UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 9, 2014
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
Texas | 1-10667 | 75-2291093 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrants telephone number, including area code)
(Not Applicable)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Forward-Looking Statements
Except for the historical information contained herein, the matters disclosed herein include forward-looking statements which are the Companys 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 those anticipated by the Company. The most significant of these risks are detailed from time to time in the Companys filings and reports with the Securities and Exchange Commission including the Companys annual report on Form 10-K for the year ended December 31, 2013 and the Companys quarterly report on Form 10-Q for the six months ended June 30, 2014. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, the Companys actual results may vary materially from those expected, estimated or projected. Actual events or results may differ materially. It is advisable not to place undue reliance on any forward-looking statements. The Company undertakes no obligation to, and does 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.
ITEM 8.01 OTHER EVENTS
The Company is filing this Current Report on Form 8-K to provide information required to be included or incorporated by reference in the registration statement on Form S-3, previously filed by the Company and AmeriCredit Financial Services, Inc. In connection with the foregoing, the Company is filing the following herewith:
| Exhibit 99.1Unaudited condensed combined balance sheets for the international auto finance and financial services businesses of Ally Financial Inc. (Ally-IO) as of June 30, 2014 and December 31, 2013, the related unaudited condensed changes in invested equity and unaudited condensed statement of cash flows for the six months ended June 30, 2014 and June 30, 2013, and the related unaudited condensed combined statements of comprehensive income for the three and six months ended June 30, 2014 and June 30, 2013. |
| Exhibit 99.2The pro forma financial information reflecting the acquisition of the international auto finance and financial services businesses of Ally Financial Inc. in Europe and Latin America and the probable future acquisition of Ally Financial Inc.s 40% equity interest in GMAC-SAIC Automotive Finance Company Limited in China. |
The information included in this Form 8-K should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2013, the Companys Quarterly Report on Form 10-Q for the six months ended June 30, 2014 and other filings the Company has made, or will make, with the Securities and Exchange Commission.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. |
Description of Exhibit | |
99.1 | Unaudited condensed combined balance sheets of Ally-IO as of June 30, 2014 and December 31, 2013, the related unaudited condensed statements of changes in invested equity, and unaudited condensed statements of cash flows for the six months ended June 30, 2014 and June 30, 2013, and the related unaudited condensed combined statements of comprehensive income for the three and six months ended June 30, 2014 and June 30, 2013 | |
99.2 | Unaudited Pro Forma Condensed Combined Financial Information as of and for the six months ended June 30, 2014 and for the year ended December 31, 2013 |
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 hereunto duly authorized.
General Motors Financial Company, Inc. | ||||||
(Registrant) | ||||||
Date: September 9, 2014 | By: | /S/ CHRIS A. CHOATE | ||||
Chris A. Choate | ||||||
Executive Vice President and Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. |
Description of Exhibit | |
99.1 | Unaudited condensed combined balance sheets of Ally-IO as of June 30, 2014 and December 31, 2013, the related unaudited condensed statements of changes in invested equity, and unaudited condensed statements of cash flows for the six months ended June 30, 2014 and June 30, 2013, and the related unaudited condensed combined statements of comprehensive income for the three and six months ended June 30, 2014 and June 30, 2013 | |
99.2 | Unaudited Pro Forma Condensed Combined Financial Information as of and for the six months ended June 30, 2014 and for the year ended December 31, 2013 |
Exhibit 99.1
Condensed Combined Statements of Comprehensive Income (unaudited)
Ally Financial Inc. - International Operations
Three months ended June 30, |
Six months ended June 30, |
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($ in millions) |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Financing revenue and other interest income |
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Interest and fees on finance receivables and loans |
$ | | $ | 178 | $ | | $ | 550 | ||||||||
Other financing revenue and interest income |
| 5 | | 23 | ||||||||||||
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Total financing revenue and other interest income |
| 183 | | 573 | ||||||||||||
Interest expense |
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Interest on short-term borrowings |
| 11 | | 41 | ||||||||||||
Interest on long-term debt |
| 90 | | 244 | ||||||||||||
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Total interest expense |
| 101 | | 285 | ||||||||||||
Depreciation expense on operating lease assets |
| | | 7 | ||||||||||||
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Net financing revenue |
| 82 | | 281 | ||||||||||||
Other revenue |
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Income from equity method investee |
33 | 29 | 66 | 56 | ||||||||||||
Other income, net of losses |
| 20 | | 52 | ||||||||||||
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Total other revenue |
33 | 49 | 66 | 108 | ||||||||||||
Total net revenue |
33 | 131 | 66 | 389 | ||||||||||||
Provision for loan losses |
| 25 | | 52 | ||||||||||||
Noninterest expense |
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Compensation and benefits expense |
| 11 | | 49 | ||||||||||||
Other operating expenses |
1 | 46 | 2 | 115 | ||||||||||||
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Total noninterest expense |
1 | 57 | 2 | 164 | ||||||||||||
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Income before income tax expense |
32 | 49 | 64 | 173 | ||||||||||||
Income tax expense |
| 8 | | 42 | ||||||||||||
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Net income |
$ | 32 | $ | 41 | $ | 64 | $ | 131 | ||||||||
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Translation adjustments |
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Translation adjustments arising from revaluations during the period |
| (52 | ) | (9 | ) | (89 | ) | |||||||||
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Other comprehensive loss net of tax |
| (52 | ) | (9 | ) | (89 | ) | |||||||||
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Comprehensive income |
$ | 32 | $ | (11 | ) | $ | 55 | $ | 42 | |||||||
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The Notes to the Condensed Combined Financial Statements are an integral part of these statements.
1
Condensed Combined Balance Sheets (unaudited)
Ally Financial Inc. - International Operations
($ in millions) |
June 30, 2014 | December 31, 2013 | ||||||
Assets |
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Investment in equity method investee |
$ | 574 | $ | 517 | ||||
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Total assets |
$ | 574 | $ | 517 | ||||
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Invested equity |
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Parents net investment |
$ | 536 | $ | 470 | ||||
Accumulated other comprehensive income |
38 | 47 | ||||||
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Total invested equity |
$ | 574 | $ | 517 | ||||
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The Notes to the Condensed Combined Financial Statements are an integral part of these statements.
