Attached files

file filename
EX-32.1 - EXHIBIT 32.1 OFFICERS' CERTIFICATIONS OF PERIODIC REPORT PURSUANT TO SECTION 906 - General Motors Financial Company, Inc.gmfexhibit321q22016.htm
EX-31.1 - EXHIBIT 31.1 OFFICERS' CERTIFICATIONS OF PERIODIC REPORT PURSUANT TO SECTION 302 - General Motors Financial Company, Inc.gmfexhibit311q22016.htm
EX-3.2 - EXHIBIT 3.2 SECOND AMENDED AND RESTATED BYLAWS - General Motors Financial Company, Inc.gmfexhibit32q22016secondam.htm
EX-3.1 - EXHIBIT 3.1 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF FORMATION - General Motors Financial Company, Inc.gmfexhibit31q22016certific.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
(Mark One)
ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 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)
 
 
June 30, 2016
 
December 31, 2015
Assets
 
 
 
 
Cash and cash equivalents
 
$
3,102

 
$
3,061

Finance receivables, net (Note 3; Note 8 VIEs)
 
39,430

 
36,781

Leased vehicles, net (Note 4; Note 8 VIEs)
 
28,442

 
20,172

Restricted cash (Note 5; Note 8 VIEs)
 
2,010

 
1,941

Goodwill
 
1,200

 
1,189

Equity in net assets of non-consolidated affiliates (Note 6)
 
879

 
986

Property and equipment, net of accumulated depreciation of $110 and $91
 
245

 
219

Deferred income taxes
 
307

 
231

Related party receivables (Note 2)
 
979

 
573

Other assets
 
1,009

 
751

Total assets
 
$
77,603

 
$
65,904

Liabilities and Shareholder's Equity
 
 
 
 
Liabilities
 
 
 
 
Secured debt (Note 7; Note 8 VIEs)
 
$
34,338

 
$
30,689

Unsecured debt (Note 7)
 
30,162

 
23,657

Accounts payable and accrued expenses
 
1,537

 
1,218

Deferred income
 
2,035

 
1,454

Deferred income taxes
 
251

 
129

Related party payables (Note 2)
 
449

 
362

Other liabilities
 
358

 
343

Total liabilities
 
69,130

 
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
 
6,486

 
6,484

Accumulated other comprehensive loss (Note 14)
 
(1,038
)
 
(1,104
)
Retained earnings
 
3,025

 
2,672

Total shareholder's equity
 
8,473

 
8,052

Total liabilities and shareholder's equity
 
$
77,603

 
$
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 June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Revenue
 
 
 
 
 
 
 
 
Finance charge income
 
$
826

 
$
848

 
$
1,644

 
$
1,702

Leased vehicle income
 
1,390

 
599

 
2,574

 
1,030

Other income
 
76

 
68

 
149

 
137

Total revenue
 
2,292

 
1,515

 
4,367

 
2,869

Costs and expenses
 
 
 
 
 
 
 
 
Salaries and benefits
 
203

 
181

 
396

 
346

Other operating expenses
 
140

 
138

 
281

 
279

Total operating expenses
 
343

 
319

 
677

 
625

Leased vehicle expenses
 
1,068

 
467

 
1,961

 
794

Provision for loan losses
 
151

 
141

 
347

 
296

Interest expense
 
501

 
391

 
964

 
771

Total costs and expenses
 
2,063

 
1,318

 
3,949

 
2,486

Equity income (Note 6)
 
37

 
28

 
73

 
56

Income before income taxes
 
266

 
225

 
491

 
439

Income tax provision
 
77

 
39

 
138

 
103

Net income
 
189

 
186

 
353

 
336

Other comprehensive income
 
 
 
 
 
 
 
 
Unrealized loss on cash flow hedge, net of tax
 
(4
)
 

 
(4
)
 

Defined benefit plans, net
 
1

 

 

 
1

Foreign currency translation adjustment
 
(83
)
 
105

 
70

 
(242
)
Other comprehensive (loss) income, net
 
(86
)
 
105

 
66

 
(241
)
Comprehensive income
 
$
103

 
$
291

 
$
419

 
$
95

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)
 
 
Six Months Ended June 30,
 
 
2016
 
2015
Net cash provided by operating activities
 
$
2,618

 
$
1,265

Cash flows from investing activities
 
 
 
