General Motors Financial Company, Inc. - FORM 10-Q - April 21, 2016

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EX-32.1 - OFFICERS' CERTIFICATIONS OF PERIODIC REPORT PURSUANT TO SECTION 906 - General Motors Financial Company, Inc.gmfexhibit321q12016.htm
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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 March 31, 2016
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 April 20, 2016, 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
Item 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts) 
(Unaudited)
 
 
March 31, 2016
 
December 31, 2015
Assets
 
 
 
 
Cash and cash equivalents
 
$
2,898

 
$
3,061

Finance receivables, net (Note 3; Note 8 VIEs)
 
38,658

 
36,781

Leased vehicles, net (Note 4; Note 8 VIEs)
 
24,538

 
20,172

Restricted cash (Note 5; Note 8 VIEs)
 
2,130

 
1,941

Goodwill
 
1,195

 
1,189

Equity in net assets of non-consolidated affiliates (Note 6)
 
989

 
986

Property and equipment, net of accumulated depreciation of $101 and $91
 
230

 
219

Deferred income taxes
 
251

 
231

Related party receivables (Note 2)
 
1,076

 
573

Other assets
 
799

 
751

Total assets
 
$
72,764

 
$
65,904

Liabilities and Shareholder's Equity
 
 
 
 
Liabilities
 
 
 
 
Secured debt (Note 7; Note 8 VIEs)
 
$
32,733

 
$
30,689

Unsecured debt (Note 7)
 
27,638

 
23,657

Accounts payable and accrued expenses
 
1,236

 
1,218

Deferred income
 
1,783

 
1,454

Deferred income taxes
 
161

 
129

Related party payables (Note 2)
 
448

 
362

Other liabilities
 
390

 
343

Total liabilities
 
64,389

 
57,852

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
 
6,491

 
6,484

Accumulated other comprehensive loss (Note 14)
 
(952
)
 
(1,104
)
Retained earnings
 
2,836

 
2,672

Total shareholder's equity
 
8,375

 
8,052

Total liabilities and shareholder's equity
 
$
72,764

 
$
65,904

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 March 31,
 
 
2016
 
2015
Revenue
 
 
 
 
Finance charge income
 
$
818

 
$
854

Leased vehicle income
 
1,184

 
431

Other income
 
73

 
69

Total revenue
 
2,075

 
1,354

Costs and expenses
 
 
 
 
Salaries and benefits
 
193

 
165

Other operating expenses
 
141

 
141

Total operating expenses
 
334

 
306

Leased vehicle expenses
 
893

 
327

Provision for loan losses
 
196

 
155

Interest expense
 
463

 
380

Total costs and expenses
 
1,886

 
1,168

Equity income (Note 6)
 
36

 
28

Income before income taxes
 
225

 
214

Income tax provision
 
61

 
64

Net income
 
164

 
150

Other comprehensive income (loss)
 
 
 
 
Defined benefit plans, net
 
(1
)
 
1

Foreign currency translation adjustment
 
153

 
(347
)
Other comprehensive income (loss), net
 
152

 
(346
)
Comprehensive income (loss)
 
$
316

 
$
(196
)
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)
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Net cash provided by operating activities
 
$
1,158

 
$
545

Cash flows from investing activities
 
 
 
 
Purchases of retail finance receivables, net
 
(4,165
)
 
(4,065
)
Principal collections and recoveries on retail finance receivables
 
3,271

 
2,814

Net funding of commercial finance receivables
 
(1,024
)
 
54

Purchases of leased vehicles, net
 
(5,158
)
 
(2,319
)
Proceeds from termination of leased vehicles
 
481

 
185

Acquisition of international operations
 
—

 
(1,049
)
Purchases of property and equipment
 
(20
)
 
(17
)
Change in restricted cash
 
(176
)
 
(154
)
Change in other assets
 
1

 
6

Net cash used in investing activities
 
(6,790
)
 
(4,545
)
Cash flows from financing activities
 
 
 
 
Net change in debt (original maturities less than three months)
 
757

 
198

Borrowings and issuance of secured debt
 
7,054

 
2,889

Payments on secured debt
 
(5,251
)
 
(2,748
)
Borrowings and issuance of unsecured debt
 
3,131

 
3,258

Payments on unsecured debt
 
(241
)
 
(308
)
Debt issuance costs
 
(26
)
 
(41
)
Net cash provided by financing activities
 
5,424

 
3,248

Net decrease in cash and cash equivalents
 
(208
)
 
(752
)
Effect of foreign exchange rate changes on cash and cash equivalents
 
45

 
(101
)
Cash and cash equivalents at beginning of period
 
3,061

 
2,974

Cash and cash equivalents at end of period
 
$
2,898

 
$
2,121

Supplemental cash flow information
 
 
 
 
Subvention receivable from GM
 
$
436

 
$
252

Commercial loan funding payable to GM
 
$
435

 
$
425

Sale of equity interest in SAIC-GMAC
 
$
—

 
$
125

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 3, 2016 ("Form 10-K").
The condensed consolidated financial statements at March 31, 2016, and for the three months ended March 31, 2016 and 2015, 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 are the wholly-owned captive finance subsidiary of General Motors Company ("GM"). We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: 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."
Accounting Standards Not Yet Adopted
In February 2016 the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, “Leases” (ASU 2016-02), which requires the lessee to recognize most leases on the balance sheet thereby resulting in the recognition of lease assets and liabilities for those leases currently classified as operating leases. The accounting for lessors is largely unchanged. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. We are currently assessing the impact the adoption of ASU 2016-02 will have on our consolidated financial statements.
Note 2.
Related Party Transactions
We offer loan and lease finance products through GM-franchised dealers to customers purchasing new and certain used vehicles manufactured by GM and make commercial loans directly to GM-franchised dealers and their affiliates. We also offer commercial loans to dealers that are consolidated by GM and those balances are included in our finance receivables, net.
Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on retail loan and lease finance products. In addition, GM makes payments to us to cover certain interest payments on commercial loans. We also provide funding under lines of credit to GM. During the three months ended March 31, 2016, we advanced $456 million under a new line of credit to GM subsidiary Adam Opel AG.
We have related party payables due to GM, primarily for commercial finance receivables originated but not yet funded. These payables typically settle within 30 days.
The following tables present related party transactions (in millions):

4

Balance Sheet Data
 
March 31, 2016
 
December 31, 2015
Commercial finance receivables, net due from dealers consolidated by GM(a)
 
$
288

 
$
229

Advances drawn on lines of credit due from GM(b)
 
$
640

 
$
190

Subvention receivable(c)
 
$
436

 
$
383

Commercial loan funding payable(d)
 
$
435

 
$
351

Income Statement Data
 
Three Months Ended March 31,
 
 
2016
 
2015
Interest subvention earned(e)
 
$
103

 
$
78

Leased vehicle subvention earned(f)
 
$
(459
)
 
$
(136
)
_________________
(a)
Included in commercial finance receivables.
(b)
Included in related party receivables.
(c)
Included in related party receivables. For the three months ended March 31, 2016 and 2015, we received $1.2 billion and $0.5 billion in subvention payments from GM, primarily related to lease originations.
(d)
Included in related party payables.
(e)
Included in finance charge income.
(f)
Included as a reduction to leased vehicle expenses.
Under our support agreement with GM (the “Support Agreement”), if our earning assets leverage ratio at the end of any calendar quarter exceeds the applicable threshold set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio to within the applicable threshold. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time. 
Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding and that GM will use its commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower of up to $4.0 billion under GM’s corporate revolving credit facilities. 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 junior subordinated unsecured intercompany revolving credit facility (the "Junior Subordinated Revolving Credit Facility"). There were no advances outstanding under the Junior Subordinated Revolving Credit Facility at March 31, 2016.
Since October 1, 2010, we have been included in GM's consolidated U.S. federal income tax returns. For taxable income we recognize in any period beginning on or after October 1, 2010, we are obligated to pay GM for our share of the consolidated U.S. federal and certain state tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable.  At March 31, 2016, there are no related party taxes payable to GM due to our taxable loss position.  