2
Condensed Combined Statements of Changes in Invested Equity (unaudited)
Ally Financial Inc. - International Operations
($ in millions) |
Parents net investment |
Accumulated other comprehensive income (loss) |
Total invested equity |
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Balance at January 1, 2013 |
$ | 3,550 | $ | 6 | $ | 3,556 | ||||||
Net income |
131 | | 131 | |||||||||
Capital contributions |
2 | | 2 | |||||||||
Dividends to Ally Financial Inc. |
(27 | ) | | (27 | ) | |||||||
Disposal of business |
(2,654 | ) | 117 | (2,537 | ) | |||||||
Other comprehensive loss, net of tax |
| (89 | ) | (89 | ) | |||||||
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Balance at June 30, 2013 |
$ | 1,002 | $ | 34 | $ | 1,036 | ||||||
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Balance at January 1, 2014 |
$ | 470 | $ | 47 | $ | 517 | ||||||
Net income |
64 | | 64 | |||||||||
Capital contributions |
2 | | 2 | |||||||||
Other comprehensive loss, net of tax |
| (9 | ) | (9 | ) | |||||||
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Balance at June 30, 2014 |
$ | 536 | $ | 38 | $ | 574 | ||||||
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The Notes to the Condensed Combined Financial Statements are an integral part of these statements.
3
Condensed Combined Statements of Cash Flows (unaudited)
Ally Financial Inc. - International Operations
Six months ended June 30, ($ in millions) |
2014 | 2013 | ||||||
Operating activities |
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Net cash provided by operating activities |
$ | | $ | 101 | ||||
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Investing activities |
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Net increase in finance receivables and loans |
| (591 | ) | |||||
Purchases of operating lease assets |
| (11 | ) | |||||
Disposals of operating lease assets |
| 83 | ||||||
Net change in restricted cash related to variable interest entity |
| (99 | ) | |||||
Sale of business units |
| (440 | ) | |||||
Other, net |
| (38 | ) | |||||
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Net cash used in investing activities |
| (1,096 | ) | |||||
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Financing activities |
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Net change in short-term borrowings - third party |
| 365 | ||||||
Proceeds from issuance of long-term debt - third party |
| 2,637 | ||||||
Repayments of long-term debt |
| (2,324 | ) | |||||
Net change in related party debt with Ally Financial Inc. |
| (404 | ) | |||||
Other, net |
| (1 | ) | |||||
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Net cash used in financing activities |
| 273 | ||||||
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Effect of exchange-rate changes on cash and cash equivalents |
| 11 | ||||||
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Net decrease in cash and cash equivalents |
| (711 | ) | |||||
Cash and cash equivalents at beginning of period |
| 888 | ||||||
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Cash and cash equivalents at end of period |
$ | | $ | 177 | ||||
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The Notes to the Condensed Combined Financial Statements are an integral part of these statements.
4
Notes to Condensed Combined Financial Statements (unaudited)
Ally Financial Inc. - International Operations
1. | Description of Business, Basis of Presentation, and Significant Accounting Policies |
Ally Financial Inc. and its affiliated companies (formerly GMAC Inc. and referred to herein as Ally or AFI) is an independent, financial services firm. Founded in 1919, Ally is a leading automotive financial services company with over 90 years of experience providing a broad array of financial products and services to automotive dealers and their customers.
On November 21, 2012, Ally announced that it had reached agreements to sell substantially all of its remaining international automotive finance operations to General Motors Financial Company, Inc. (GMF). The agreements include sales of Allys international automotive finance operations in 14 countries across Asia, Europe and South America (AFI-IO) whose focus has been on five core markets: China (through our joint venture, GMAC-SAIC Automotive Finance Company Limited (GMAC-SAIC)), Brazil, Mexico, Germany and the United Kingdom.
On April 1, 2013, AFI completed the disposal of substantially all of the European and Latin American automotive finance operations except for France, Portugal and Brazil; on June 1, 2013 AFI completed the disposal of our operations in France and Portugal; and on October 1, 2013 AFI completed the disposal of our operations in Brazil. The aggregate consideration for these disposals was $3.3 billion, which was paid to our parent.
The agreed China transaction is subject to customary regulatory review and approval as well as other closing conditions including the requirements to deliver carve-out financial statements of AFI-IO. The accompanying special purpose financial statements represent the combined financial position and results of operations for the entities governed under the agreements of sale (herein referred to as the Carve-out Financial Statements). Within these financial statements we, us, the Company, and our refers to AFI-IO. AFI-IO provides financial services to automotive dealer customers, predominately focusing on financing automobiles manufactured by General Motors Company (GM).
Combination and Basis of Presentation
The Carve-out Financial Statements include the combined financial position and results of operations for AFI-IO entities during the periods owned by AFI. The financial information for 2013 recorded within the Condensed Combined Statement of Comprehensive Income represents three months of our operations in Europe, Latin America and China, The Condensed Combined Balance Sheet at June 30, 2014 and December 31, 2013, includes only the investment in China.
The Carve-out Financial Statements include our accounts after eliminating all significant intercompany balances and transactions and include all variable interest entities (VIEs) in which we were the primary beneficiary. Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP).
The financial statements of entities that operate outside of the United States generally are measured using the local currency as the functional currency. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at quarter-end exchange rates and the results of operations and cash flows are determined using approximate weighted average exchange rates for the period. Translation adjustments are related to foreign subsidiaries using local currency as their functional currency and are reported as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains or losses are recorded directly to the Condensed Combined Statement of Comprehensive Income, regardless of whether such amounts are either realized or unrealized. We may elect to enter into foreign-currency derivatives to mitigate our exposure to changes in foreign-exchange rates.
The Carve-out Financial Statements reflect the assets, liabilities, revenues and expenses directly attributable to AFI-IO, as well as allocations deemed reasonable by management, to present the financial position, results of operations, changes in invested equity and cash flows on a stand-alone basis. The principal allocation methodologies have been described below. The financial information included herein may not necessarily reflect the financial position, results of operations, changes in invested equity and cash flows of the AFI-IO in the future or what they would have been had AFI-IO been a separate, stand-alone entity during the periods presented.
AFI provided certain corporate services to us, and costs associated with these functions have been allocated to us. These allocations include costs related to corporate services, such as executive management, information technology, legal, finance and accounting, investor relations, human resources, risk management, tax, treasury, and other services. The allocations represent costs for services directly benefiting AFI-IO. A service is a benefit if it improves or has the potential to improve the operations or profitability of the benefited entity. An activity is generally considered to provide a benefit if the party in receipt of the services would have performed the same or similar activity for itself or would be willing to pay a third party to perform the same or similar activity. The total amount of these allocations from AFI were approximately $2 million and $23 million for the six months ended June 30, 2014 and 2013, respectively. These cost allocations are reflected within other operating expenses in our Condensed Combined Statement of Comprehensive Income and classified as Allocated corporate overhead expense in Note 7. Management believes the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented.