 
Purchases of retail finance receivables, net
 
(8,343
)
 
(8,366
)
Principal collections and recoveries on retail finance receivables
 
6,641

 
5,716

Net funding of commercial finance receivables
 
(1,362
)
 
(37
)
Purchases of leased vehicles, net
 
(10,196
)
 
(6,724
)
Proceeds from termination of leased vehicles
 
1,090

 
468

Acquisition of international operations
 

 
(1,049
)
Disposition of equity interest
 

 
125

Purchases of property and equipment
 
(47
)
 
(44
)
Change in restricted cash
 
(72
)
 
(140
)
Change in other assets
 
(4
)
 
17

Net cash used in investing activities
 
(12,293
)
 
(10,034
)
Cash flows from financing activities
 
 
 
 
Net change in debt (original maturities less than three months)
 
405

 
(150
)
Borrowings and issuance of secured debt
 
13,847

 
9,791

Payments on secured debt
 
(10,039
)
 
(7,406
)
Borrowings and issuance of unsecured debt
 
7,306

 
6,697

Payments on unsecured debt
 
(1,758
)
 
(871
)
Debt issuance costs
 
(83
)
 
(101
)
Net cash provided by financing activities
 
9,678

 
7,960

Net increase (decrease) in cash and cash equivalents
 
3

 
(809
)
Effect of foreign exchange rate changes on cash and cash equivalents
 
38

 
(95
)
Cash and cash equivalents at beginning of period
 
3,061

 
2,974

Cash and cash equivalents at end of period
 
$
3,102

 
$
2,070

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 consolidated 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 audited 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 June 30, 2016, and for the three and six months ended June 30, 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. 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.
In June 2016 ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), was issued and requires entities to use a current expected credit loss ("CECL") model which is a new impairment model based on expected losses rather than incurred losses. Under this model an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity's estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon loan origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting periods beginning after December 15, 2018. We are currently assessing the impact the adoption of ASU 2016-13 will have on our consolidated financial statements.

4


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 six months ended June 30, 2016, we advanced $456 million under a new line of credit to GM subsidiary Adam Opel AG, which is included in our net funding of commercial finance receivables on the condensed consolidated statements of cash flows.
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):
Balance Sheet Data
 
June 30, 2016
 
December 31, 2015
Commercial finance receivables, net due from dealers consolidated by GM(a)
 
$
321

 
$
229

Advances drawn on lines of credit due from GM(b)
 
$
614

 
$
190

Subvention receivable(c)
 
$
365

 
$
383

Commercial loan funding payable(d)
 
$
436

 
$
351

Income Statement Data
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Interest subvention earned(e)
 
$
109

 
$
85

 
$
212

 
$
163

Leased vehicle subvention earned(f)
 
$
540

 
$
196

 
$
999

 
$
332

_________________
(a)
Included in commercial finance receivables.
(b)
Included in related party receivables.
(c)
Included in related party receivables. We received subvention payments from GM of $1.0 billion and $0.8 billion for the three months ended June 30, 2016 and 2015 and $2.2 billion and $1.3 billion for the six months ended June 30, 2016 and 2015.
(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, which were amended in May 2016. These amendments increased GM's borrowing capacity on its corporate revolving credit facilities from $12.5 billion to $14.5 billion. We have the ability to borrow up to $1.0 billion under GM's three-year, $4.0 billion unsecured revolving credit facility and $3.0 billion under GM's five-year, $10.5 billion unsecured revolving credit facility, subject to available capacity. GM also agreed to certain provisions in the Support Agreement intended to ensure that we maintain adequate access to liquidity. Pursuant to these provisions, GM provided us with a $1.0 billion junior subordinated unsecured intercompany revolving credit facility (the "Junior Subordinated Revolving Credit Facility"). There were no advances outstanding under the Junior Subordinated Revolving Credit Facility at June 30, 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.

