RNS Number:3991N
General Motors Accept Corp Canada
9 June 2005
General Motors Acceptance Corporation of Canada, Limited
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
For the Quarter Ended March 31, 2005
Consolidated Balance Sheets (unaudited)
General Motors Acceptance Corporation of Canada, Limited
March 31, December 31,
2005 2004
---------- ----------
(in thousands)
Assets
Cash and cash equivalents $ 1,175,063 $ 2,785,666
Subordinated interests in securitization
trusts, net 399,987 444,452
Finance receivables and loans, net 6,439,739 6,385,266
Investment in operating leases, net 7,262,665 7,079,305
Income and other taxes receivable 50,774 19,618
Notes receivable from affiliates 2,619,063 2,552,074
Investments 797,500 797,500
Other assets 805,134 759,350
---------- ----------
TOTAL ASSETS $ 19,549,925 $ 20,823,231
========== ==========
Liabilities
Debt payable within one year $ 6,072,219 $ 7,166,238
Accounts payable to affiliates 47,458 64,988
Interest payable 154,408 171,889
Accrued expenses and other liabilities 817,447 893,387
Future income taxes 769,519 777,327
Debt payable after one year 9,715,509 9,778,720
---------- ----------
Total Liabilities 17,576,560 18,852,549
---------- ----------
Shareholder's Equity
Capital stock without par value (authorized
- unlimited, outstanding - 1,450,000 common
shares) 50,000 50,000
Retained earnings 1,923,365 1,920,682
---------- ----------
Total Shareholder's Equity 1,973,365 1,970,682
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 19,549,925 $ 20,823,231
========== ==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Consolidated Statements of Income and Retained Earnings (unaudited)
General Motors Acceptance Corporation of Canada, Limited
For the three months ended
March 31,
2005 2004
------------ ------------
(in thousands)
Revenue
Consumer $ 64,049 $ 73,638
Commercial 49,430 50,458
Operating leases 468,586 370,196
------------ ------------
Total financing revenue 582,065 494,292
Interest and discount (215,583) (209,878)
Depreciation on operating
leases (357,446) (269,070)
------------ ------------
Net financing revenue 9,036 15,344
Other income 51,167 88,278
------------ ------------
Net financing revenue and
other income 60,203 103,622
------------ ------------
Expense
Operating expenses 46,209 40,201
Provision for credit losses 3,941 2,180
------------ ------------
Total expenses 50,150 42,381
------------ ------------
Income before income taxes 10,053 61,241
Income tax expense 7,370 24,931
------------ ------------
Net income 2,683 36,310
------------ ------------
Retained earnings, beginning
of the period 1,920,682 1,778,494
------------ ------------
Retained earnings, end of the
period $ 1,923,365 $ 1,814,804
============ ============
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Consolidated Statements of Cash Flows (unaudited)
General Motors Acceptance Corporation of Canada, Limited
For the three months ended
March 31,
2005 2004
---------- ----------
(in thousands)
Operating Activities
Net income $ 2,683 $ 36,310
Depreciation 357,981 269,595
Provision for credit losses 3,941 2,180
Gain on sale of finance receivables - (1,552) (20,370)
Consumer
Net change in:
Other assets (46,319) (65,433)
Accounts payable to affiliates (17,530) 29,290
Interest payable (17,481) (36,178)
Income and other taxes receivable (31,156) (16,853)
Accrued expenses and other liabilities (75,940) 131,625
Future income taxes (7,808) 18,610
---------- ----------
Cash provided by operating activities 166,819 348,776
---------- ----------
Financing Activities
Net change in short-term debt (439,825) (138,582)
Issuance of long-term debt 1,269,609 614,228
Repayment of long-term debt (1,987,014) (1,308,494)
---------- ----------
Cash used in financing activities (1,157,230) (832,848)
---------- ----------
Investing Activities
Acquisitions of finance receivables and loans (4,388,905) (4,160,226)
Liquidations of finance receivables and loans 3,672,700 3,380,450
Proceeds from sales of finance receivables 659,343 1,000,824
Purchases of operating lease assets (814,917) (604,676)
Disposals of operating lease assets 274,111 161,529
Net change in:
Notes receivable from affiliates (66,989) (47,660)
Subordinated interests in securitization trusts 44,465 (41,169)
---------- ----------
Cash used in investing activities (620,192) (310,928)
---------- ----------
Decrease in cash and cash equivalents (1,610,603) (795,000)
Cash and cash equivalents at beginning of
the period 2,785,666 2,366,000
---------- ----------
Cash and cash equivalents at end of the period $ 1,175,063 $ 1,571,000
========== ==========
Supplemental disclosure
Cash paid for:
Interest $ 232,462 $ 245,522
Taxes $ 46,290 $ 18,147
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Notes to Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation of Canada, Limited
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by General Motors Acceptance Corporation of Canada, Limited (the "Company") in
accordance with Canadian generally accepted accounting principles, using the
same accounting policies and methods of application as used in the Company's
financial statements as of and for the year ended December 31, 2004, except as
discussed in Note 2. In the opinion of management, the financial statements
include all necessary adjustments (which are of a normal and recurring nature)
for the fair presentation of the results of the interim periods presented and
consistent with prior period reporting.