The allocations may not reflect the expense we would have incurred as a stand-alone company for the periods presented. Actual costs that we may have incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in certain areas.
The Parents net investment represents AFIs interest in our recorded net assets. The Parents net investment balance represents the cumulative net investment made by AFI in us through that date, including any prior net income or loss or other comprehensive income (loss) attributed to us and contributions received from or distributions made to AFI. Certain transactions between us and other related parties that are wholly-owned subsidiaries of AFI, including allocated expenses and settlement of intercompany transactions, are also included in the Parents net investment.
5
Notes to Condensed Combined Financial Statements (unaudited)
Ally Financial Inc. - International Operations
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and that affect income and expenses during the reporting period and related disclosures. In developing the estimates and assumptions, management uses all available evidence; however, actual results could differ because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes.
2. | Other Income, Net of Losses |
Details of other income, net of losses, were as follows.
Three months ended June 30, |
Six months ended June 30, |
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($ in millions) |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Insurance commissions income (a) |
$ | | $ | 5 | $ | | $ | 21 | ||||||||
Late charges and other administrative fees |
| 6 | | 15 | ||||||||||||
Other income, net of losses |
| 9 | | 16 | ||||||||||||
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Total other income, net of losses |
$ | | $ | 20 | $ | | $ | 52 | ||||||||
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(a) | Primarily represents commissions earned from third party insurance companies related to insurance policies purchased by retail finance customers. |
3. | Other Operating Expenses |
Details of other operating expenses were as follows.
Three months ended June 30, |
Six months ended June 30, |
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($ in millions) |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Allocated corporate overhead expense (a) |
$ | 1 | $ | 7 | $ | 2 | $ | 23 | ||||||||
Technology and communications |
| 5 | | 21 | ||||||||||||
Local non-income taxes |
| 10 | | 29 | ||||||||||||
Professional services |
| 6 | | 15 | ||||||||||||
Other operating expenses |
| 18 | | 62 | ||||||||||||
Settlement of non-income tax contingency |
| | | (35 | ) | |||||||||||
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Total other operating expenses |
$ | 1 | $ | 46 | $ | 2 | $ | 115 | ||||||||
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(a) | Refer to Note 7. |
4. | Finance Receivables and Loans, Net |
The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans.
Three months ended June 30, 2013 ($ in millions) |
Consumer automobile |
Commercial | Total | |||||||||
Allowance at April 1, 2013 |
$ | 157 | $ | 20 | $ | 177 | ||||||
Charge-offs |
(25 | ) | | (25 | ) | |||||||
Recoveries |
7 | | 7 | |||||||||
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Net charge-offs |
(18 | ) | | (18 | ) | |||||||
Provision for loan losses |
24 | 1 | 25 | |||||||||
Other (a) |
(75 | ) | (19 | ) | (94 | ) | ||||||
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Allowance at June 30, 2013 |
$ | 88 | $ | 2 | $ | 90 | ||||||
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(a) | Balance includes $66 million and $19 million for consumer automobile and commercial, respectively, for entities sold to GMF as of April 1, 2013 and June 1, 2013. |
6
Notes to Condensed Combined Financial Statements (unaudited)
Ally Financial Inc. - International Operations
Six months ended June 30, 2013 ($ in millions) |
Consumer automobile |
Commercial | Total | |||||||||
Allowance at January 1, 2013 |
$ | 155 | $ | 23 | $ | 178 | ||||||
Charge-offs |
(68 | ) | (1 | ) | (69 | ) | ||||||
Recoveries |
21 | 1 | 22 | |||||||||
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Net charge-offs |
(47 | ) | | (47 | ) | |||||||
Provision for loan losses |
54 | (2 | ) | 52 | ||||||||
Other (a) |
(74 | ) | (19 | ) | (93 | ) | ||||||
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Allowance at June 30, 2013 |
$ | 88 | $ | 2 | $ | 90 | ||||||
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Allowance for loan losses |
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Ending balance |
$ | 88 | $ | 2 | $ | 90 | ||||||
Individually evaluated for impairment |
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Collectively evaluated for impairment |
88 | 2 | 90 | |||||||||
Finance receivables and loans, net |
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Ending balance |
3,186 | 767 | 3,953 | |||||||||
Individually evaluated for impairment |
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Collectively evaluated for impairment |
3,186 | 767 | 3,953 |
(a) | Balance includes $66 million and $19 million for consumer automobile and commercial, respectively, for entities sold to GMF as of April 1, 2013 and June 1, 2013. |
5. | Derivative Instruments and Hedging Activities |
We entered into derivative instruments, including interest rate and foreign-currency swaps and options in connection with our market risk management activities. Derivative instruments were used to manage interest rate risk relating to specific groups of assets and liabilities, including debt. In addition, we used foreign exchange contracts to mitigate foreign-currency risk associated with foreign-currency-denominated debt. Our primary objective for utilizing derivative financial instruments was to manage market risk volatility associated with interest rate and foreign-currency risks related to the assets and liabilities.
Interest Rate Risk
We executed interest rate swaps to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate and certain variable-rate instruments to a fixed rate. We monitored our mix of fixed- and variable-rate debt in relation to the rate profile of our assets. When it is cost-effective to do so, we entered into interest rate swaps to achieve our desired mix of fixed- and variable-rate debt.
We entered into economic hedges to mitigate exposure for the following categories.
| Debt We did not apply hedge accounting to our derivative portfolio held to mitigate interest rate risk associated with our debt portfolio. Typically, the significant terms of the interest rate swaps match the significant terms of the underlying debt resulting in an effective conversion of the rate of the related debt. |
| Other We entered into interest rates swaps to economically hedge our net fixed versus variable interest rate exposure. |
Foreign Currency Risk
We entered into derivative financial instruments to mitigate the risk associated with variability in cash flows related to foreign-currency financial instruments. Currency swaps were used to economically hedge foreign exchange exposure on foreign-currency-denominated debt by converting the funding currency to the same currency of the assets being financed. Similar to our interest rate derivatives, the swaps were generally entered into or traded concurrent with the debt issuance with the terms of the swap matching the terms of the underlying debt.