5


federal and certain state tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable.  At June 30, 2016 and December 31, 2015, there are no related party taxes payable to GM due to our taxable loss position.  
Note 3.    Finance Receivables
The finance receivables portfolio consists of the following (in millions): 
 
 
June 30, 2016
 
December 31, 2015

Retail
 
 
 
 
Retail finance receivables, collectively evaluated for impairment, net of fees(a)
 
$
29,128

 
$
27,512

Retail finance receivables, individually evaluated for impairment, net of fees
 
1,733

 
1,612

Total retail finance receivables(b)
 
30,861

 
29,124

Less: allowance for loan losses - collective
 
(570
)
 
(515
)
Less: allowance for loan losses - specific
 
(244
)
 
(220
)
Total retail finance receivables, net
 
30,047

 
28,389

Commercial
 
 
 
 
Commercial finance receivables, collectively evaluated for impairment, net of fees
 
9,318

 
8,357

Commercial finance receivables, individually evaluated for impairment, net of fees
 
115

 
82

Total commercial finance receivables
 
9,433

 
8,439

Less: allowance for loan losses - collective
 
(41
)
 
(38
)
Less: allowance for loan losses - specific
 
(9
)
 
(9
)
Total commercial finance receivables, net
 
9,383

 
8,392

Total finance receivables, net
 
$
39,430

 
$
36,781

________________
(a) Includes $1.3 billion and $1.1 billion of direct-financing leases at June 30, 2016 and December 31, 2015.
(b) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $190 million and $179 million at June 30, 2016 and December 31, 2015.
Retail Finance Receivables
Following is a summary of activity in our retail finance receivables portfolio (in millions): 
 
 
Six Months Ended June 30,
 
 
2016
 
2015
Beginning balance
 
$
29,124

 
$
25,623

Purchases
 
8,339

 
8,366

Principal collections and other
 
(6,248
)
 
(5,294
)
Charge-offs
 
(559
)
 
(454
)
Foreign currency translation
 
205

 
(911
)
Ending balance
 
$
30,861

 
$
27,330

A summary of the activity in the allowance for retail loan losses is as follows (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Beginning balance
 
$
796

 
$
692

 
$
735

 
$
655

Provision for loan losses
 
148

 
139

 
345

 
296

Charge-offs
 
(266
)
 
(220
)
 
(559
)
 
(454
)
Recoveries
 
133

 
111

 
283

 
233

Foreign currency translation
 
3

 
(1
)
 
10

 
(9
)
Ending balance
 
$
814

 
$
721

 
$
814

 
$
721



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 have expanded our prime lending programs.
A summary of the credit risk profile by FICO score band or equivalent scores, determined at origination, of the retail finance receivables in the North America Segment is as follows (dollars in millions):
 
 
June 30, 2016
 
December 31, 2015
 
 
Amount
 
Percent
 
Amount
 
Percent
Prime - FICO Score 680 and greater
 
$
5,650

 
29.1
%
 
$
4,418

 
24.4
%
Near-prime - FICO Score 620 to 679
 
3,116

 
16.0
%
 
2,890

 
15.9
%
Sub-prime - FICO Score less than 620
 
10,663

 
54.9
%
 
10,840

 
59.7
%
Balance at end of period
 
$
19,429

 
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): 
 
 
June 30, 2016
 
June 30, 2015
 
 
Total
 
Percent of Contractual Amount Due
 
Total
 
Percent of Contractual Amount Due
31 - 60 days
 
$
1,070

 
3.4
%
 
$
1,062

 
3.6
%
Greater than 60 days
 
465

 
1.5

 
452

 
1.6

Total finance receivables more than 30 days delinquent
 
1,535

 
4.9

 
1,514

 
5.2

In repossession
 
51

 
0.2

 
46

 
0.2

Total finance receivables more than 30 days delinquent or in repossession
 
$
1,586

 
5.1
%
 
$
1,560

 
5.4
%
The accrual of finance charge income has been suspended on $758 million and $778 million of retail finance receivables (based on contractual amount due) at June 30, 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 June 30, 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):
 
 
June 30, 2016
 
December 31, 2015
Outstanding recorded investment
 
$
1,733

 
$
1,612

Less: allowance for loan losses
 
(244
)
 
(220
)
Outstanding recorded investment, net of allowance
 
$
1,489

 
$
1,392

Unpaid principal balance
 
$
1,777

 
$
1,642

Additional information about loans classified as TDRs is presented below (in millions, except for number of loans):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Average outstanding recorded investment
 