5

Note 3.    Finance Receivables
The finance receivables portfolio consists of the following (in millions): 
 
 
March 31, 2016
 
December 31, 2015

Retail
 
 
 
 
Retail finance receivables, collectively evaluated for impairment, net of fees(a)
 
$
28,613

 
$
27,512

Retail finance receivables, individually evaluated for impairment, net of fees
 
1,659

 
1,612

Total retail finance receivables(b)
 
30,272

 
29,124

Less: allowance for loan losses - collective
 
(567
)
 
(515
)
Less: allowance for loan losses - specific
 
(229
)
 
(220
)
Total retail finance receivables, net
 
29,476

 
28,389

Commercial
 
 
 
 
Commercial finance receivables, collectively evaluated for impairment, net of fees
 
9,116

 
8,357

Commercial finance receivables, individually evaluated for impairment, net of fees
 
113

 
82

Total commercial finance receivables
 
9,229

 
8,439

Less: allowance for loan losses - collective
 
(37
)
 
(38
)
Less: allowance for loan losses - specific
 
(10
)
 
(9
)
Total commercial finance receivables, net
 
9,182

 
8,392

Total finance receivables, net
 
$
38,658

 
$
36,781

________________
(a) Includes $1.2 billion and $1.1 billion of direct-financing leases at March 31, 2016 and December 31, 2015.
(b) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $195 million and $179 million at March 31, 2016 and December 31, 2015.
Retail Finance Receivables
Following is a summary of activity in our retail finance receivables portfolio (in millions): 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Beginning balance
 
$
29,124

 
$
25,623

Purchases
 
4,143

 
4,078

Principal collections and other
 
(3,067
)
 
(2,593
)
Charge-offs
 
(293
)
 
(234
)
Foreign currency translation
 
365

 
(1,283
)
Ending balance
 
$
30,272

 
$
25,591

A summary of the activity in the allowance for retail loan losses is as follows (in millions):
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Beginning balance
 
$
735

 
$
655

Provision for loan losses
 
197

 
157

Charge-offs
 
(293
)
 
(234
)
Recoveries
 
150

 
122

Foreign currency translation
 
7

 
(8
)
Ending balance
 
$
796

 
$
692



6

Retail 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. We also consider other factors, such as employment history, financial stability and capacity to pay. At the time of loan origination, substantially all of our international customers 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 lending programs. A summary of the credit risk profile by FICO score band or equivalent scores, determined at origination, of the retail finance receivables in the North America Segment is as follows (dollars in millions):
 
 
March 31, 2016
 
December 31, 2015
 
 
Amount
 
Percent
 
Amount
 
Percent
Prime - FICO Score 680 and greater
 
$
5,063

 
26.9
%
 
$
4,418

 
24.4
%
Near-prime - FICO Score 620 to 679
 
3,001

 
16.0
%
 
2,890

 
15.9
%
Sub-prime - FICO Score less than 620
 
10,742

 
57.1
%
 
10,840

 
59.7
%
Balance at end of period
 
$
18,806

 
100.0
%
 
$
18,148

 
100.0
%

In addition, we review the credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract.
The following is a consolidated summary of the contractual amounts of retail 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): 
 
 
March 31, 2016
 
March 31, 2015
 
 
Total
 
Percent of Contractual Amount Due
 
Total
 
Percent of Contractual Amount Due
31 - 60 days
 
$
963

 
3.1
%
 
$
880

 
3.4
%
Greater than 60 days
 
421

 
1.4

 
357

 
1.4

 
 
1,384

 
4.5

 
1,237

 
4.8

In repossession
 
48

 
0.2

 
42

 
0.2

 
 
$
1,432

 
4.7
%
 
$
1,279

 
5.0
%
The accrual of finance charge income has been suspended on $667 million and $778 million of retail finance receivables (based on contractual amount due) at March 31, 2016 and December 31, 2015.
Impaired Retail Finance Receivables - TDRs
Retail finance receivables that become classified as troubled debt restructurings ("TDRs") are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. Accounts that become classified as TDRs because of a payment deferral 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 March 31, 2016 and December 31, 2015, the outstanding balance of retail 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.

7

The outstanding recorded investment for retail finance receivables that are considered to be TDRs and the related allowance is presented below (in millions):
 
 
March 31, 2016
 
December 31, 2015
Outstanding recorded investment
 
$
1,659

 
$
1,612

Less: allowance for loan losses
 
(229
)
 
(220
)
Outstanding recorded investment, net of allowance
 
$
1,430

 
$
1,392

Unpaid principal balance
 
$
1,700

 
$
1,642

Additional information about loans classified as TDRs is presented below (in millions, except for number of loans):
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Average outstanding recorded investment
 
$
1,636

 
$
1,264

Finance charge income recognized
 
$
51

 
$
40

Number of loans classified as TDRs during the period
 
14,646

 
11,752

Recorded investment of loans classified as TDRs during the period
 
$
254

 
$
199

A redefault is when an account meets the requirements for evaluation under our charge-off policy. 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 months ended March 31, 2016 and 2015.
Commercial Finance Receivables
Following is a summary of activity in our commercial finance receivables portfolio (in millions): 
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Beginning balance
 
$
8,439

 
$
8,072

Net funding (collections)
 
665

 
(40
)
Charge-offs
 
—

 
—

Foreign currency translation
 
125

 
(425
)
Ending balance
 
$
9,229

 
$
7,607


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.
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 or leased the vehicle inventory. All receivables from the same dealer customer share the same risk rating.

8

A summary of the credit risk profile by dealer grouping of the commercial finance receivables is as follows (in millions): 
 
 
 
 
March 31, 2016
 
December 31, 2015
Group I
-
Dealers with superior financial metrics
 
$
1,318

 
$
1,299

Group II
-
Dealers with strong financial metrics
 
2,881

 
2,648

Group III
-
Dealers with fair financial metrics
 
3,001

 
2,703

Group IV
-
Dealers with weak financial metrics
 
1,249

 
1,100

Group V
-
Dealers warranting special mention due to potential weaknesses
 
630

 
505

Group VI
-
Dealers with loans classified as substandard, doubtful or impaired
 
150

 
184

Ending balance
 
$
9,229

 
$
8,439

At March 31, 2016 and December 31, 2015 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 months ended March 31, 2016 and 2015.
Note 4.
Leased Vehicles
The following table presents information regarding our leased vehicles (in millions):
 
 
March 31, 2016
 
December 31, 2015
Leased vehicles
 
$
33,707

 
$
27,587

Manufacturer incentives
 
(5,606
)
 
(4,582
)
 
 
28,101

 
23,005

Less: accumulated depreciation
 
(3,563
)
 
(2,833
)
Leased vehicles, net
 
$
24,538

 
$
20,172

The following table summarizes minimum rental payments due to us as lessor under operating leases (in millions):
 
 
Years Ending December 31,
 
 
2016
 
2017
 
2018
 
2019
 
2020
 
Total
Minimum rental payments under operating leases
 
$
3,056

 
$
3,580

 
$
2,113

 
$
387

 
$
14

 
$
9,150

Note 5.    Restricted Cash
The following table summarizes the components of restricted cash (in millions):
 
March 31, 2016
 
December 31, 2015
Revolving credit facilities
$
372

 
$
345

Securitization notes payable
1,689

 
1,531

Other
69

 
65

Total restricted cash
$
2,130

 
$
1,941

Restricted cash for securitization notes payable and revolving credit facilities includes collections from borrowers that have not yet been used for repayment of debt. In addition, this cash includes funds deposited in restricted cash accounts as collateral required to support securitization transactions or to provide additional collateral for borrowings under revolving credit facilities.
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.
We use the equity method to account for our equity interest in SAIC-GMAC Automotive Finance Company Limited ("SAIC-GMAC"), a joint venture that conducts auto finance operations in China. The income of SAIC-GMAC is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income. At March 31, 2016, we had undistributed earnings of $77 million related to SAIC-GMAC. Equity income from SAIC-GMAC recorded in the three months ended March 31, 2016 and 2015 was $36 million and $28 million.
We received a cash dividend from SAIC-GMAC of $27 million in the three months ended March 31, 2016.

9

Note 7.
Debt
Debt consists of the following (in millions): 
 
 
March 31, 2016
 
December 31, 2015
Secured debt
 
 
 


Revolving credit facilities
 
$
8,713

 
$
7,548

Securitization notes payable
 
24,020

 
23,141

Total secured debt
 
$
32,733

 
$
30,689

 
 
 
 
 
Unsecured debt
 
 
 

Senior notes
 
$
21,827

 
$
18,973

Credit facilities
 
3,546

 
2,759

Retail customer deposits
 
1,599

 
1,260

Other unsecured debt
 
666

 
665

Total unsecured debt
 
$
27,638

 
$
23,657

Secured Debt
Most of the secured debt was issued by variable interest entities, as further discussed in Note 8 - "Variable Interest Entities." This debt is repayable only from proceeds related to the underlying pledged finance receivables and leasing related assets.
During the three months ended March 31, 2016, we entered into new credit facilities or renewed credit facilities with a total additional net borrowing capacity of $366 million, and we issued securitization notes payable of $3.2 billion through securitization transactions.
Unsecured Debt
In March 2016, our top-tier holding company issued $2.75 billion in senior notes comprised of $1.5 billion of 4.20% notes due in March 2021 and $1.25 billion of 5.25% notes due in March 2026. All of these notes are guaranteed solely by AmeriCredit Financial Services, Inc. ("AFSI"). These notes contain terms and covenants customary of these types of securities including limitations on our ability to incur certain liens.
During the three months ended March 31, 2016, we increased net borrowing capacity on unsecured committed credit facilities by $66 million.
During 2015, we began accepting deposits from retail banking customers in Germany. Following is summarized information for our deposits at March 31, 2016 and December 31, 2015 (dollars in millions):
 
March 31, 2016
 
December 31, 2015
 
Outstanding Balance
 
Weighted Average Interest Rate
 
Outstanding Balance
 
Weighted Average Interest Rate
Overnight deposits
$
654

 
0.85
%
 
$
555

 
1.00
%
Term deposits -12 months
444

 
1.27
%
 
337

 
1.32
%
Term deposits - 24 months
192

 
1.38
%
 
123

 
1.44
%
Term deposits - 36 months
309

 
1.60
%
 
245

 
1.65
%
Total deposits
$
1,599

 
1.18
%
 
$
1,260

 
1.25
%
Compliance with Debt Covenants
Several of our loan facilities, including our revolving credit facilities, require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Some of our secured and unsecured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. At March 31, 2016, we were in compliance with these debt covenants.