We have not elected to treat any foreign-currency derivatives as hedges for accounting purposes principally because the changes in the fair values of the foreign-currency swaps are substantially offset by the foreign-currency revaluation gains and losses of the underlying assets and liabilities.
7
Notes to Condensed Combined Financial Statements (unaudited)
Ally Financial Inc. - International Operations
Condensed Combined Statement of Comprehensive Income Presentation
The following table summarizes the location and amounts of gains and losses on derivative instruments reported in our Condensed Combined Statement of Comprehensive Income.
Three months ended June 30, |
Six months ended June 30, |
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($ in millions) |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Economic derivatives |
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Gain (loss) recognized in earnings on derivatives |
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Interest rate contracts |
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Other income, net of losses |
$ | | $ | | $ | | $ | (7 | ) | |||||||
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Total interest rate contracts |
| | | (7 | ) | |||||||||||
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Foreign exchange contracts (a) |
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Interest on long-term debt |
| 3 | | 36 | ||||||||||||
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Total foreign exchange contracts |
| 3 | | 36 | ||||||||||||
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Gain recognized in earnings on derivatives |
$ | | $ | 3 | $ | | $ | 29 | ||||||||
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(a) | Amounts exclude gains and losses related to the revaluation of the related foreign-denominated debt or receivable. Gains of $34 million were recognized for the period ended June 30, 2013. |
6. | Contingencies and Other Risks |
In the normal course of business, we enter into transactions that expose us to varying degrees of risk.
Legal Proceedings
We are subject to potential liability under various governmental proceedings, claims, and legal actions that are pending or otherwise asserted against us. We are named as defendants in a number of legal actions, and we are involved in governmental proceedings arising in connection with our respective businesses. Some of the pending actions purport to be class actions, 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.
Other Contingencies
We are subject to potential liability under various other exposures including tax, nonrecourse loans, self-insurance, and other miscellaneous contingencies. We establish reserves for these contingencies when the item becomes probable and the costs can be reasonably estimated. The actual costs of resolving these items may be substantially higher or lower than the amounts reserved for any one item. Based on information currently available, it is the opinion of management that the eventual outcome of these items will not have a material adverse impact on our results of operations, financial position, or cash flows.
7. | Related Party |
Pursuant to AFIs Bylaws dated December 30, 2009 (the Bylaws), we must, subject to certain limited exceptions, conduct all transactions with our affiliates, current or former officers or directors, or any of their respective family members on terms that are fair and reasonable and no less favorable to AFI-IO than we would obtain in a comparable arms-length transaction with an independent third party.
Related party transactions are primarily settled in cash. Certain related party transactions are settled by non-cash capital contributions or dividends. AFI, as a parent, has provided guarantees on certain AFI-IO loan obligations.
A summary of the income statement effect of transactions with AFI follows:
Three months ended June 30, |
Six months ended June 30, |
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($ in millions) |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net financing revenue |
||||||||||||||||
Interest expense on loans with Ally Financial Inc. |
$ | | $ | | $ | | $ | 20 | ||||||||
Guarantee fees expense |
| | | 5 | ||||||||||||
Other expense |
||||||||||||||||
Allocated corporate overhead expense (Refer to Note 1) |
1 | 7 | 2 | 23 |
8
Notes to Condensed Combined Financial Statements (unaudited)
Ally Financial Inc. - International Operations
8. | 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. 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.
9. | Subsequent Events |
We have evaluated subsequent events through September 9, 2014, the date our financial statements were issued.
9
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On November 21, 2012, General Motors Financial Company, Inc. (GM Financial) and Ally Financial Inc. (Ally) announced agreements to acquire Allys auto finance and financial services operations in Europe and Latin America and its non-controlling 40% equity interest in GMAC-SAIC Automotive Finance Company Limited (GMAC-SAIC), which conducts auto finance and financial services business in China (collectively, the International Operations).
On April 1, 2013, GM Financial and Ally completed a transaction under which GM Financial acquired Allys equity interests in its top-level holding companies that comprise substantially all of Allys auto finance and financial services business in Europe other than in France and Portugal and in Latin America other than Brazil, pursuant to the Purchase and Sale Agreement entered into on November 21, 2012, as subsequently amended and restated on February 22, 2013 (the PSA). The purchase price was approximately $2.4 billion.
On May 14, 2013, GM Financial issued and sold $1.0 billion in aggregate principal amount of 2.75% Senior Notes due 2016 (the 2016 Notes), $750 million in aggregate principal amount of 3.25% Senior Notes due 2018 (the 2018 Notes) and $750 million in aggregate principal amount of 4.25% Senior Notes due 2023 (the 2023 Notes and, together with the 2016 Notes and the 2018 Notes, the Notes).
On June 3, 2013, GM Financial and Ally completed a transaction under which GM Financial acquired, effective as of June 1, 2013, Allys equity interests in its companies that comprise Allys auto finance and financial services business in France and Portugal. The purchase price was approximately $150 million.
On October 1, 2013, GM Financial and Ally completed a transaction under which GM Financial acquired Allys equity interests in its companies that comprise Allys auto finance and financial services business in Brazil (together, with Ally businesses acquired on April 1, 2013, and June 3, 2013, the Previously Acquired International Operations), pursuant to the PSA. The purchase price was approximately $700 million.
As of September 9, 2014, the acquisition of the non-controlling 40% equity interest in GMAC-SAIC is expected to be completed, subject to certain regulatory and other approvals, in 2014 or as soon as practicable thereafter. The non-controlling 40% equity interest in GMAC-SAIC to be acquired is referred to in this Unaudited Pro Forma Condensed Combined Financial Information section as the China International Operations.
GM Financial is the wholly-owned captive finance subsidiary of General Motors Company (GM). Ally has historically provided a majority of the financing for GMs dealers and a significant portion of the financing for its customers in the U.S. and Canada and other major international markets where it operates including through the operations that are the subject of the transactions described herein. Historically, Ally has been GMs primary financing partner for incentivized retail financing programs in its major markets. The purchase price was determined based on arms length negotiations.