The interim period consolidated financial statements, including the related
notes, are condensed and do not include all disclosures required in the annual
financial statements. These interim period consolidated financial statements
should be read in conjunction with the Company's December 31, 2004 audited
consolidated financial statements. Certain amounts in the prior year
consolidated financial statements have been reclassified to conform with current
year presentation.
Note 2. New Accounting Policy
Effective January 1, 2005, the Company adopted Accounting Guideline ("AcG")-15
"Consolidation of Variable Interest Entities". This Guideline requires
consolidation by the primary beneficiary of a variable interest entity. A
number of the Company's variable interests related to the securitization of
retail finance receivables are structured as qualifying special purpose entities
and, therefore, are exempt from this standard. The remainder of the Company's
variable interests in the securitization of retail finance receivables and
wholesale loans are held in multi-seller securitization trusts. A primary
beneficiary analysis of these multi-seller securitization trusts was completed
and it was determined that consolidation was not required. The Company has
interests in other variable interest entities for which a primary beneficiary
analysis was performed. It was determined that consolidation of these variable
interest entities was not required. The adoption of AcG-15 did not have any
impact on the Company's financial condition or results of its operations.
Note 3. Finance Receivables and Loans
The composition of finance receivables and loans outstanding was as follows:
March 31, December 31,
2005 2004
------------ ------------
(in thousands)
Consumer
Retail automotive $ 4,031,999 $ 4,212,688
------------ ------------
Commercial
Wholesale 1,735,270 1,467,063
Leasing and lease financing 328,461 361,060
Term loans to dealers and 379,504 381,209
other
------------ ------------
Total commercial 2,443,235 2,209,332
------------ ------------
Total finance receivables and loans 6,475,234 6,422,020
------------ ------------
Less: Allowance for credit losses 35,495 36,754
------------ ------------
Total finance receivables and loans,
net(1) $ 6,439,739 $ 6,385,266
============ ============
(1) Net of unearned income of $359,631 and $392,580 at March 31, 2005 and
December 31, 2004, respectively.
Note 4. Sale of Finance Receivables
In January 2005, the Company sold retail finance receivables with contractual
principal aggregating $477.7 million. A pre-tax gain of $1.6 million was
realized on the sale. For the three months ended March 31, 2004, the Company
sold retail finance receivables with contractual principal aggregating $1,171.7
million. Total pre-tax gains of $20.4 million were realized on the sales. The
outstanding balance of sold retail finance receivables totaled $3,168.9 million
and $3,304.9 million at March 31, 2005 and December 31, 2004, respectively.
The Company has also sold wholesale loans on a revolving basis resulting in a
decrease in the balance of wholesale loans outstanding of $2,597.0 million and
$2,551.1 million at March 31, 2005 and December 31, 2004, respectively. The
Company is committed to sell eligible loans arising on certain dealer accounts
to a maximum of $2,597.0 million.
Note 5. Secured Financing
In January 2005, GMAC Leaseco Corporation ("Leaseco") entered into a Master
Concurrent Lease Agreement ("MCLA") with Canadian Auto Retail Lease Trust No.
2. The original net book value of the lease assets, which were subject to the
MCLA, was approximately $766.4 million and the financing received was
approximately $744.1 million. In 2004, Leaseco entered into a MCLA with
Canadian Auto Retail Lease Trust No. 1. The Company acts as Administrative
Agent for the Trust pursuant to the Administration Agreement.
In accordance with the MCLA's, the Trusts will be entitled to receive the lease
payments from the underlying lessees, and the Trusts will also have an option to
acquire the underlying vehicles upon termination of the underlying lease or the
occurrence of other certain limited events, limited to the pool of operating
leases held by each Trust. This transaction was accounted for as a secured
financing. At March 31, 2005, the net book value of the operating leases,
subject to the MCLA's, was $1,289.7 million and the outstanding financing was
$1,294.2 million. The total financing received has been allocated between debt
payable within one year ($436.0 million) and debt payable after one year ($858.2
million). At December 31, 2004, the net book value of the operating leases,
subject to the MCLA's, was $759.9 million and the outstanding financing was
$633.2 million.
The Company maintains cash collateral accounts for certain lease securitizations
at predetermined amounts in the unlikely event that deficiencies occur in cash
flows owed to investors. The amounts available in such cash collateral accounts
are recorded in other assets and totaled $151.1 million and $83.1 million as of
March 31, 2005 and December 31, 2004, respectively.
Note 6. Lines of Credit with Banks
Established committed revolving lines of credit with banks totaled $1.25 billion
at March 31, 2005 and December 31, 2004, of which $625 million was renewed and
will expire on June 13, 2005 and $625 million will expire on June 16, 2008.