$
1,696

 
$
1,347

 
$
1,673

 
$
1,309

Finance charge income recognized
 
$
50

 
$
41

 
$
101

 
$
81

Number of loans classified as TDRs during the period
 
16,133

 
14,397

 
30,779

 
26,124

Recorded investment of loans classified as TDRs during the period
 
$
277

 
$
245

 
$
531

 
$
446

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 and six months ended June 30, 2016 and 2015.
Commercial Finance Receivables
Following is a summary of activity in our commercial finance receivables portfolio (in millions): 
 
 
Six Months Ended June 30,
 
 
2016
 
2015
Beginning balance
 
$
8,439

 
$
8,072

Net funding
 
1,032

 
29

Charge-offs
 

 

Foreign currency translation
 
(38
)
 
(286
)
Ending balance
 
$
9,433

 
$
7,815


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. Dealers in Group VI are subject to additional funding restrictions including suspension of lines of credit and liquidation of assets.
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): 
 
 
 
 
June 30, 2016
 
December 31, 2015
Group I
-
Dealers with superior financial metrics
 
$
1,277

 
$
1,299

Group II
-
Dealers with strong financial metrics
 
3,105

 
2,648

Group III
-
Dealers with fair financial metrics
 
3,087

 
2,703

Group IV
-
Dealers with weak financial metrics
 
1,162

 
1,100

Group V
-
Dealers warranting special mention due to potential weaknesses
 
609

 
505

Group VI
-
Dealers with loans classified as substandard, doubtful or impaired
 
193

 
184

Ending balance
 
$
9,433

 
$
8,439

At June 30, 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 and six months ended June 30, 2016 and 2015.
Note 4.
Leased Vehicles
The following table presents information regarding our leased vehicles (in millions):
 
 
June 30, 2016
 
December 31, 2015
Leased vehicles
 
$
39,198

 
$
27,587

Manufacturer incentives
 
(6,352
)
 
(4,582
)
 
 
32,846

 
23,005

Less: accumulated depreciation
 
(4,404
)
 
(2,833
)
Leased vehicles, net
 
$
28,442

 
$
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
 
Thereafter
 
Total
Minimum rental payments under operating leases
 
$
2,392

 
$
4,341

 
$
2,828

 
$
779

 
$
54

 
$
1

 
$
10,395

Note 5.    Restricted Cash
The following table summarizes the components of restricted cash (in millions):
 
 
June 30, 2016
 
December 31, 2015
Revolving credit facilities
 
$
325

 
$
345

Securitization notes payable
 
1,669

 
1,531

Other
 
16

 
65

Total restricted cash
 
$
2,010

 
$
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.

9


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.
We received cash dividends from SAIC-GMAC of $129 million in the six months ended June 30, 2016. At June 30, 2016, we had undistributed earnings of $64 million related to SAIC-GMAC.
Note 7.
Debt
Debt consists of the following (in millions): 
 
 
June 30, 2016
 
December 31, 2015
Secured debt
 
 
 


Revolving credit facilities
 
$
7,914

 
$
7,548

Securitization notes payable
 
26,424

 
23,141

Total secured debt
 
$
34,338

 
$
30,689

 
 
 
 
 
Unsecured debt
 
 
 

Senior notes
 
$
24,402

 
$
18,973

Credit facilities
 
3,333

 
2,759

Retail customer deposits
 
1,795

 
1,260

Other unsecured debt
 
632

 
665

Total unsecured debt
 
$
30,162

 
$
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 six months ended June 30, 2016, we entered into new credit facilities or renewed credit facilities with a total additional net borrowing capacity of $2.5 billion, and we issued securitization notes payable of $8.4 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").
In May 2016, our top-tier holding company issued $3.0 billion in senior notes comprised of $1.4 billion of 2.40% notes due in May 2019, $1.2 billion of 3.70% notes due in May 2023 and $400 million of floating rate notes due in May 2019. All of these notes are guaranteed solely by AFSI.
Also in May 2016, one of our European subsidiaries issued €500 million of 1.168% notes under our Euro medium term notes program. These notes are due in May 2020 and are guaranteed by our top-tier holding company and AFSI.
Subsequent to June 30, 2016, our top-tier holding company issued $2.0 billion of 3.20% senior notes due in July 2021. These notes are guaranteed solely by AFSI.