The pro forma financial information set forth herein gives effect to the following events (collectively, the Transactions):
1) | The consummation of the Previously Acquired International Operations, which occurred on April 1, 2013, June 1, 2013, and October 1, 2013; |
2) | The consummation of the probable future acquisition of Allys non-controlling 40% interest in GMAC-SAIC, partially funded by a capital contribution from GM of $0.7 billion; |
3) | The repayment of certain assumed debt obligations in the amount of $1.4 billion, which occurred in April 2013 and June 2013 subsequent to the closings of certain of the Previously Acquired International Operations that occurred on April 1, 2013 and June 1, 2013; and |
4) | The issuance of the Notes. |
The unaudited pro forma condensed combined financial information included herein is derived from the historical financial statements of GM Financial and the International Operations and include adjustments which give effect to events that are (i) directly attributable to the Transactions, (ii) expected to have continued impact on GM Financial, (iii) factually supportable, and (iv) not reflected in the historical financial statements as of and for the period ended June 30, 2014. Refer to the section entitled Notes to Unaudited Pro Forma Condensed Combined Financial Information.
The unaudited pro forma condensed combined balance sheet includes certain pro forma adjustments to reflect the estimated impact of the consummation of the probable future acquisition of Allys non-controlling
1
40% interest in GMAC-SAIC, assuming this acquisition occurred on June 30, 2014. There are no pro forma adjustments related to the acquisitions of the Previously Acquired International Operations and issuance of the Notes, as these transactions were consummated prior to June 30, 2014 and the effects of these transactions are reflected in the historical balance sheet as of June 30, 2014 included within GM Financials Form 10-Q for the corresponding period.
The unaudited pro forma condensed combined statements of income for the year ended December 31, 2013 and the six months ended June 30, 2014 includes certain pro forma adjustments to reflect the impact of the consummated acquisitions of the Previously Acquired International Operations, the issuance of the Notes, and the consummation of the probable future acquisition of Allys non-controlling 40% interest in GMAC-SAIC, assuming these transactions occurred on January 1, 2013, to the extent the impact of the acquisitions of the Previously Acquired International Operations and issuance of the Notes have not been reflected in the historical statement of income for the year ended December 31, 2013 and the six months ended June 30, 2014 included within GM Financials Form 10-K and Form 10-Q for the corresponding periods, respectively.
GM Financial has not finalized its purchase price allocation with respect to the Previously Acquired International Operations assets acquired and liabilities assumed at their fair values. Adjustments and amounts reflected within the unaudited pro forma condensed combined financial information related to the China International Operations are managements estimates based on available information. Accordingly, as described in Note 2 below, the unaudited pro forma condensed combined financial statements include preliminary allocations of the purchase price to reflect the estimated fair values of certain assets and liabilities expected to be acquired in connection with the consummation of the probable future acquisition of Allys non-controlling 40% interest in GMAC-SAIC.
The unaudited pro forma condensed combined financial information:
| do not purport to represent what the consolidated results of operations actually would have been if the Transactions had occurred on January 1, 2013 or what those results will be for any future periods or what the consolidated balance sheet would have been if the Transactions had occurred on June 30, 2014 or what the consolidated balance sheet will be on any future date; and |
| have not been adjusted to reflect any matters not directly attributable to implementing the acquisition of the International Operations. No adjustments, therefore, have been made for actions, such as any of GM Financials integration plans related to the International Operations. In connection with the plan to integrate the International Operations, GM Financial anticipates that non-recurring charges, such as costs associated with systems implementation and other costs related to exit or disposal activities, could be incurred. These charges could affect the results of operations of GM Financial in the period in which they are recorded. The unaudited pro forma condensed combined financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the acquisition of the International Operations, as they are non-recurring in nature and were not determinable at the time that the unaudited pro forma condensed combined financial statements were prepared. |
2
General Motors Financial Company, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2014
The following preliminary unaudited pro forma condensed combined balance sheet combines the historical balance sheets of the China International Operations and GM Financial on an acquisition accounting basis assuming that the acquisition of the China International Operations was completed on June 30, 2014.
(In millions) | GM Financial | International Operations, Reclassified (Note 5) |
Purchase Accounting and Other Adjustments |
Pro Forma Combined |
||||||||||||||
Assets |
||||||||||||||||||
Cash and cash equivalents |
$ | 1,412 | $ | | $ | (289 | ) | A | $ | 1,120 | ||||||||
(3 | ) | B | ||||||||||||||||
Finance receivables, net |
31,545 | | | 31,545 | ||||||||||||||
Restricted cash |
2,205 | | | 2,205 | ||||||||||||||
Property and equipment, net |
150 | | | 150 | ||||||||||||||
Investment in equity method investee |
| 574 | 415 | C | 989 | |||||||||||||
Leased vehicles, net |
4,748 | | | 4,748 | ||||||||||||||
Deferred income taxes |
433 | | | 433 | ||||||||||||||
Goodwill |
1,245 | | | 1,245 | ||||||||||||||
Related party receivables |
185 | | | 185 | ||||||||||||||
Other assets |
436 | | | 436 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 42,359 | $ | 574 | $ | 123 | $ | 43,056 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||
Liabilities: |
||||||||||||||||||
Secured debt |
$ | 25,006 | $ | | $ | | $ | 25,006 | ||||||||||
Unsecured debt |
7,596 | | | 7,596 | ||||||||||||||
Accounts payable and accrued expenses |
984 | | | 984 | ||||||||||||||
Deferred income |
249 | | | 249 | ||||||||||||||
Deferred income taxes |
12 | | | 12 | ||||||||||||||
Taxes payable |
293 | | | 293 | ||||||||||||||
Related party taxes payable |
891 | | | 891 | ||||||||||||||
Related party payable |
432 | | | 432 | ||||||||||||||
Other liabilities |
229 | | | 229 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
35,692 | | | 35,692 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Shareholders Equity: |
||||||||||||||||||
Additional paid-in capital |
4,793 | 536 | (536 | ) | D | 5,493 | ||||||||||||
700 | E | |||||||||||||||||
Accumulated other comprehensive income/(loss) |
65 | 38 | (38 | ) | F | 65 | ||||||||||||
Retained earnings |
1,809 | (3 | ) | B | 1,806 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders equity |
6,667 | 574 | 123 | 7,364 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and shareholders equity |
$ | 42,359 | $ | 574 | $ | 123 | $ | 43,056 | ||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined financial information
3
General Motors Financial Company, Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 2013
The following preliminary unaudited pro forma condensed combined statement of income combines the historical statements of income of the International Operations and GM Financial on an acquisition accounting basis assuming that the Transactions were completed on January 1, 2013.