Note 7. Other Income
Details of other income were as follows:
For the three months ended
March 31,
2005 2004
--------- ---------
(in thousands)
Excess interest and other
ongoing revenue from securitizations $ 18,971 $ 23,519
Gains on securitizations 16,247 34,107
Service fee revenue from General Motors
of Canada Limited 7,839 9,389
Interest revenue on cash and cash
equivalents 17,263 13,813
Gain (loss) on fair value derivatives (11,532) 4,580
Other 2,379 2,870
--------- ---------
Total other income $ 51,167 $ 88,278
========= =========
Note 8. Derivatives
Derivatives that were dedesignated from pre-existing hedging relationships on
January 1, 2004 when Accounting Guideline 13-"Hedging Relationships" was first
adopted were recorded at fair value on the balance sheet. The net cumulative
unrealized gain of $17.8 million up to that date was deferred and recorded in
accrued expenses and other liabilities and will be amortized into interest
expense and other income over the remaining term of the original hedging
relationship. For the three months ended March 31, 2005, $2.5 million of the
net cumulative unrealized gain has been amortized into income with $Nil recorded
in interest expense and a net $2.5 million loss recorded in other income. For
the three months ended March 31, 2004, $5.3 million of the net cumulative
unrealized gain had been amortized into income with $3.3 million credited
against interest expense and $2.0 million recorded in other income.
Note 9. Employee Benefit Plans
The Company has recorded employee future benefits, within operating expenses, of
$1.1 million and $0.8 million for the three months ended March 31, 2005 and
March 31, 2004, respectively.
Note 10. Subsequent Events
Secured Financing
On April 6, 2005, Leaseco entered into a MCLA with Canadian Auto Retail Lease
Trust No. 3. The original net book value of the lease assets, which were
subject to the MCLA, was approximately $1,288.6 million and the financing
received was approximately $1,243.4 million.
Credit Ratings
Substantially all of General Motors Acceptance Corporation ("GMAC") and the
Company's debt have been rated by nationally recognized statistical rating
organizations. Concerns over the competitive and financial strength of General
Motors ("GM"), including how it will fund its burdensome health care
liabilities, have resulted in GMAC and the Company experiencing a series of
negative rating actions, which commenced late in 2001. Most recently, on May 5,
2005, Standard & Poor's Ratings Services ("S&P") downgraded the senior debt of
GMAC and the Company to non-investment grade (to BB, from BBB-) while also
downgrading the commercial paper rating to B-1, from A-3, with the other rating
agencies continuing to maintain an investment grade rating on GMAC and the
Company's senior debt. A further reduction of GMAC and the Company's credit
ratings such that GMAC and the Company would be rated non-investment grade by
more than one rating agency, would increase borrowing costs and further
constrain GMAC and the Company's access to unsecured debt markets, including
capital markets for retail debt. In addition, a further reduction of GMAC and
the Company's credit ratings could increase the possibility of additional terms
and conditions contained in any new or replacement financing arrangements.
However, over the past few years, GMAC and the Company have increased the focus
on expanding and developing diversified funding sources, including committed
bank conduit facilities and asset-backed securities that are not directly
affected by ratings on unsecured debt.
Notwithstanding the foregoing, management believes that the current ratings
situation and outlook increases the level of risk as to the long term ability of
GMAC and the Company to sustain the current level of asset originations.
Management continuously assesses this matter and is seeking to mitigate the
increased risk by exploring whether actions could be taken that would provide a
basis for rating agencies to evaluate GMAC and the Company's financial
performance in order to provide GMAC and the Company with ratings independent of
those assigned to GM. Currently, only Moody's Investors Service, Inc.
("Moody's") and Dominion Bond Rating Service Limited ("DBRS") assign a different
credit rating to GMAC and the Company than they do to GM. There can be no
assurance that any actions by GMAC and the Company would be taken or that such
actions, if taken, would be successful in achieving a "split" rating from other
rating agencies.
The following summarizes GMAC and the Company's current ratings, outlook and the
date of last rating or outlook change by the respective nationally recognized
rating agencies.
Rating Commercial Senior
Agency Paper Debt Outlook Date of Last Action
----------- --------- -------- --------- -------------------
Fitch, Inc. F-3 BBB- Negative March 16, 2005 (a)
Moody's Prime-2 Baa2 Negative April 5, 2005 (b)
S&P B-1 BB Negative May 5, 2005 (c)
DBRS R-1 (low) BBB (high) Negative March 16, 2005 (d)
----------- --------- -------- --------- -------------------
(a) Fitch downgraded senior debt to BBB- from BBB and downgraded the
commercial paper rating to F-3 from F-2, and maintained an outlook of
negative.
(b) Moody's lowered the senior debt to Baa2 from Baa1, and maintained an
outlook of negative.
(c) Standard & Poor's downgraded senior debt to BB from BBB- and downgraded
the commercial paper rating to B-1 from A-3 and maintained an outlook of
negative.
(d) DBRS confirmed the ratings but changed the trend to negative from stable.
*****
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