10

Note 8.    Variable Interest Entities
Securitizations and credit facilities
The following table summarizes the assets and liabilities related to our consolidated VIEs (in millions):
 
 
March 31, 2016
 
December 31, 2015
Restricted cash
 
$
2,061

 
$
1,876

Finance receivables, net
 
$
25,194

 
$
24,942

Lease related assets
 
$
15,001

 
$
11,684

Secured debt
 
$
31,662

 
$
29,386

These amounts are related to securitization and credit facilities held by consolidated VIEs. Our continuing involvement with these VIEs consists of servicing assets held by the entities and holding residual interests in the entities. We consolidate these VIEs because we have (i) power over the significant activities of these entities and (ii) an obligation to absorb losses or the right to receive benefits from these VIEs which could be potentially significant to these VIEs. We are not required, and do not currently intend, to provide any additional financial support to these VIEs. Liabilities recognized as a result of consolidating these entities generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of these entities operations and cannot be used to satisfy our or our 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):
 
 
March 31, 2016
 
December 31, 2015
Assets(a)
 
$
4,422

 
$
3,652

Liabilities(b)
 
$
3,677

 
$
2,941

_________________
(a)
Comprised primarily of finance receivables of $3.5 billion and $3.2 billion at March 31, 2016 and December 31, 2015.
(b)
Comprised primarily of debt of $2.9 billion and $2.6 billion at March 31, 2016 and December 31, 2015.
The following table summarizes the revenue and net income of these entities (in millions):
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Total revenue
 
$
47

 
$
41

Net income
 
$
7

 
$
11

Other transfers of finance receivables
Under certain debt agreements, we transfer finance receivables to entities which we do not control through majority voting interest or through contractual arrangements. These transfers do not meet the criteria to be considered sales under U.S. GAAP; therefore, the finance receivables and the related debt are included in our 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 March 31, 2016 and December 31, 2015, $1.2 billion and $1.5 billion in finance receivables had been transferred in secured funding arrangements to third-party banks, to which $1.1 billion and $1.4 billion in secured debt was outstanding.

11

Note 9.
Derivative Financial Instruments and Hedging Activities
Derivative swap and cap agreements consist of the following (in millions): 
 
 
 
March 31, 2016
 
December 31, 2015
 
Level
 
Notional
 
Fair Value
 
Notional
 
Fair Value
Fair value hedges
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Interest rate swaps(a)(c)
2
 
$
1,000

 
$
19

 
$
—

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(a)(d)
2
 
$
2,750

 
$
24

 
$
1,000

 
$
6

Cash flow hedge
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)(d)
3
 
$
431

 
$
—

 
$
—

 
$
—

Derivatives not designated as hedges
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)
3
 
5,716

 
25

 
4,122

 
8

Interest rate caps(a)
2
 
8,410

 
8

 
6,327

 
19

Foreign currency swaps(a)
2
 
907

 
21

 
1,460

 
48

Total assets(c)
 
 
$
15,033

 
$
54

 
$
11,909

 
$
75

Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)
3
 
$
8,445

 
$
32

 
$
8,041

 
$
24

Interest rate caps(a)
2
 
7,956

 
8

 
5,892

 
19

Foreign currency swaps(a)
2
 
829

 
15

 
—

 
—

Total liabilities(d)
 
 
$
17,230

 
$
55

 
$
13,933

 
$
43

 _________________
(a)
The fair value is based on observable market inputs.
(b)
The fair value is estimated by discounting future net cash flows expected to be settled using current risk-adjusted rates.
(c)
Included in other assets on the consolidated balance sheets.
(d)
Included in other liabilities on the consolidated balance sheets.
The following table presents information on the effect of derivative instruments on the consolidated statements of income and comprehensive income (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
Fair value hedges
 
 
 
Interest rate contracts(a)
 
 
 
Net interest expense
$
(4
)
 
$
—

Ineffectiveness(b)
(2
)
 
—

Derivatives not designated as hedges
 
 
 
Interest rate contracts(a)
—

 
(6
)
Foreign currency derivatives(c)
69

 
69

 
$
63

 
$
63

 _________________
(a)
Recognized in earnings as interest expense.
(b)
Hedge ineffectiveness reflects the net change in the fair value of interest rate contracts of $2 million offset by the change in fair value of hedged debt attributable to the hedged risk of $4 million.
(c)
Activity is substantially offset by translation activity (included in operating expenses) related to foreign currency-denominated loans.
Cash flow hedges had no impact on the consolidated statement of income for the three months ended March 31, 2016 and 2015.

12

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 months ended March 31, 2016 and 2015.
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):
 
 
 
March 31, 2016
 
December 31, 2015
 
Level
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents(a)
1
 
$
2,898

 
$
2,898

 
$
3,061

 
$
3,061

Retail finance receivables, net
3
 
$
29,476

 
$
29,784

 
$
28,390

 
$
28,545

Commercial finance receivables, net(b)
2
 
$
9,182

 
$
9,182

 
$
8,392

 
$
8,392

Restricted cash(a)
1
 
$
2,130

 
$
2,130

 
$
1,941

 
$
1,941

Financial liabilities
 
 
 
 
 
 
 
 
 
Secured debt
 
 
 
 
 
 
 
 
 
North America(c)
2
 
$
25,231

 
$
25,285

 
$
23,151

 
$
23,182

International(d)
2
 
$
2,852

 
$
2,852

 
$
3,122

 
$
3,125

International(e)
3
 
$
4,650

 
$
4,636

 
$
4,416

 
$
4,364

Unsecured debt
 
 
 
 
 
 
 
 
 
North America(f)
2
 
$
20,523

 
$
20,867

 
$
17,731

 
$
17,792

International(g)
2
 
$
5,733

 
$
5,751

 
$
4,605

 
$
4,617

International(e)
3
 
$
1,382

 
$
1,381

 
$
1,321

 
$
1,317

_________________
(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 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 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 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 is estimated by discounting future net cash flows expected to be settled, which is an unobservable input, using current risk-adjusted rates.
(f)
The fair value is based on quoted market prices of identical instruments in thinly-traded markets.
(g)
The fair value of senior notes is based on quoted market prices of identical instruments in thinly-traded markets. The fair value of the remaining level 2 unsecured debt is assumed to be par value, as the debt has terms of one year or less.
The fair value of our retail 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

13

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 are guaranteed by our primary U.S. operating subsidiary, AFSI. At March 31, 2016 and December 31, 2015, the par value of these senior notes was $22.0 billion and $19.1 billion. See Note 16 - "Guarantor Condensed Consolidating Financial Statements" for further discussion.
Legal Proceedings
As a retail finance company, we are subject to various customer 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 customers 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 March 31, 2016, we estimated our reasonably possible legal exposure for unfavorable outcomes of up to $106 million and have accrued $43 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 retail auto loan business and securitization of auto loans. These investigations are ongoing and 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.
Other Administrative Tax Matters
We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.
In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time. Where there is a reasonable possibility that losses exceeding amounts already recognized may be incurred, our estimate of the additional range of loss is up to $53 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 months ended March 31, 2016, income tax expense of $61 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. In the three months ended March 31, 2015, income tax expense of $64 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefits related to tax audit settlements in various jurisdictions.