(In millions) | GM Financial | International Operations, Reclassified (Note 5) |
Purchase Accounting and Other Adjustments |
Pro Forma Combined |
||||||||||||||
Revenue |
||||||||||||||||||
Finance charge income |
$ | 2,563 | $ | 716 | $ | 48 | G | $ | 3,327 | |||||||||
Leased vehicle income |
595 | 1 | | 596 | ||||||||||||||
Other income |
186 | 96 | 18 | H | 300 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
3,344 | 813 | 66 | 4,223 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Costs and expenses |
||||||||||||||||||
Salaries and benefits |
448 | 58 | | 506 | ||||||||||||||
Other operating expenses |
322 | 140 | 19 | I | 481 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
770 | 198 | 19 | 987 | ||||||||||||||
Leased vehicle expenses |
453 | 1 | 454 | |||||||||||||||
Provision for loan losses |
475 | 71 | 87 | G | 633 | |||||||||||||
Interest expense |
721 | 412 | 14 | J | 1,160 | |||||||||||||
(4 | ) | K | ||||||||||||||||
12 | L | |||||||||||||||||
5 | M | |||||||||||||||||
Acquisition and integration expenses |
42 | | (42 | ) | N | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
2,461 | 682 | 91 | 3,234 | |||||||||||||||
Income before income taxes |
883 | 131 | (25 | ) | 989 | |||||||||||||
Income tax provision (credit) |
317 | 43 | (9 | ) | O | 351 | ||||||||||||
Equity method investee income, net of taxes |
| 118 | | 118 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ | 566 | $ | 206 | $ | (16 | ) | $ | 756 | |||||||||
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined financial information
4
General Motors Financial Company, Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Six Months Ended June 30, 2014
The following preliminary unaudited pro forma condensed combined statement of income combines the historical statements of income of the International Operations and GM Financial on an acquisition accounting basis assuming that the Transactions were completed on January 1, 2013.
(In millions) | GM Financial | International Operations, Reclassified (Note 5) |
Purchase Accounting and Other Adjustments |
Pro Forma Combined |
||||||||||||||
Revenue |
||||||||||||||||||
Finance charge income |
$ | 1,712 | $ | | $ | 3 | G | $ | 1,715 | |||||||||
Leased vehicle income |
438 | | | 438 | ||||||||||||||
Other income |
138 | | (4 | ) | H | 134 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
2,288 | | (1 | ) | 2,287 | ||||||||||||||
Costs and expenses |
||||||||||||||||||
Salaries and benefits |
290 | | | 290 | ||||||||||||||
Other operating expenses |
259 | 2 | (11 | ) | I | 250 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
549 | 2 | (11 | ) | 540 | |||||||||||||
Leased vehicle expenses |
335 | | | 335 | ||||||||||||||
Provision for loan losses |
248 | | | 248 | ||||||||||||||
Interest expense |
669 | | (2 | ) | K | 664 | ||||||||||||
(2 | ) | L | ||||||||||||||||
(1 | ) | M | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
1,801 | 2 | (16 | ) | 1,787 | ||||||||||||||
Income before income taxes |
487 | (2 | ) | 15 | 500 | |||||||||||||
Income tax provision (credit) |
167 | | 5 | O | 172 | |||||||||||||
Equity method investee income, net of taxes |
| 66 | | 66 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ | 320 | $ | 64 | $ | 10 | $ | 394 | ||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined financial information
5
General Motors Financial Company, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
For the Period Ended June 30, 2014
Note 1Preliminary Purchase Accounting Allocation for the China International Operations
The unaudited pro forma condensed combined financial information for the Transactions includes the unaudited pro forma condensed combined balance sheet as of June 30, 2014, assuming the acquisition of the China International Operations occurred on June 30, 2014 on an acquisition accounting basis. The unaudited condensed combined statement of income for the year ended December 31, 2013 and the six months ended June 30, 2014 assumes that the Transactions occurred on January 1, 2013 on an acquisition accounting basis.
The acquisition of the China International Operations is being accounted for using the acquisition method of accounting; accordingly, GM Financials cost to acquire the China International Operations will be allocated to the assets, including identifiable intangible assets, and liabilities of the China International Operations at their respective estimated fair values as of acquisition date. The table below reflects the preliminary allocation of purchase price to the acquired assets and liabilities based on preliminary estimates of fair value.
Preliminary Purchase Price Allocation
Unaudited Condensed Combined Pro Forma Financial Informationas of June 30, 2014
(In millions) | China International Operations |
|||
Total Purchase Price for the China International Operations |
$ | 989 | ||
Net Book Value of the China International Operations |
574 | |||
Preliminary Allocation of Purchase Price |
||||
Pre-tax adjustments to reflect acquired assets and liabilities at fair value |
||||
Equity method investment |
415 | |||
|
|
|||
Pre-tax total adjustments |
415 | |||
Deferred income taxes |
| |||
After-tax total adjustment |
$ | 415 | ||
|
|
|||
Fair value of net assets acquired |
989 | |||
|
|
|||
Preliminary goodwill resulting from the acquisition of the China International Operations |
$ | | ||
|
|
The final allocation of the purchase price will be determined after completion of the acquisition the China International Operations and final analysis to determine the fair values of the International Operations tangible and intangible assets and liabilities.
The purchase price for the Previously Acquired International Operations was approximately $3.3 billion. The purchase price was allocated to the identifiable assets and liabilities assumed based upon their estimated fair values at the date of the acquisitions. The excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill in the amount is $138 million, but is subject to further adjustment pending the closing of the China International Operations.
Note 2Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information related to the Transactions is included as of June 30, 2014 and for the year and six month periods ended December 31, 2013 and June 30, 2014, respectively. The acquisition is being accounted for under the purchase method of accounting in accordance with Accounting Standards Codification 805, Business Combinations.
The unaudited pro forma condensed combined financial information as of June 30, 2014 and for the year and six months ended December 31, 2013 and June 30, 2014, respectively includes preliminary estimated adjustments to record the assets and liabilities of the International Operations at their respective estimated fair
6
values and represents managements estimates based on available information. Management utilized various valuation methodologies and models which it believes are reasonable. However other market participants could utilize different methodologies and models to arrive at different valuations. The pro forma adjustments included herein may be revised as additional information becomes available and additional analyses are performed. The final allocation of the purchase price will be determined after completion of the acquisition of all of the China International Operations and final analysis to determine the fair values of the International Operations tangible and intangible assets and liabilities.
