 million and $155 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefits related to adjustments for finalizing prior year tax returns and an increase in certain U.S. federal tax credits.  In the three and nine months ended September 30, 2014, income tax expense of $50 million and $217 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefits related to settlements in various jurisdictions.

We are included in GM’s consolidated U.S. federal income tax return and for certain states’ income tax returns. Income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction. The tax losses generated by us have been utilized by GM.
Note 13.
Segment Reporting

We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: the North America Segment (consisting of operations in the U.S. and Canada) and the International Segment (consisting of operations in all other countries). Our chief operating decision maker evaluates the operating results and performance of our business based on these operating segments. The management of each segment is responsible for executing our strategies.

For segment reporting purposes only, interest expense related to the senior notes has been allocated based on targeted leverage for each segment. Interest expense in excess of the targeted overall leverage is reflected in the "Corporate" column below. In addition, the interest income on intercompany loans provided to the international operations is presented in the "Corporate" column as revenue.
All inter-segment balances and transactions have been eliminated. Key financial data for our operating segments were as follows (in millions):
 
 
Three Months Ended September 30, 2015
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
1,302

 
$
405

 
$
2

 
$
(2
)
 
$
1,707

Operating expenses, including leased vehicle expenses
 
811

 
138

 

 

 
949

Provision for loan losses
 
106

 
38

 

 

 
144

Interest expense
 
214

 
175

 
25

 
(2
)
 
412

Equity income
 

 
29

 

 

 
29

Income before income taxes
 
$
171

 
$
83

 
$
(23
)
 
$

 
$
231


16


 
 
Three Months Ended September 30, 2014
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
759

 
$
502

 
$
14

 
$
(14
)
 
$
1,261

Operating expenses, including leased vehicle expenses
 
366

 
159

 

 

 
525

Provision for loan losses
 
119

 
41

 

 

 
160

Interest expense
 
124

 
244

 
14

 
(14
)
 
368

Income before income taxes
 
$
150

 
$
58

 
$

 
$

 
$
208

 
 
Nine Months Ended September 30, 2015
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
3,293

 
$
1,283

 
$
13

 
$
(13
)
 
$
4,576

Operating expenses, including leased vehicle expenses
 
1,946

 
422

 

 

 
2,368

Provision for loan losses
 
335

 
105

 

 

 
440

Interest expense
 
572

 
564

 
60

 
(13
)
 
1,183

Equity income
 

 
85

 

 

 
85

Income before income taxes
 
$
440

 
$
277

 
$
(47
)
 
$

 
$
670

 
 
Nine Months Ended September 30, 2014
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
2,086

 
$
1,463

 
$
45

 
$
(45
)
 
$
3,549

Operating expenses, including leased vehicle expenses
 
950

 
459

 

 

 
1,409

Provision for loan losses
 
312

 
96

 

 

 
408

Interest expense
 
320

 
706

 
56

 
(45
)
 
1,037

Income before income taxes
 
$
504

 
$
202

 
$
(11
)
 
$

 
$
695

 
 
September 30, 2015
 
December 31, 2014
 
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Finance receivables, net
 
$
19,853

 
$
15,221

 
$
35,074

 
$
15,943

 
$
17,057

 
$
33,000

Leased vehicles, net
 
$
16,843

 
$
72

 
$
16,915

 
$
7,029

 
$
31

 
$
7,060

Total assets
 
$
41,065

 
$
18,481

 
$
59,546

 
$
27,687

 
$
20,037

 
$
47,724

Note 14.
Accumulated Other Comprehensive Loss
A summary of changes in accumulated other comprehensive loss is as follows (in millions):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Defined benefit plans, net:
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
(10
)
 
$
3

 
$
(11
)
 
$
3

Unrealized gain on subsidiary pension
 

 

 
1

 

Balance at end of period
 
(10
)
 
3

 
(10
)
 
3

Foreign currency translation adjustment:
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(664
)
 
62

 
(422
)
 
8

Translation loss
 
(282
)
 
(272
)
 
(524
)
 
(218
)
Balance at end of period
 
(946
)
 
(210
)
 
(946
)
 
(210
)
Total accumulated other comprehensive loss
 
$
(956
)
 
$
(207
)
 
$
(956
)
 
$
(207
)

17


Note 15.
Regulatory Capital
The International Segment includes the operations of certain stand-alone entities that operate in local markets as either banks or regulated finance companies that are subject to regulatory restrictions. These regulatory restrictions, among other things, require that these entities meet certain minimum capital requirements and may restrict dividend distributions and ownership of certain assets. We were in compliance with all regulatory requirements at September 30, 2015. Total assets of our regulated international banks and finance companies were approximately $10.8 billion and $11.4 billion at September 30, 2015 and December 31, 2014.
Note 16.
Guarantor Condensed Consolidating Financial Statements
The payment of principal and interest on senior notes issued by our top-tier holding company is currently guaranteed solely by AFSI (the "Guarantor") and none of our other subsidiaries (the "Non-Guarantor Subsidiaries"). The Guarantor is a 100% owned consolidated subsidiary and is unconditionally liable for the obligations represented by the senior notes.  The Guarantor’s guarantee may be released only upon customary circumstances, the terms of which vary by issuance.  Customary circumstances include the sale or disposition of all of the Guarantor’s assets or capital stock, the achievement of investment grade rating of the senior notes and legal or covenant defeasance.
The condensed consolidating financial statements present consolidating financial data for (i) General Motors Financial Company, Inc. (on a parent-only basis), (ii) the Guarantor, (iii) the combined Non-Guarantor Subsidiaries and (iv) the parent company and our subsidiaries on a consolidated basis at September 30, 2015 and December 31, 2014, and for the three and nine months ended September 30, 2015 and 2014 (after the elimination of intercompany balances and transactions).
Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

18




GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2015
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$