14


We are included in GM’s consolidated U.S. federal income tax return and for certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction.
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 March 31, 2016
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
1,688

 
$
387

 
$
(1
)
 
$
1

 
$
2,075

Operating expenses, including leased vehicle expenses
 
1,089

 
138

 
—

 
—

 
1,227

Provision for loan losses
 
177

 
19

 
—

 
—

 
196

Interest expense
 
305

 
157

 
—

 
1

 
463

Equity income
 
—

 
36

 
—

 
—

 
36

Income (loss) before income taxes
 
$
117

 
$
109

 
$
(1
)
 
$
—

 
$
225

 
 
Three Months Ended March 31, 2015
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
906

 
$
448

 
$
7

 
$
(7
)
 
$
1,354

Operating expenses, including leased vehicle expenses
 
487

 
146

 
—

 
—

 
633

Provision for loan losses
 
118

 
37

 
—

 
—

 
155

Interest expense
 
165

 
206

 
16

 
(7
)
 
380

Equity income
 
—

 
28

 
—

 
—

 
28

Income (loss) before income taxes
 
$
136

 
$
87

 
$
(9
)
 
$
—

 
$
214

 
 
March 31, 2016
 
December 31, 2015
 
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Finance receivables, net
 
$
22,535

 
$
16,123

 
$
38,658

 
$
21,558

 
$
15,223

 
$
36,781

Leased vehicles, net
 
$
24,422

 
$
116

 
$
24,538

 
$
20,086

 
$
86

 
$
20,172

Total assets
 
$
52,777

 
$
19,987

 
$
72,764

 
$
47,419

 
$
18,485

 
$
65,904


15

Note 14.
Accumulated Other Comprehensive Loss
A summary of changes in accumulated other comprehensive loss is as follows (in millions):
 
 
Three Months Ended March 31,
 
 
2016
 
2015
Defined benefit plans, net
 
 
 
 
Beginning balance
 
$
(13
)
 
$
(11
)
Unrealized gain on subsidiary pension, net of tax
 
(1
)
 
1

Ending balance
 
(14
)
 
(10
)
Foreign currency translation adjustment
 
 
 
 
Beginning balance
 
(1,091
)
 
(422
)
Translation income (loss)
 
153

 
(347
)
Ending balance
 
(938
)
 
(769
)
Total accumulated other comprehensive loss
 
$
(952
)
 
$
(779
)
Note 15.
Regulatory Capital
We are required to comply with a wide variety of laws and regulations. Our 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 capital requirements as most recently reported.
Total assets of our regulated international banks and finance companies were approximately $12.2 billion and $11.1 billion at March 31, 2016 and December 31, 2015.
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 March 31, 2016 and December 31, 2015, and for the three months ended March 31, 2016 and 2015 (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.
We determined that a revision was required to correct the classification of certain intercompany amounts between General Motors Financial Company, Inc. and Guarantor and Non-Guarantor Subsidiaries that were previously being presented net within the change in the due from/due to affiliates line item in the consolidating balance sheet in the financing activities section of the consolidating statements of cash flows for the three months ended March 31, 2015. As a result, correcting adjustments have been made from what was previously reported to (1) reclassify $1.6 billion of the net change in the due from affiliates for General Motors Financial Company, Inc. within the consolidating statements of cash flows to the investing activities section; and (2) reclassify $1.6 billion of the net change in the due from affiliates for the Guarantor within the consolidating statements of cash flows to the investing activities section. In addition, reclassifications have been made solely within the investing activities section of the consolidating statements of cash flows to separately present cash flow activities related to repurchases by the Guarantor of receivables that had previously been transferred to Non-Guarantor Subsidiaries of $672 million. These adjustments had no effect on the consolidated financial statements at or for the three months ended March 31, 2015.



16

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2016
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
2,033

 
$
865

 
$
—

 
$
2,898

Finance receivables, net
—

 
6,132

 
32,526

 
—

 
38,658

Leased vehicles, net
—

 
—

 
24,538

 
—

 
24,538

Restricted cash
—

 
67

 
2,063

 
—

 
2,130

Goodwill
1,095

 
—

 
100

 
—

 
1,195

Equity in net assets of non-consolidated affiliates
—

 
—

 
989

 
—

 
989

Property and equipment, net
—

 
105

 
125

 
—

 
230

Deferred income taxes
268

 
—

 
246

 
(263
)
 
251

Related party receivables
—

 
26

 
1,050

 
—

 
1,076

Other assets
36

 
160

 
663

 
(60
)
 
799

Due from affiliates
18,162

 
8,764

 
—

 
(26,926
)
 
—

Investment in affiliates
8,884

 
6,303

 
—

 
(15,187
)
 
—

Total assets
$
28,445

 
$
23,590

 
$
63,165

 
$
(42,436
)
 
$
72,764

Liabilities and Shareholder's Equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Secured debt
$
—

 
$
—

 
$
32,793

 
$
(60
)
 
$
32,733

Unsecured debt
19,831

 
—

 
7,807

 
—

 
27,638

Accounts payable and accrued expenses
169

 
222

 
845

 
—

 
1,236

Deferred income
—

 
—

 
1,783

 
—

 
1,783

Deferred income taxes
—

 
169

 
255

 
(263
)
 
161

Related party payables
—

 
—

 
448

 
—

 
448

Other liabilities
70

 
43

 
277

 
—

 
390

Due to affiliates
—

 
18,107

 
8,819

 
(26,926
)
 
—

Total liabilities
20,070

 
18,541

 
53,027

 
(27,249
)
 
64,389

Shareholder's equity
 
 
 
 
 
 
 
 
 
Common stock
—

 
—

 
698

 
(698
)
 
—

Additional paid-in capital
6,491

 
79

 
6,149

 
(6,228
)
 
6,491

Accumulated other comprehensive loss
(952
)
 
(136
)
 
(936
)
 
1,072

 
(952
)
Retained earnings
2,836

 
5,106

 
4,227

 
(9,333
)
 
2,836

Total shareholder's equity
8,375

 
5,049

 
10,138

 
(15,187
)
 
8,375

Total liabilities and shareholder's equity
$
28,445

 
$
23,590

 
$
63,165

 
$
(42,436
)
 
$
72,764




17

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2015
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
2,259

 
$
802

 
$
—

 
$
3,061

Finance receivables, net
—

 
4,808

 
31,973

 
—

 
36,781

Leased vehicles, net
—

 
—

 
20,172

 
—

 
20,172

Restricted cash
—

 
60

 
1,881

 
—

 
1,941

Goodwill
1,095

 
—

 
94

 
—

 
1,189

Equity in net assets of non-consolidated affiliates
—

 
—

 
986

 
—

 
986

Property and equipment, net
—

 
41

 
178

 
—

 
219

Deferred income taxes
212

 
—

 
179

 
(160
)
 
231

Related party receivables
—

 
27

 
546

 
—

 
573

Other assets
32

 
32

 
687

 
—

 
751

Due from affiliates
15,573

 
7,556

 
—

 
(23,129
)
 
—

Investment in affiliates
8,476

 
6,425

 
—

 
(14,901
)
 
—

Total assets
$
25,388

 
$
21,208

 
$
57,498

 
$
(38,190
)
 
$
65,904

Liabilities and Shareholder's Equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Secured debt
$
—

 
$
—

 
$
30,689

 
$
—

 
$
30,689

Unsecured debt
17,087

 
—

 
6,570

 
—

 
23,657

Accounts payable and accrued expenses
181

 
717

 
320

 
—

 
1,218

Deferred income
—

 
—

 
1,454

 
—

 
1,454

Deferred income taxes
—

 
289

 
—

 
(160
)
 
129

Related party payables
—

 
—

 
362

 
—

 
362

Other liabilities
68

 
34

 
241

 
—

 
343

Due to affiliates
—

 
15,495

 
7,634

 
(23,129
)
 
—

Total liabilities
17,336

 
16,535

 
47,270

 
(23,289
)
 
57,852

Shareholder's equity
 
 
 
 
 
 
 
 
 
Common stock
—

 
—

 
698

 
(698
)
 
—

Additional paid-in capital
6,484

 
79

 
6,490

 
(6,569
)
 
6,484

Accumulated other comprehensive loss
(1,104
)
 
(175
)
 
(1,095
)
 
1,270

 
(1,104
)
Retained earnings
2,672

 
4,769

 
4,135

 
(8,904
)
 
2,672

Total shareholder's equity
8,052

 
4,673

 
10,228

 
(14,901
)
 
8,052

Total liabilities and shareholder's equity
$
25,388

 
$
21,208

 
$
57,498

 
$
(38,190
)
 
$
65,904








18

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2016
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Revenue
 
 
 
 
 
 
 
 
 
Finance charge income
$
—

 
$
99

 
$
719

 
$
—

 
$
818

Leased vehicle income
—

 
—

 
1,184

 
—

 
1,184

Other income
(1
)
 
205

 
15

 
(146
)
 
73

Total revenue
(1
)
 
304

 
1,918

 
(146
)
 
2,075

Costs and expenses
 
 
 
 
 
 
 
 
 
Salaries and benefits
—

 
135

 
58

 
—

 
193

Other operating expenses
(4
)
 
68

 
170

 
(93
)
 
141

Total operating expenses
(4
)
 
203

 
228

 
(93
)
 
334

Leased vehicle expenses
—

 
—

 
893

 
—

 
893

Provision for loan losses
—

 
103

 
93

 
—

 
196

Interest expense
176

 
(30
)
 
370

 
(53
)
 
463

Total costs and expenses
172

 
276

 
1,584

 
(146
)
 
1,886

Equity income
255

 
168

 
36

 
(423
)
 
36

Income before income taxes
82

 
196

 
370

 
(423
)
 
225

Income tax (benefit) provision
(82
)
 
12

 
131

 
—

 
61

Net income
$
164

 
$
184

 
$
239

 
$
(423
)
 
$
164

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
316

 
$
223

 
$
398

 
$
(621
)
 
$
316




19

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2015
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Revenue
 
 
 
 
 
 
 
 
 