Certain amounts in the historical consolidated financial statements of the International Operations have been reclassified to conform to GM Financials classification; refer to Note 5 Reclassification Adjustments for further information.
The unaudited pro forma condensed combined financial information is presented in accordance with the Securities Exchange Act of 1934, as amended, for illustrative purposes only and does not indicate the results of operations or the combined financial position that would have resulted had the Transactions been completed at the beginning for the applicable period presented, nor the impact of possible business model changes as a result of current market conditions which would impact revenues, performance of finance receivables, expense efficiencies, asset dispositions, and other factors.
Additionally, the unaudited pro forma condensed combined financial information is not indicative of the results of operations in future periods or the future financial position of the combined businesses.
Note 3Transactions Not Completed as of the Date of this Filing
As of September 9, 2014, the acquisition by GM Financial of Allys non-controlling 40% equity interest in GMAC-SAIC remained subject to certain regulatory and other approvals. The acquisition of the non-controlling 40% equity interest in GMAC-SAIC is expected to be completed in 2014 or as soon as practicable thereafter. The pro forma financial information gives effect to the probable future acquisition of Allys non-controlling 40% interest in GMAC-SAIC.
Note 4Purchase Accounting and Acquisition Adjustment Descriptions
(A) | Adjustments to reflect the estimated cash payment of $1.0 billion to acquire the China International Operations as of June 30, 2014, as well as an adjustment to record a $0.7 billion capital contribution from GM. |
(Dollars in millions) | Amount | |||
Capital Contribution from GM |
$ | 700 | ||
Less: Amount paid to Ally for the China International Operations at closing |
(989 | ) | ||
|
|
|||
Net decrease to cash and cash equivalents |
(289 | ) |
(B) | Adjustments to reflect the payment of incremental transaction costs expected to be incurred in connection with the acquisition of the International Operations. |
(C) | Adjustment totaling approximately $415 million to record the non-controlling equity investment in GMAC-SAIC at fair value as of June 30, 2014. This adjustment reflects the estimated fair value of the equity interest in GMAC-SAIC Automotive Finance Company as of June 30, 2014. This adjustment does not affect the income or loss earned in connection with the equity interest for the six months ended June 30, 2014 or the year ended December 31, 2013. Assumptions utilized in determining the preliminary fair value include estimated future cash flows and discount rates, among others. These assumptions could vary from those used in the final valuation. |
(D) | Adjustment to eliminate the China International Operations historical net parent investment. |
(E) | Adjustment to record a $0.7 billion capital contribution from GM Financials parent, GM. This contribution will be used to fund the acquisition of the China International Operations. The adjustment does not affect the income statement for the year ended December 31, 2013 or the six months ended June 30, 2014. |
(F) | Adjustment to eliminate the carrying value of the China International Operations accumulated other comprehensive income. |
(G) | Adjustments to increase finance charge income of $48 million for the year ended December 31, 2013 and to increase finance charge income of $3 million for the six months ended June 30, 2014, related to the Previously Acquired International Operations. These adjustments are based on the effective interest rate amortization method and gives effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. In addition, this adjustment increases provision expense by $87 million for the year ended December 31, 2013, to reflect loss recognition associated with the acquired finance receivables with no evidence of credit deterioration at acquisition. |
7
(H) | Adjustments to reflect an increase to other income of $18 million for the year ended December 31, 2013 and a decrease to other income of $4 million for the six months ended June 30, 2014 with the total amount due to the write off at acquisition of deferred commissions for a specific product offering within the Previously Acquired International Operations. These adjustments are based on a straight line amortization method and gives effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. |
(I) | Adjustments to the income statement for the year ended December 31, 2013 include $19 million increase of expected amortization and for the six months ended June 30, 2014 includes $11 million decrease of expected amortization associated with dealer networks and business licenses of the Previously Acquired International Operations, which have estimated useful lives of between one and five years. These adjustments give effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. |
(J) | Adjustments totaling $14 million to interest expense for the year ended December 31, 2013. This adjustment reflects the interest expense impact of the issuance of the Notes and the repayment of certain debt obligations assumed in connection with acquisition of the International Operations and give effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. Refer to detail below: |
(Dollars in millions) | Balance | Interest Rate | December 31, 2013 | |||||||||
Instrument |
||||||||||||
Assumed IndebtednessApril and June Repayments |
$ | (1,416 | ) | 5.00 | % | $ | (19 | ) | ||||
Senior Notes |
2,500 | 3.35 | % | 31 | ||||||||
Amortization of issuance costsSenior Notes |
25 | n/a | 2 | |||||||||
|
|
|||||||||||
Interest Expense Adjustment |
$ | 14 | ||||||||||
|
|
(K) | Adjustment to reflect a decrease to interest expense of $4 million for the year ended December 31, 2013, and for the six months ended June 30, 2014 include $2 million decrease to interest expense with the total amount due to the Previously Acquired International Operations unamortized debt issuance costs at acquisition. This adjustment is based on the effective interest rate amortization method and gives effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. |
(L) | Adjustments to reflect an increase to interest expense of $12 million for the year ended December 31, 2013 and for the six months ended June 30, 2014 includes $2 million decrease to interest expense with the total amount due to the Previously Acquired International Operations fair value adjustment for secured debt held at acquisition. These adjustments are based on the effective interest rate amortization method and give effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. |
(M) | Adjustments to reflect an increase to interest expense by $5 million for the year ended December 31, 2013 and for the six months ended June 30, 2014 includes $1 million decrease to interest expense with the total amount due to the Previously Acquired International Operations fair value adjustment for unsecured debt held at acquisition. These adjustments are based on the effective interest rate amortization method and give effect to the income statement to the extent these effects are not recorded in the historical financial statements of GM Financial. |
(N) | Adjustments to eliminate nonrecurring costs directly relating to the Transactions included in the historical income statements of GM Financial. |