10


During 2015, we began accepting deposits from retail banking customers in Germany. Following is summarized information for our deposits at June 30, 2016 and December 31, 2015 (dollars in millions):
 
June 30, 2016
 
December 31, 2015
 
Outstanding Balance
 
Weighted Average Interest Rate
 
Outstanding Balance
 
Weighted Average Interest Rate
Overnight deposits
$
640

 
0.60
%
 
$
555

 
1.00
%
Term deposits -12 months
558

 
1.22
%
 
337

 
1.32
%
Term deposits - 24 months
238

 
1.34
%
 
123

 
1.44
%
Term deposits - 36 months
359

 
1.55
%
 
245

 
1.65
%
Total deposits
$
1,795

 
1.11
%
 
$
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. Certain of our secured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. Our unsecured senior notes contain covenants including limitations on our ability to incur certain liens. At June 30, 2016, we were in compliance with these debt covenants.
Note 8.    Variable Interest Entities
Securitizations and credit facilities
The following table summarizes the assets and liabilities related to our consolidated VIEs (in millions):
 
 
June 30, 2016
 
December 31, 2015
Restricted cash
 
$
1,994

 
$
1,876

Finance receivables, net of fees
 
$
24,596

 
$
24,942

Lease related assets
 
$
17,533

 
$
11,684

Secured debt
 
$
33,281

 
$
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 amounts presented below are stated prior to intercompany eliminations and include amounts related to securitizations and credit facilities held by consolidated VIEs.
The following table summarizes the assets and liabilities of these entities (in millions):
 
 
June 30, 2016
 
December 31, 2015
Assets(a)
 
$
4,700

 
$
3,652

Liabilities(b)
 
$
3,962

 
$
2,941


11


_________________
(a)
Comprised primarily of finance receivables, net of $3.6 billion and $3.2 billion at June 30, 2016 and December 31, 2015.
(b)
Comprised primarily of debt of $2.9 billion and $2.6 billion at June 30, 2016 and December 31, 2015.
The following table summarizes the revenue and net income of these entities (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Total revenue
 
$
61

 
$
40

 
$
108

 
$
81

Net income
 
$
9

 
$
8

 
$
16

 
$
19

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 June 30, 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.
Note 9.
Derivative Financial Instruments and Hedging Activities
Derivative swap and cap agreements consist of the following (in millions): 
 
 
 
June 30, 2016
 
December 31, 2015
 
Level
 
Notional
 
Fair Value
 
Notional
 
Fair Value
Fair value hedges
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Interest rate swaps(a)(c)
2
 
$
6,450

 
$
70

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(a)(d)
2
 
$
500

 
$

 
$
1,000

 
$
6

Cash flow hedges
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)(d)
3
 
$
1,786

 
$
6

 
$

 
$

Derivatives not designated as hedges
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)
3
 
$
5,153

 
$
60

 
$
4,122

 
$
8

Interest rate caps(a)
2
 
8,028

 
5

 
6,327

 
19

Foreign currency swaps(a)
2
 
1,307

 
79

 
1,460

 
48

Total assets(c)
 
 
$
14,488

 
$
144

 
$
11,909

 
$
75

Liabilities
 
 
 
 
 
 
 
 
 
Interest rate swaps(b)
3
 
$
7,874

 
$
42

 
$
8,041

 
$
24

Interest rate caps(a)
2
 
8,124

 
5

 
5,892

 
19

Total liabilities(d)
 
 
$
15,998

 
$
47

 
$
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 condensed consolidated balance sheets.
(d)
Included in other liabilities on the condensed consolidated balance sheets.

12


The following table presents information on the gains/(losses) on derivative instruments included in the condensed consolidated statements of income and comprehensive income (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Fair value hedges
 
 
 
 
 
 
 
 
Interest rate contracts(a)
 
 
 
 
 
 
 
 
Net interest settlements and accruals
 
$
8

 
$

 
$
12

 
$

Ineffectiveness(b)
 
10

 

 
8

 

Derivatives not designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts(a)
 
(15
)
 
7

 
(15
)
 
1

Foreign currency derivatives(c)
 
96

 
(58
)
 
165

 
11

Total
 
$
99

 
$
(51
)
 
$
170

 
$
12

 _________________
(a)
Recognized in earnings as interest expense.
(b)
Hedge ineffectiveness reflects the net change in the fair value of interest rate contracts of $74 million and $76 million offset by the change in fair value of hedged debt attributable to the hedged risk of $64 million and $68 million for the three and six months ended June 30, 2016.
(c)
Activity is substantially offset by translation activity (included in operating expenses) related to foreign currency-denominated loans.
Cash flow hedges had an insignificant impact on the condensed consolidated statement of income for the three and six months ended June 30, 2016 and 2015.
The activity for interest rate swap agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) was insignificant for the three and six months ended June 30, 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.