Finance charge income
$
—

 
$
80

 
$
774

 
$
—

 
$
854

Leased vehicle income
—

 
—

 
431

 
—

 
431

Other income
7

 
108

 
45

 
(91
)
 
69

Total revenue
7

 
188

 
1,250

 
(91
)
 
1,354

Costs and expenses
 
 
 
 
 
 
 
 
 
Salaries and benefits
—

 
89

 
76

 
—

 
165

Other operating expenses
54

 
(3
)
 
154

 
(64
)
 
141

Total operating expenses
54

 
86

 
230

 
(64
)
 
306

Leased vehicle expenses
—

 
—

 
327

 
—

 
327

Provision for loan losses
—

 
74

 
81

 
—

 
155

Interest expense
94

 
(2
)
 
315

 
(27
)
 
380

Total costs and expenses
148

 
158

 
953

 
(91
)
 
1,168

Equity income
238

 
129

 
28

 
(367
)
 
28

Income before income taxes
97

 
159

 
325

 
(367
)
 
214

Income tax (benefit) provision
(53
)
 
11

 
106

 
—

 
64

Net income
$
150

 
$
148

 
$
219

 
$
(367
)
 
$
150

 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(196
)
 
$
90

 
$
(125
)
 
$
35

 
$
(196
)



20

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2016
(In millions) 
(Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Net cash (used in) provided by operating activities
$
(144
)
 
$
(537
)
 
$
1,839

 
$
—

 
$
1,158

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of retail finance receivables, net
—

 
(4,466
)
 
(4,388
)
 
4,689

 
(4,165
)
Principal collections and recoveries on retail finance receivables
—

 
359

 
2,912

 
—

 
3,271

Proceeds from transfer of retail finance receivables, net
—

 
2,866

 
1,823

 
(4,689
)
 
—

Net funding of commercial finance receivables
—

 
(227
)
 
(797
)
 
—

 
(1,024
)
Purchases of leased vehicles, net
—

 
—

 
(5,158
)
 
—

 
(5,158
)
Proceeds from termination of leased vehicles
—

 
—

 
481

 
—

 
481

Purchases of property and equipment
—

 
(15
)
 
(5
)
 
—

 
(20
)
Change in restricted cash
—

 
(6
)
 
(170
)
 
—

 
(176
)
Change in other assets
—

 
(60
)
 
1

 
60

 
1

Net change in due from affiliates
(2,587
)
 
(1,208
)
 
—

 
3,795

 
—

Net change in investment in affiliates
—

 
336

 
—

 
(336
)
 
—

Net cash used in investing activities
(2,587
)
 
(2,421
)
 
(5,301
)
 
3,519

 
(6,790
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Net change in debt (original maturities less than three months)
—

 
—

 
757

 
—

 
757

Borrowings and issuance of secured debt
—

 
—

 
7,114

 
(60
)
 
7,054

Payments on secured debt
—

 
—

 
(5,251
)
 
—

 
(5,251
)
Borrowings and issuance of unsecured debt
2,744

 
—

 
387

 
—

 
3,131

Payments on unsecured debt
—

 
—

 
(241
)
 
—

 
(241
)
Net capital contributions
—

 
—

 
(336
)
 
336

 
—

Debt issuance costs
(13
)
 
—

 
(13
)
 
—

 
(26
)
Net change in due to affiliates
—

 
2,732

 
1,063

 
(3,795
)
 
—

Net cash provided by financing activities
2,731

 
2,732

 
3,480

 
(3,519
)
 
5,424

Net increase (decrease) in cash and cash equivalents
—

 
(226
)
 
18

 
—

 
(208
)
Effect of foreign exchange rate changes on cash and cash equivalents
—

 
—

 
45

 
—

 
45

Cash and cash equivalents at beginning of period
—

 
2,259

 
802

 
—

 
3,061

Cash and cash equivalents at end of period
$
—

 
$
2,033

 
$
865

 
$
—

 
$
2,898


21

GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2015
(In millions) 
(Unaudited) 
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
 Net cash (used in) provided by operating activities
$
(62
)
 
$
368

 
$
239

 
$
—

 
$
545

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of retail finance receivables, net
—

 
(2,955
)
 
(2,950
)
 
1,840

 
(4,065
)
Principal collections and recoveries on retail finance receivables
—

 
120

 
2,694

 
—

 
2,814

Proceeds from transfer of retail finance receivables, net
—

 
1,168

 
672

 
(1,840
)
 
—

Net funding of commercial finance receivables
—

 
150

 
(96
)
 
—

 
54

Purchases of leased vehicles, net
—

 
—

 
(2,319
)
 
—

 
(2,319
)
Proceeds from termination of leased vehicles
—

 
—

 
185

 
—

 
185

Acquisition of international operations
(513
)
 
(536
)
 
—

 
—

 
(1,049
)
Purchases of property and equipment
—

 
(8
)
 
(9
)
 
—

 
(17
)
Change in restricted cash
—

 
4

 
(158
)
 
—

 
(154
)
Change in other assets
—

 
—

 
6

 
—

 
6

Net change in due from affiliates
(1,607
)
 
(1,633
)
 
—

 
3,240

 
—

Net change in investment in affiliates
(48
)
 
571

 
—

 
(523
)
 
—

Net cash used in investing activities
(2,168
)
 
(3,119
)
 
(1,975
)
 
2,717

 
(4,545
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Net change in debt (original maturities less than three months)
—

 
—

 
198

 
—

 
198

Borrowings and issuance of secured debt
—

 
—

 
2,889

 
—

 
2,889

Payments on secured debt
—

 
—

 
(2,748
)
 
—

 
(2,748
)
Borrowings and issuance of unsecured debt
2,250

 
—

 
1,008

 
—

 
3,258

Payments on unsecured debt
—

 
—

 
(308
)
 
—

 
(308
)
Net capital contributions
—

 
—

 
(523
)
 
523

 
—

Debt issuance costs
(20
)
 
—

 
(21
)
 
—

 
(41
)
Net change in due to affiliates
—

 
1,929

 
1,311

 
(3,240
)
 
—

Net cash provided by financing activities
2,230

 
1,929

 
1,806

 
(2,717
)
 
3,248

Net increase (decrease) in cash and cash equivalents
—

 
(822
)
 
70

 
—

 
(752
)
Effect of foreign exchange rate changes on cash and cash equivalents
—

 
—

 
(101
)
 
—

 
(101
)
Cash and cash equivalents at beginning of period
—

 
2,266

 
708

 
—

 
2,974

Cash and cash equivalents at end of period
$
—

 
$
1,444

 
$
677

 
$
—

 
$
2,121










22

Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of Presentation
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the audited consolidated financial statements and notes thereto included in our 2015 Form 10-K.
Retail
Our automobile finance programs in the North America Segment include full credit spectrum lending and leasing offered through GM-franchised dealers under the "GM Financial" brand. We also offer a sub-prime lending product through non-GM franchised and select independent dealers under the "AmeriCredit" brand. Our sub-prime lending program is designed to serve customers who have limited access to automobile financing through banks and credit unions. We therefore generally charge higher rates than those charged by banks and credit unions and expect to sustain a higher level of credit losses than on prime lending. We finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low mileage used vehicles.
The retail lending and leasing programs in our International Segment focus on financing new GM vehicles and select used vehicles, predominantly for customers with prime credit scores. We also offer finance-related insurance products through third parties, such as credit life, gap and extended warranty coverage.
We are expanding our leasing and prime lending programs through GM-franchised dealerships in North America and expect that leasing and prime lending will become an increasing percentage of our originations and retail portfolio balance over time. Since April 2015, we have been the exclusive subvented lease provider for GM in the U.S. We define prime lending as lending to customers with FICO scores or equivalents of 680 and greater, near-prime lending as lending to customers with FICO scores or equivalents between 620 to 679, and sub-prime lending as lending to customers with FICO scores or equivalents of less than 620. The following table presents our retail loan and lease originations in North America by FICO score band or equivalents (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
 
Amount
 
Percentage
 
Amount
 
Percentage
Prime - FICO Score 680 and greater
$
6,347

 
68.3
%
 
$
2,819

 
53.4
%
Near-prime - FICO Score 620 to 679
1,241

 
13.3

 
961

 
18.2

Sub-prime - FICO Score less than 620
1,712

 
18.4

 
1,500

 
28.4

Total originations
$
9,300

 
100.0
%
 
$
5,280

 
100.0
%
The following table summarizes the number of vehicles, by type that are included in Note 4 - "Leased Vehicles" to the condensed consolidated financial statements, of which the North America Segment accounted for approximately 99% at March 31, 2016 and 2015:
 
March 31,
 
2016
 
2015
Cars
326,808

 
155,127

Trucks
149,279

 
41,437

Crossovers
477,300

 
179,004

Total
953,387

 
375,568








23

The following table summarizes additional information for North America operating leases:
 