(O) | Adjustments to record estimated incremental income tax provision utilizing GM Financials statutory rate of 35%, recognized as a result of purchase accounting adjustments. |
8
Note 5Reclassification Adjustments
Unaudited Pro Forma Condensed Combined Balance Sheet: International Operations Reporting Reclassification Adjustments
As of June 30, 2014
(In millions) | GM Financial |
International Operations |
Reporting Reclassification Adjustments |
International Operations Reclassified |
||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents |
$ | 1,412 | $ | | $ | | $ | | ||||||||
Finance receivables, net |
31,545 | | | | ||||||||||||
Restricted cash |
2,205 | | | | ||||||||||||
Property and equipment, net |
150 | | | | ||||||||||||
Investment in equity method investee |
574 | | 574 | |||||||||||||
Leased vehicles, net |
4,748 | | | | ||||||||||||
Deferred income taxes |
433 | | | | ||||||||||||
Goodwill |
1,245 | | | | ||||||||||||
Related party receivables |
185 | | | | ||||||||||||
Other assets |
436 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | 42,359 | $ | 574 | $ | | $ | 574 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities and Shareholders Equity |
||||||||||||||||
Liabilities: |
||||||||||||||||
Secured debt |
$ | 25,006 | $ | | $ | | $ | | ||||||||
Unsecured debt |
7,596 | | | | ||||||||||||
Accounts payable and accrued expenses |
984 | | | | ||||||||||||
Deferred income |
249 | | | | ||||||||||||
Deferred income taxes |
12 | | | | ||||||||||||
Taxes payable |
293 | | | | ||||||||||||
Related party taxes payable |
891 | | | | ||||||||||||
Related party payable |
432 | | | | ||||||||||||
Other liabilities |
229 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
35,692 | | | | ||||||||||||
Shareholders equity |
||||||||||||||||
Parents net investment |
| 536 | (536 | )(1) | | |||||||||||
Additional paid-in capital |
4,793 | | 536 | (1) | 536 | |||||||||||
Accumulated other comprehensive income/loss |
65 | 38 | | 38 | ||||||||||||
Retained earnings |
1,809 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total shareholders equity |
6,667 | 574 | | 574 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities and shareholders equity |
$ | 42,359 | $ | 574 | $ | | $ | 574 | ||||||||
|
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|
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Balance SheetInternational Operations Reclassification Adjustment Descriptions:
The following reclassification has been made to the International Operations financial statements in order to conform to the GM Financial presentation:
(1) | Adjustments to reclassify International Operations parents net investment category to additional paid-in capital. |
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Unaudited Pro Forma Condensed Combined Income Statement: International Operations Reporting Reclassification Adjustments
For the Year Ended December 31, 2013
(In millions) | GM Financial |
International Operations |
Reporting Reclassification Adjustments |
International Operations Reclassified |
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Revenue |
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Finance charge income |
$ | 2,563 | $ | 715 | $ | 5 | (1) | $ | 716 | |||||||
(4 | )(4) | | ||||||||||||||
Leased vehicle income |
595 | | 1 | (1) | 1 | |||||||||||
Other income |
186 | 73 | 2 | (1) | 96 | |||||||||||
21 | (2) | |||||||||||||||
Other financing revenue and interest income |
| 29 | (29 | )(1 & 2) | | |||||||||||
Interest expense on short-term borrowings |
| (52 | ) | 52 | (3) | | ||||||||||
Interest expense on long-term borrowings |
| (360 | ) | 360 | (3) | | ||||||||||
Depreciation expense on operating lease assets |
| (7 | ) | 7 | (4) | | ||||||||||
Income in equity method investee |
| 118 | (118 | )(5) | | |||||||||||
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3,344 | 516 | 297 | 813 | |||||||||||||
Costs and expenses |
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Salaries and benefits |
448 | 58 | | 58 | ||||||||||||
Operating expenses |
322 | 138 | 2 | (4) | 140 | |||||||||||
Total operating expenses |
770 | 196 | 2 | 198 | ||||||||||||
Leased vehicle expenses |
453 | | 1 | (4) | 1 | |||||||||||
Provision for loan losses |
475 | 71 | | 71 | ||||||||||||
Interest expense |
721 | | 412 | (3) | 412 | |||||||||||
Acquisition and integration expenses |
42 | | | | ||||||||||||
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2,461 | 267 | 415 | 682 | |||||||||||||
Income before income taxes |
883 | 249 | (118 | ) | 131 | |||||||||||
Income tax provision |
317 | 43 | | 43 | ||||||||||||
Equity method investee income |
| 118 | (5) | 118 | ||||||||||||
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Net income |
$ | 566 | $ | 206 | $ | | $ | 206 | ||||||||
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For the Six Months Ended June 30, 2014
(In millions) | GM Financial |
International Operations |
Reporting Reclassification Adjustments |
International Operations Reclassified |
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Revenue |
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Finance charge income |
$ | 1,712 | $ | | $ | | $ | | ||||||||
Leased vehicle income |
438 | | | | ||||||||||||
Other income |
138 | | | | ||||||||||||
Other financing revenue and interest income |
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Interest expense on short-term borrowings |
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Interest expense on long-term borrowings |
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Depreciation expense on operating lease assets |
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Income in equity method investee |
| 66 | (66 | )(5) | | |||||||||||
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2,288 | 66 | (66 | ) | | ||||||||||||
Costs and expenses |
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Salaries and benefits |
290 | | | | ||||||||||||
Operating expenses |
259 | 2 | | 2 | ||||||||||||
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Total operating expenses |
549 | 2 | | 2 | ||||||||||||
Leased vehicle expenses |
335 | | | | ||||||||||||
Provision for loan losses |
248 | | | | ||||||||||||
Interest expense |
669 | | | | ||||||||||||
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1,801 | 2 | | 2 | |||||||||||||
Income before income taxes |
487 | 64 | (66 | ) | (2 | ) | ||||||||||
Income tax provision |
167 | | | | ||||||||||||
Equity method investee income |
| | 66 | (5) | 66 | |||||||||||
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Net income |
$ | 320 | $ | 64 | $ | | $ | 64 | ||||||||
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Income StatementInternational Operations Reclassification Adjustment Descriptions:
The following reclassifications have been made to the International Operations financial statements in order to conform to the GM Financial presentation:
(1) | Adjustments to reclassify International Operations operating leases revenue to finance charge income, leased vehicle income, and other income. |
(2) | Adjustments to reclassify International Operations income on interest-bearing cash to other income. |
(3) | Adjustments to reclassify International Operations interest expense on short-term and long-term borrowings to interest expense. |
(4) | Adjustments to reclassify International Operations depreciation expense on operating lease assets to finance charge income, leased vehicle expense and operating expense. |
(5) | Adjustments to reclassify International Operations equity method investee income, net of tax. |
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