13


Estimated fair values, carrying values and various methods and assumptions used in valuing our financial instruments are set forth below (in millions):
 
 
 
June 30, 2016
 
December 31, 2015
 
Level
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents(a)
1
 
$
3,102

 
$
3,102

 
$
3,061

 
$
3,061

Retail finance receivables, net
3
 
$
30,047

 
$
30,448

 
$
28,389

 
$
28,545

Commercial finance receivables, net(b)
2
 
$
9,383

 
$
9,383

 
$
8,392

 
$
8,392

Restricted cash(a)
1
 
$
2,010

 
$
2,010

 
$
1,941

 
$
1,941

Financial liabilities
 
 
 
 
 
 
 
 
 
Secured debt
 
 
 
 
 
 
 
 
 
North America(c)
2
 
$
27,664

 
$
27,855

 
$
23,151

 
$
23,182

International(d)
2
 
$
3,591

 
$
3,593

 
$
3,122

 
$
3,125

International(e)
3
 
$
3,083

 
$
3,082

 
$
4,416

 
$
4,364

Unsecured debt
 
 
 
 
 
 
 
 
 
North America(f)
2
 
$
22,577

 
$
23,185

 
$
17,731

 
$
17,792

International(g)
2
 
$
6,277

 
$
6,320

 
$
4,605

 
$
4,617

International(e)
3
 
$
1,308

 
$
1,314

 
$
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 of 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 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.

14


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 June 30, 2016 and December 31, 2015, the par value of these senior notes was $24.5 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 June 30, 2016, we estimated our reasonably possible legal exposure for unfavorable outcomes of up to $98 million and have accrued $37 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 $54 million.
Note 12.     Income Taxes

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

In the three and six months ended June 30, 2016, income tax expense of $77 million and $138 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. In the three and six months ended June 30, 2015, income tax expense of $39 million and $103 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefits related to releases of uncertain tax positions in various jurisdictions and an increase in certain U.S. federal tax credits.

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.

15


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.

Key financial data for our operating segments were as follows (in millions):
 
 
Three Months Ended June 30, 2016
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
1,886

 
$
406

 
$

 
$

 
$
2,292

Operating expenses
 
215

 
128

 

 

 
343

Leased vehicle expenses
 
1,061

 
7

 

 

 
1,068

Provision for loan losses
 
125

 
26

 

 

 
151

Interest expense
 
337

 
164

 

 

 
501

Equity income
 

 
37

 

 

 
37

Income before income taxes
 
$
148

 
$
118

 
$

 
$

 
$
266

 
 
Three Months Ended June 30, 2015
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
1,085

 
$
430

 
$
4

 
$
(4
)
 
$
1,515

Operating expenses
 
184

 
135

 

 

 
319

Leased vehicle expenses
 
464

 
3

 

 

 
467

Provision for loan losses
 
111

 
30

 

 

 
141

Interest expense
 
193

 
183

 
19

 
(4
)
 
391

Equity income
 

 
28

 

 

 
28

Income (loss) before income taxes
 
$
133

 
$
107

 
$
(15
)
 
$

 
$
225

 
 
Six Months Ended June 30, 2016
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
3,574

 
$
793

 
$
(1
)
 
$
1

 
$
4,367

Operating expenses
 
416

 
261

 

 

 
677

Leased vehicle expenses
 
1,949

 
12

 

 

 
1,961

Provision for loan losses
 
302

 
45

 

 

 
347

Interest expense
 
642

 
321

 

 
1

 
964

Equity income
 

 
73

 

 

 
73

Income (loss) before income taxes
 
$
265

 
$
227

 
$
(1
)
 
$

 
$
491


16


 
 
Six Months Ended June 30, 2015
 
 
North
America
 
International
 
Corporate
 
Eliminations
 
Total
Total revenue
 
$
1,991

 
$
878

 
$
11

 
$
(11
)
 
$
2,869

Operating expenses
 
345

 
280

 

 

 
625

Leased vehicle expenses
 
790

 
4

 

 

 
794

Provision for loan losses
 
229

 
67

 

 