Three Months Ended March 31,
 
2016
 
2015
Operating leases originated (a)
185,277

 
81,084

Operating leases terminated (b)
26,437

 
11,137

Operating lease vehicles returned (c)
12,676

 
5,248

Return rate (d)
48
%
 
47
%
________________ 
(a)
Operating leases originated represents the number of operating leases we purchase during a given period. Since early 2015, operating leases originated increased due to the implementation of our exclusive subvention arrangement with GM.
(b)
Operating leases terminated represents the number of vehicles for which the lease has ended during a given period. Operating leases terminated increased due to the growth of the lease portfolio.
(c)
Operating lease vehicles returned represents the number of vehicles returned to us at the end of the lease term. Operating lease vehicles returned increased due to the growth of the lease portfolio.
(d)
Return rates are calculated as the number of operating leases returned divided by the number of operating leases terminated. Due to the age and size of our lease portfolio, the current return rates are lower than we expect them to become as our lease portfolio grows and matures.
Commercial
Our commercial lending program is offered primarily to our GM-franchised dealer customers and their affiliates. Commercial lending products consist of floorplan financing, also known as wholesale or inventory financing, which is lending to finance vehicle inventory, as well as dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial products include primarily parts and accessories, dealer fleet financing and storage center financing.
We establish new and used vehicle inventory credit lines at the time of dealer account acquisition, subject to revision as part of subsequent annual credit reviews. The maximum availability on these credit lines is based upon a dealer’s monthly vehicle sales rate and financial strength at the time of account acquisition or annual review, as applicable. At times, a dealer’s vehicle inventory needs may exceed its credit line availability for a number of reasons, such as seasonal factory build-out, planned marketing events, reductions in sales, or other business and seasonal factors. When a dealer's needs require that its outstanding balance be allowed to exceed the maximum availability under its credit line(s), we may accept a temporary overline situation, reallocate credit amounts among existing lines, temporarily or permanently increase the dealer's credit line, or suspend the dealer's credit lines. The action we take depends on communications with the dealer, analysis of the dealer's financial condition and the underlying cause of the need for the overline.
Financing
We primarily finance our loan, lease and commercial originations through the use of our secured and unsecured credit facilities, through public and private securitization transactions where such markets are developed, through the issuance of unsecured debt in the public markets and by accepting deposits from retail banking customers in Germany. Generally, we seek to fund our operations through local sources of funding to minimize currency and country risk. We may issue debt globally in order to enhance investor diversification and support financing needs for North America . As such, the mix of funding sources varies from country to country, based on the characteristics of our earning assets and the relative development of the capital markets in each country. Our U.S., Canadian and Latin American operations are funded locally. Our European operations obtain most of their funding from local sources and also borrow funds from affiliated companies.



24

RESULTS OF OPERATIONS
In our tabular presentation of the changes in results between financial periods, we provide the following information:  (i) the amount of change excluding the impact of foreign currency translation (“FX”); (ii) the amount of the impact of foreign currency translation; and (iii) the total change. The amount of the impact of foreign currency translation was derived by translating current year results at the average of prior year exchange rates, and was driven by the appreciation of the U.S. Dollar against all of the currencies used by our foreign operations. We believe the amount of change excluding the foreign currency translation impact facilitates a better comparison of results. In our discussion below, we discuss changes in relevant items excluding any foreign currency translation impact.
Three Months Ended March 31, 2016 compared to Three Months Ended March 31, 2015
Average Earning Assets:
Average earning assets were as follows (dollars in millions, except where noted):
 
Three Months Ended March 31,
 
2016 vs. 2015
 
2016
 
2015
 
Change excluding FX
 
FX
 
Total change
 
%
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
 
 
 
 
 
 
 
Average retail finance receivables
$
18,622

 
$
10,963

 
$
29,585

 
$
13,860

 
$
11,847

 
$
25,707

 
$
5,418

 
$
(1,540
)
 
$
3,878

 
15.1
%
Average commercial finance receivables
4,109

 
4,510

 
8,619

 
3,140

 
4,497

 
7,637

 
1,455

 
(473
)
 
982

 
12.9
%
Average finance receivables
22,731

 
15,473

 
38,204

 
17,000

 
16,344

 
33,344

 
6,873

 
(2,013
)
 
4,860

 
14.6
%
Average leased vehicles, net
22,190

 
97

 
22,287

 
7,825

 
36

 
7,861

 
14,611

 
(185
)
 
14,426

 
183.5
%
Average earning assets
$
44,921

 
$
15,570

 
$
60,491

 
$
24,825

 
$
16,380

 
$
41,205

 
$
21,484

 
$
(2,198
)
 
$
19,286

 
46.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail finance receivables purchased
$
2,580

 
$
1,563

 
$
4,143

 
$
2,273

 
$
1,805

 
$
4,078

 
$
273

 
$
(208
)
 
$
65

 
1.6
%
Average new retail loan size (in dollars)
$
27,470

 
$
11,425

 
 
 
$
24,081

 
$
12,248

 
 
 
 
 
 
 
 
 
 
Leased vehicles purchased
$
6,720

 
$
32

 
$
6,752

 
$
3,007

 
$
17

 
$
3,024

 
$
3,750

 
$
(22
)
 
$
3,728

 
123.3
%
Average new lease size (in dollars)
$
36,270

 
$
20,020

 
 
 
$
37,080

 
$
21,317

 
 
 
 
 
 
 
 
 
 
Average earning assets increased in the North America Segment as a result of the continued increase of our share of GM's business in that segment. Average earning assets in the International Segment decreased solely due to the impact of foreign currency translation. The increase in average leased vehicles, net primarily resulted from our exclusive lease subvention arrangement in the U.S. with GM, which was implemented on a brand-by-brand basis between February and April 2015.
In the North America Segment, the average annual percentage rate for retail finance receivables purchased during the three months ended March 31, 2016 decreased to 7.7% from 9.9% during the prior period, and the average new retail loan size increased. These changes are primarily due to the expansion of our prime lending program, resulting in higher volumes of originations of loans for new vehicles, which typically are for higher amounts and have lower contractual rates due to the rate subvention support provided by GM.

25

Revenue:
Revenues were as follows (dollars in millions):
 
Three Months Ended March 31,
 
2016 vs. 2015
 
2016
 
2015
 
Change excluding FX
 
FX
 
Total change
 
%
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
 
 
 
 
 
 
 
Finance charge income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail finance receivables
$
453

 
$
260

 
$
713

 
$
436

 
$
317

 
$
753

 
$
20

 
$
(60
)
 
$
(40
)
 
(5.3
)%
Commercial finance receivables
$
32

 
$
73

 
$
105

 
$
22

 
$
79

 
$
101

 
$
14

 
$
(10
)
 
$
4

 
4.0
 %
Leased vehicle income
$
1,178

 
$
6

 
$
1,184

 
$
429

 
$
2

 
$
431

 
$
765

 
$
(12
)
 
$
753

 
174.7
 %
Other income
$
25

 
$
48

 
$
73

 
$
19

 
$
50

 
$
69

 
$
16

 
$
(12
)
 
$
4

 
5.8
 %
Effective yield - retail finance receivables
9.8
%
 
9.5
%
 
9.7
%
 
12.8
%
 
10.9
%
 
11.9
%
 
 
 
 
 
 
 
 
Effective yield - commercial finance receivables
3.1
%
 
6.5
%
 
4.9
%
 
2.8
%
 
7.1
%
 
5.4
%
 
 
 
 
 
 
 
 
In the North America Segment, finance charge income on retail finance receivables increased for the three months ended March 31, 2016, compared to the three months ended March 31, 2015, due to the growth in the portfolio, partially offset by a decrease in effective yield. The effective yield on our retail finance receivables decreased primarily due to a decrease in the average annual percentage rate on new originations as we have increased our prime and near-prime lending. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average retail finance receivables. The effective yield, as a percentage of average retail finance receivables, is higher than the contractual rates of our auto finance contracts primarily because the effective yield includes, in addition to the contractual rates and fees, the impact of rate subvention provided by GM.
Commercial finance charge income remained flat despite the increase in the size of the commercial receivable portfolio, largely due to a decrease in the effective yield on commercial finance receivables.
The increase in leased vehicle income reflects the increase in the size of the leased asset portfolio.
Costs and Expenses:
Costs and expenses were as follows (dollars in millions):
 
Three Months Ended March 31,
 
2016 vs. 2015
 
2016
 
2015
 
Change excluding FX
 
FX
 
Total change
 
%
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
 
 
 
 
 
 
 
Operating expenses
$
200

 
$
134

 
$
334

 
$
161

 
$
145

 
$
306

 
$
46

 
$
(18
)
 
$
28

 
9.2
%
Leased vehicle expenses
$
888

 
$
5

 
$
893

 
$
326

 
$
1

 
$
327

 
$
574

 
$
(8
)
 
$
566

 
173.1
%
Provision for loan losses
$
177

 
$
19

 
$
196

 
$
118

 
$
37

 
$
155

 
$
45

 
$
(4
)
 
$
41

 
26.5
%
Interest expense(a)
$
305

 
$
158

 
$
463

 
$
186

 
$
194

 
$
380

 
$
127

 
$
(44
)
 
$
83

 
21.8
%
Average debt outstanding
$
43,101

 
$
13,654

 
$
56,755

 
$
24,469

 
$
13,614

 
$
38,083

 
$
20,513

 
$
(1,841
)
 
$
18,672

 
49.0
%
Effective rate of interest on debt
2.8
%
 
4.7
%
 
3.3
%
 
3.1
%
 
5.8
%
 
4.0
%
 
 
 
 
 
 
 
 
        
(a) Amounts do not reflect allocation of senior note interest expense, and therefore may not agree with amounts presented in Note 13 - "Segment Reporting" in our condensed consolidated financial statements in this Form 10-Q.
Operating Expenses
The increase in operating expenses relates to the growth in earning assets and investments to support the prime lending program and enhance lease origination and servicing capabilities in the North America Segment. Operating expenses as an annualized percentage of average earning assets were 2.2% and 3.0% for the three months ended March 31, 2016 and 2015.