 
296

Interest expense
 
358

 
389

 
35

 
(11
)
 
771

Equity income
 

 
56

 

 

 
56

Income (loss) before income taxes
 
$
269

 
$
194

 
$
(24
)
 
$

 
$
439

 
 
June 30, 2016
 
December 31, 2015
 
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Finance receivables, net
 
$
23,546

 
$
15,884

 
$
39,430

 
$
21,558

 
$
15,223

 
$
36,781

Leased vehicles, net
 
$
28,278

 
$
164

 
$
28,442

 
$
20,086

 
$
86

 
$
20,172

Total assets
 
$
57,913

 
$
19,690

 
$
77,603

 
$
47,419

 
$
18,485

 
$
65,904

Note 14.
Accumulated Other Comprehensive Loss
A summary of changes in accumulated other comprehensive loss is as follows (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Unrealized loss on cash flow hedge
 
 
 
 
 
 
 
 
Beginning balance
 
$

 
$

 
$

 
$

Change in value of cash flow hedge, net of tax
 
(4
)
 

 
(4
)
 

Ending balance
 
(4
)
 

 
(4
)
 

Defined benefit plans, net
 
 
 
 
 
 
 
 
Beginning balance
 
(14
)
 
(10
)
 
(13
)
 
(11
)
Unrealized gain on subsidiary pension, net of tax
 
1

 

 

 
1

Ending balance
 
(13
)
 
(10
)
 
(13
)
 
(10
)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
Beginning balance
 
(938
)
 
(769
)
 
(1,091
)
 
(422
)
Translation (loss) income
 
(83
)
 
105

 
70

 
(242
)
Ending balance
 
(1,021
)
 
(664
)
 
(1,021
)
 
(664
)
Total accumulated other comprehensive loss
 
$
(1,038
)
 
$
(674
)
 
$
(1,038
)
 
$
(674
)
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 $12.5 billion and $11.1 billion at June 30, 2016 and December 31, 2015.

17


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 June 30, 2016 and December 31, 2015, and for the three and six months ended June 30, 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 condensed consolidating balance sheet in the financing activities section of the condensed consolidating statements of cash flows for the six months ended June 30, 2015. As a result, correcting adjustments have been made from what was previously reported to (1) reclassify $3.9 billion of the net change in the due from affiliates for General Motors Financial Company, Inc. within the condensed consolidating statements of cash flows to the investing activities section; and (2) reclassify $3.2 billion of the net change in the due from affiliates for the Guarantor within the condensed consolidating statements of cash flows to the investing activities section. In addition, reclassifications have been made solely within the investing activities section of the condensed 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 $762 million. These adjustments had no effect on the consolidated financial statements at or for the three and six months ended June 30, 2015.



18


GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2016
(In millions) (Unaudited)
 
General
Motors
Financial
Company,
Inc.
 
Guarantor
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
2,209

 
$
893

 
$

 
$
3,102

Finance receivables, net

 
6,805

 
32,625

 

 
39,430

Leased vehicles, net

 

 
28,442

 

 
28,442

Restricted cash

 
14

 
1,996

 

 
2,010

Goodwill
1,095

 

 
105

 

 
1,200

Equity in net assets of non-consolidated affiliates

 

 
879

 

 
879

Property and equipment, net

 
119

 
126

 

 
245

Deferred income taxes
340

 

 
264

 
(297
)
 
307

Related party receivables

 
27

 
952

 

 
979

Other assets
20

 
361

 
767

 
(139
)
 
1,009

Due from affiliates
20,087

 
10,514

 

 
(30,601
)
 

Investment in affiliates
9,127

 
6,082

 

 
(15,209
)
 

Total assets
$
30,669

 
$
26,131

 
$
67,049

 
$
(46,246
)
 
$
77,603

Liabilities and Shareholder's Equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Secured debt
$

 
$

 
$
34,477

 
$
(139
)
 
$
34,338

Unsecured debt
21,887

 

 
8,275

 

 
30,162

Accounts payable and accrued expenses
244

 
385

 
908

 

 
1,537

Deferred income

 

 
2,035

 

 
2,035

Deferred income taxes

 
392

 
156

 
(297
)
 
251

Related party payables
1

 

 
448

 

 
449

Other liabilities
64

 
15

 
279

 

 
358

Due to affiliates

 
20,042