26

Leased Vehicle Expenses
Leased vehicle expenses, which are primarily comprised of depreciation of leased vehicles, increased due to the growth of the leased asset portfolio in the North America Segment.
Provision for Loan Losses
The provision for retail loan losses increased primarily due to the growth in the retail finance receivables portfolio. As an annualized percentage of average retail finance receivables, the provision for loan losses was 2.7% and 2.5% for the three months ended March 31, 2016 and 2015. The provision for commercial loan losses was insignificant for the three months ended March 31, 2016 and 2015.
Interest Expense
Interest expense increased primarily due to an increase in the average debt outstanding resulting from growth in the loan and lease portfolios, partially offset by a decrease in the effective rate of interest on debt.
Taxes
Our consolidated effective income tax rate was 32.3% and 34.4% of income before income taxes and equity income for the three months ended March 31, 2016 and 2015. The decrease in the effective income tax rate is due primarily to reduced tax expense attributable to entities included in our effective tax rate calculation.
Other Comprehensive Income:
Foreign Currency Translation Adjustment
Foreign currency translation adjustments included in other comprehensive income (loss) were $153 million and $(347) million for three months ended March 31, 2016 and 2015. Most of the international operations use functional currencies other than the U.S. Dollar. Translation adjustments result from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changes in relation to international currencies.

27

CREDIT QUALITY
Retail Finance Receivables
The following tables present certain data related to the retail finance receivables portfolio (dollars in millions, except where noted):
 
March 31, 2016
 
December 31, 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Retail finance receivables, net of fees
$
18,806

 
$
11,466

 
$
30,272

 
$
18,148

 
$
10,976

 
$
29,124

Less: allowance for loan losses
(673
)
 
(123
)
 
(796
)
 
(618
)
 
(117
)
 
(735
)
Retail finance receivables, net
$
18,133

 
$
11,343

 
$
29,476

 
$
17,530

 
$
10,859

 
$
28,389

Number of outstanding contracts
977,889

 
1,582,310

 
2,560,199

 
955,094

 
1,563,831

 
2,518,925

Average amount of outstanding contracts (in dollars)(a)
$
19,231

 
$
7,246

 
$
11,824

 
$
19,001

 
$
7,019

 
$
11,562

Allowance for loan losses as a percentage of retail finance receivables, net of fees
3.6
%
 
1.1
%
 
2.6
%
 
3.4
%
 
1.1
%
 
2.5
%
_________________ 
(a)
Average amount of outstanding contracts consists of retail finance receivables, net of fees, divided by number of outstanding contracts.

Delinquency
The following is a summary of the contractual amounts of delinquent retail finance receivables, which is not materially 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):
 
 
March 31, 2016
 
March 31, 2015
 
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
31 - 60 days
 
$
841

 
$
122

 
$
963

 
3.1
%
 
$
767

 
$
113

 
$
880

 
3.4
%
Greater than 60 days
 
312

 
109

 
421

 
1.4

 
259

 
98

 
357

 
1.4

 
 
1,153

 
231

 
1,384

 
4.5

 
1,026

 
211

 
1,237

 
4.8

In repossession
 
41

 
7

 
48

 
0.2

 
34

 
8

 
42

 
0.2

 
 
$
1,194

 
$
238

 
$
1,432

 
4.7
%
 
$
1,060

 
$
219

 
$
1,279

 
5.0
%
Deferrals
In accordance with our policies and guidelines in the North America Segment, we, at times, offer payment deferrals to retail customers, whereby the borrower is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received. Contracts receiving a payment deferral as an average quarterly percentage of average retail finance receivables outstanding were 5.1% and 5.5% for the three months ended March 31, 2016 and 2015. Deferrals in the International Segment are insignificant.
Troubled Debt Restructurings
See Note 3 - "Finance Receivables" to our condensed consolidated financial statements in this Form 10-Q for further discussion of TDRs.

28

Credit Losses - non-U.S. GAAP measure
We analyze credit performance of our combined portfolio, which includes loans acquired with deteriorated credit quality. This information facilitates comparisons of current and historical results. The following is a reconciliation of charge-offs to credit losses on the combined portfolio (in millions):
 
Three Months Ended March 31,
 
2016
 
2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Charge-offs
$
259

 
$
34

 
$
293

 
$
200

 
$
34

 
$
234

Other(a)
2

 
—

 
2

 
7

 
1

 
8

Credit losses
$
261

 
$
34

 
$
295

 
$
207

 
$
35

 
$
242

 _________________
(a)
Adjustments to reflect write-offs of contractual amounts on loans acquired with deteriorated credit quality.
The following table presents credit loss data (which includes charge-offs and write-offs of contractual amounts on loans acquired with deteriorated credit quality) with respect to our retail finance receivables portfolio (dollars in millions): 
 
Three Months Ended March 31,
 
2016
 
2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Credit losses
$
261

 
$
34

 
$
295

 
$
207

 
$
35

 
$
242

Less: recoveries
(144
)
 
(11
)
 
(155
)
 
(119
)
 
(12
)
 
(131
)
Net credit losses
$
117

 
$
23

 
$
140

 
$
88

 
$
23

 
$
111

Net annualized credit loss percentage(a)
2.5
%
 
0.8
%
 
1.9
%
 
2.6
%
 
0.8
%
 
1.8
%
Recovery percentage(b)
54.1
%
 
 
 
 
 
57.7
%
 
 
 
 
_________________ 
(a)
Net annualized credit loss percentage is calculated as a percentage of average retail finance receivables.
(b)
Recovery percentage is a percentage of gross repossession credit losses. Credit losses for the International Segment primarily include the write-down of receivables to net realizable value. As a result, a calculation of recoveries as a percentage of gross credit losses is not meaningful.
Commercial Finance Receivables
The following table presents certain data related to the commercial finance receivables portfolio (dollars in millions):
 
March 31, 2016
 
December 31, 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Commercial finance receivables, net of fees
$
4,427

 
$
4,802

 
$
9,229

 
$
4,051

 
$
4,388

 
$
8,439

Less: allowance for loan losses
(25
)
 
(22
)
 
(47
)
 
(23
)
 
(24
)
 
(47
)
Total commercial finance receivables, net
$
4,402

 
$
4,780

 
$
9,182

 
$
4,028

 
$
4,364

 
$
8,392

Number of dealers
694

 
2,147

 
2,841

 
656

 
2,139

 
2,795

Average carrying amount per dealer
$
6

 
$
2

 
$
3

 
$
6

 
$
2

 
$
3

Allowance for loan losses as a percentage of commercial finance receivables, net of fees
0.6
%
 
0.5
%
 
0.5
%
 
0.6
%
 
0.5
%
 
0.6
%
There were no charge-offs of commercial finance receivables during the three months ended March 31, 2016 and 2015. At March 31, 2016 and December 31, 2015, substantially all of our commercial finance receivables were current with respect to payment status and none were classified as TDRs.
Leased Vehicles
At March 31, 2016 and 2015, 99.1% and 98.9% of our operating leases were current with respect to payment status.

29

LIQUIDITY AND CAPITAL RESOURCES
General
Our primary sources of cash are finance charge income, leasing income, servicing fees, net distributions from secured debt facilities, including securitizations, secured and unsecured borrowings and collections and recoveries on finance receivables. Our primary uses of cash are purchases of retail finance receivables and leased vehicles, the funding of commercial finance receivables, repayment of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured debt facilities, operating expenses, interest costs and business acquisitions.
In the North America Segment, our purchase and funding of retail and commercial finance receivables and leased vehicles are financed initially utilizing cash and borrowings on our secured credit facilities. Subsequently, our strategy is to obtain long-term financing for finance receivables and leased vehicles through securitization transactions and the issuance of unsecured debt.
In the International Segment, our purchase and funding of finance receivables are typically financed with borrowings on secured and unsecured credit facilities. In certain countries where the debt capital and securitization markets are sufficiently developed, such as in Germany and the U.K., we obtain long-term financing through securitization transactions. In addition, we raise unsecured debt in the international capital markets through the issuance of notes under our Euro medium term note program and accept deposits from retail banking customers in Germany.
Cash Flow
During the three months ended March 31, 2016, net cash provided by operating activities increased primarily due to increased lease vehicle income resulting from growth in the leased vehicle portfolio.
During the three months ended March 31, 2016, net cash used by investing activities increased compared to the three months ended March 31, 2015 due to an increase in purchases of leased vehicles of $2.8 billion and an increase in net fundings of commercial finance receivables of $1.1 billion, partially offset by a net decrease in cash invested in retail finance receivables of $357 million, an increase in proceeds received on terminated leases of $296 million and $1.0 billion used for the purchase of our equity interest in SAIC-GMAC in 2015.
During the three months ended March 31, 2016, net cash provided by financing activities increased compared to the three months ended March 31, 2015 primarily due to an increase in borrowings, net of repayments, of $2.2 billion.
Liquidity
Our available liquidity consists of the following (in millions): 
 
March 31, 2016
 
December 31, 2015
Cash and cash equivalents(a)
$
2,898

 
$
3,061

Borrowing capacity on unpledged eligible assets
8,423

 
9,697

Borrowing capacity on committed unsecured lines of credit
397

 
904

Borrowing capacity on the Junior Subordinated Revolving Credit Facility
1,000

 
1,000

 
$
12,718

 
$
14,662

_________________
(a)
Includes $826 million and $756 million in unrestricted cash outside of the U.S. at March 31, 2016 and December 31, 2015. This cash is considered to be indefinitely invested based on specific plans for reinvestment of these earnings.
During the three months ended March 31, 2016 available liquidity decreased due primarily to the funding of loan and lease originations in excess of available borrowing capacity, as well as the funding of an intercompany loan.
We have the ability to borrow up to $2.0 billion against each of GM's unsecured revolving credit facilities (a three-year, $5.0 billion facility and a five-year $7.5 billion facility) subject to available capacity. Our borrowings under GM's facilities are limited by GM's ability to borrow the entire amount available under the facilities. Therefore, we may be able to borrow up to $4.0 billion in total or may be unable to borrow depending on GM's borrowing activity. If we do borrow under these facilities, we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business. Neither we, nor any of our subsidiaries, guarantee any obligations under these facilities and none of our assets secure these facilities. Liquidity available to us under the GM unsecured revolving credit facilities is not included in the table above. At March 31, 2016, we had no amounts borrowed against either of GM's unsecured revolving facilities.

30

Credit Facilities
In the normal course of business, in addition to using our available cash, we utilize borrowings under our credit facilities, which may be secured or structured as securitizations, or may be unsecured, and we repay these borrowings as appropriate under our liquidity management strategy.
At March 31, 2016, credit facilities consist of the following (in millions):
Facility Type
 
Facility Amount
 
Advances Outstanding
Revolving retail asset-secured facilities(a)
 
$
19,230

 
$
7,650

Revolving commercial asset-secured facilities(b)
 
3,924

 
1,063

Total secured
 
$
23,154

 
$
8,713

Unsecured committed facilities(c)
 
1,620

 
1,223

Unsecured uncommitted facilities(d)
 
—

 
2,323

Total unsecured
 
$
1,620

 
$
3,546

Junior Subordinated Revolving Credit Facility
 
1,000

 
—

Total
 
$
25,774

 
$
12,259

_________________
(a)
Includes revolving credit facilities backed by retail finance receivables and leases.
(b)
Includes revolving credit facilities backed by loans to dealers for floorplan financing.
(c)
Does not include $4.0 billion in liquidity available to us under GM's unsecured revolving credit facilities.
(d)
The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them; therefore, we do not include available capacity on these facilities in our liquidity. We had $612 million and $468 million in unused borrowing capacity on these facilities at March 31, 2016 and December 31, 2015.
See Note 8 - "Debt" to our consolidated financial statements in our Form 10-K for further discussion of the terms of our revolving credit facilities.
Securitization Notes Payable
We periodically finance our retail and commercial finance receivables and leases through public and private term securitization transactions, where the securitization markets are sufficiently developed. A summary of securitization notes payable is as follows (in millions):
Year of Transaction
 
Maturity Date(a)
 
Original Note
Issuance(b)
 
Note
Balance At
March 31, 2016
2007
 
June 2018
 
 
 
$
74

 
$
50

2011
 
March 2019
 
 
 
$
900

 
98

2012
 
July 2019
-
May 2020
 
$
5,600

 
956

2013
 
July 2020
-
October 2021
 
$
6,335

 
1,703

2014
 
March 2019
-
September 2022
 
$
10,710

 
5,529

2015
 
February 2017
-
December 2023
 
$
14,617

 
12,114

2016
 
November 2017
-
February 2022
 
$
3,722

 
3,623

Total active securitizations
 
 
 
 
 
 
 
$
24,073

Debt issuance costs
 
 
 
 
 
 
 
(53
)
 
 
 
 
 
 
 
 
$
24,020

_________________ 
(a)
Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables and leases pledged.
(b)
At historical foreign currency exchange rates at the time of issuance.
Our securitizations utilize special purpose entities which are also VIEs that meet the requirements to be consolidated in our financial statements. See Note 8- "Variable Interest Entities" to our condensed consolidated financial statements in this Form 10-Q for further discussion.


31

Senior Notes, Retail Customer Deposits and Other Unsecured Debt
We periodically access the debt capital markets through the issuance of senior unsecured notes, predominantly from registered shelves in the U.S. and Europe. At March 31, 2016, the par value of our outstanding senior notes was $22.0 billion.
In the International Segment, particularly in Latin America, we issue other unsecured debt through commercial paper offerings and other non-bank funding sources. At March 31, 2016, we had $666 million of this type of unsecured debt outstanding. During 2015, we began accepting deposits from retail banking customers in Germany. At March 31, 2016, the outstanding balance of these deposits was $1.6 billion, of which 41% were overnight deposits.
Support Agreement
Due to the rate of increase in our earning assets, as well as the effects of foreign currency translation adjustments, we expect that our earning assets leverage ratio could rise to levels near or slightly exceeding the applicable ratios contained in the Support Agreement at certain points during 2016. Under the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio to within the applicable level. If our levels were to exceed the applicable ratio in 2016, we believe it would be temporary and we would not expect to need any additional funding from GM because we anticipate that our available liquidity would be sufficient to operate our business.
At March 31, 2016, our earning assets leverage ratio was 8.8, and the applicable ratio was 9.5.

FORWARD-LOOKING STATEMENTS
This report contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" or "anticipate" and other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2015. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.
The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:
•
changes in general economic and business conditions;
•
GM's ability to sell new vehicles that we finance in the markets we serve in North America, Europe, Latin America and China;
•
interest rate and currency fluctuations;
•
our financial condition and liquidity, as well as future cash flows and earnings;
•
competition;
•
the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;
•
the availability and cost of sources of financing;
•
the level of net charge-offs, delinquencies and prepayments on the loans and leases we originate;
•
vehicle return rates and the residual value performance on vehicles we lease;
•
the viability of GM-franchised dealers that are commercial loan customers;
•
the prices at which used cars are sold in the wholesale auction markets; and
•
changes in business strategy, including expansion of product lines and credit risk appetite, and acquisitions.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposure to interest rate risk since December 31, 2015. See Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.

32

Item 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and accumulated and communicated to our management, including our principal executive officer ("CEO") and principal financial officer ("CFO"), as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) at March 31, 2016. Based on this evaluation, required by paragraph (b) of Rule 13a-15 and/or 15d-15, our CEO and CFO concluded that our disclosure controls and procedures were effective at March 31, 2016.
Changes in Internal Control Over Financial Reporting
There were no changes made in our internal control over financial reporting during the three months ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Part II
Item 1.
Legal Proceedings
See the discussion under Note 11 - "Commitments and Contingencies" to our condensed consolidated financial statements and the 2015 Form 10-K for information relating to certain legal proceedings.
Item 1A.
Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risks factors. There have been no material changes to the risk factors disclosed in 2015 Form 10-K.


33

Item 6.
Exhibits
31.1
 
Officers' Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
Filed Herewith
 
 
 
 
 
32.1
 
Officers' Certifications of Periodic Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002
 
Furnished with this Report
 
 
 
 
 
101.INS*
 
XBRL Instance Document
 
Filed Herewith
 
 
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document
 
Filed Herewith
 
 
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
Filed Herewith
 
 
 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document
 
Filed Herewith
 
 
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document
 
Filed Herewith
 
 
 
 
 
101.PRE*
 
XBRL Taxonomy Presentation Linkbase Document
 
Filed Herewith
__________
*
Submitted electronically with this Report in accordance with the provisions of Regulation S-T.


34

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
General Motors Financial Company, Inc.
 
 
 
 
 
(Registrant)
 
 
 
 
 
 
Date:
April 21, 2016
 
By:
 
/S/    CHRIS A. CHOATE        
 
 
 
 
 
(Signature)
 
 
 
 
 
Chris A. Choate
 
 
 
 
 
Executive Vice President and
 
 
 
 
 
Chief Financial Officer


35

General Motors Financial Company, Inc. Reports

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