UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1995, --- OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-3754
GENERAL MOTORS ACCEPTANCE CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 38-0572512
- ------------------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153
3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-556-5000
------------
The registrant meets the conditions set forth in General Instruction J(1) (a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------- ------------------------
--
8 3/8% Notes due May 1, 1997 |
6.00 % Debentures due April 1, 2011 |
10.00 % Deferred Interest Debentures > New York
due December 1, 2012 | Stock Exchange
10.30 % Deferred Interest Debentures |
due June 15, 2015 |
8 1/4% Debentures due April 1, 2016 __|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes X . No ___.
As of December 31, 1995, there were outstanding 22,000,000 shares of the
issuer's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
CONTENTS
PAGE NO.
PART I
Item 1. Business ....................................
Item 2. Properties ..................................
Item 3. Legal Proceedings ...........................
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters .............
Item 6. Selected Financial Data .....................
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data .
Management's Responsibilities for
Consolidated Financial Statements ......
Independent Auditors' Report ...........
Consolidated Balance Sheet .............
Consolidated Statement of Income and Net
Income Retained for Use in the Business
Consolidated Statement of Cash Flows ...
Notes to Financial Statements ..........
Supplementary Financial Data ...........
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .....................
Signatures ..................................
Exhibit Index ...............................
Ratio of Earnings ...........................
Independent Auditors' Consent ...............
<PAGE>
PART I
ITEM 1. BUSINESS
General Motors Acceptance Corporation (the "Company" or "GMAC"), a wholly-owned
subsidiary of General Motors Corporation ("General Motors" or "GM"), was
incorporated in 1919 under the New York Banking Law relating to investment
companies.
In conducting its primary form of business, GMAC and its affiliated companies
offer a wide variety of automotive financial services to and through franchised
General Motors dealers in many countries throughout the world. GMAC also offers
financial services to other automobile dealerships and to the customers of those
dealerships. GMAC also provides commercial financing for real estate, equipment
and capital loans to automobile dealerships, GM suppliers and customers of GM
affiliates. GMAC's other financial services include insurance and mortgage
banking. The Company had 17,252 and 17,246 employees worldwide, as of December
31, 1995 and 1994, respectively.
The Company operates directly and through its subsidiaries and through
affiliates (including joint ventures outside the U.S.) in which the Company or
GM has equity investments. In its principal markets, GMAC offers automotive
financing and other services as described below. The Company operates its
automotive financing services outside of the U.S. and Canada in a similar
manner, although subject to local laws or other circumstances that may modify
such procedures. The Company's policies and internal accounting controls are
designed to ensure compliance with applicable laws and regulations.
The automotive financing industry is highly competitive. The Company's principal
competitors for retail financing and leasing are affiliated finance subsidiaries
of other major manufacturers as well as a large number of banks, commercial
finance companies, savings and loan associations and credit unions. Wholesale
and lease financing competitors are primarily comprised of other manufacturers'
affiliated finance companies, independent commercial finance companies and
banks. Neither the Company nor any of its competitors is considered to be a
dominant force in the industry when analyzed individually. The Company's ability
to offer competitive financing rates, the primary basis of competition, is
directly affected by its access to capital markets. The Company applies a
strategy of constantly reviewing funding alternatives to foster continued
success. The quality of service provided to automotive dealerships and their
customers contributes to the Company's competitive advantages.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
In the U.S. automotive business, seasonal retail sales fluctuations cause
production levels to vary from month to month. In addition, the changeover
period related to the annual new model introduction traditionally occurs in the
third quarter of each year, causing an unfavorable impact on the operating
results of automobile manufacturers. These factors produce minor fluctuations in
financing volume with the second quarter of each year generally experiencing the
strongest activity. However, seasonal variations in vehicle deliveries do not
have a material impact on the Company's interim results; quarterly financing
revenue remains relatively consistent throughout the year, primarily
attributable to the use of the interest method for recognition of income from
retail and lease financing transactions as well as consistent dealer inventory
levels.
RETAIL FINANCING
GMAC conducts its U.S. and Canadian retail automotive financing business under
the trade name GMAC Financial Services. The Company provides financing services
to customers through dealers who have established relationships with GMAC. GMAC
purchases retail instalment obligations for new and used products directly from
dealers. These obligations must first meet GMAC's credit standards. Thereafter,
GMAC collects and administers the obligations.
Outside the U.S. and Canada, GMAC conducts its retail automotive financing
business under various trade names primarily depending upon General Motors
activity in the country while also considering local customs and requirements.
Retail automotive financing is provided in a similar manner to the U.S., but in
some cases GMAC enters into an instalment obligation directly with the
customer.
Retail obligations are generally secured by lien notation on vehicle titles
and/or other forms of security interest in the products financed. After
satisfying local requirements, GMAC can generally repossess the product if the
instalment buyer fails to meet the obligations of the contract. The interests of
both GMAC and the retail buyer are usually protected by automobile physical
damage insurance.
WHOLESALE FINANCING
Using GMAC's wholesale financing, qualifying dealers can finance new and used
vehicles held in inventory pending sale or lease to retail or fleet buyers. When
a dealer uses GMAC's Wholesale Finance Plan to acquire vehicles from a
manufacturer or other vehicle sources, GMAC is ordinarily granted a security
interest in those vehicles. GMAC can generally repossess the product if the
dealer does not pay the amount advanced or fails to comply with other conditions
specified in the security agreement.
GMAC also makes term loans to dealers and their affiliates for business
acquisitions, facilities refurbishing, real estate purchases and working
capital. The Company generally secures the loans with liens on real estate,
other dealership assets and/or the personal guarantee of the dealer.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
LEASING
GMAC offers leasing plans to retail customers as well as dealers or other
companies that rent or lease vehicles to others.
OPERATING LEASES:
GMAC's most successful leasing program, called SmartLease in the U.S. and
Canada, is a plan in which dealers originate the leases and offer them for
purchase by GMAC. As GMAC assumes ownership of the vehicle, these leases are
accounted for as operating leases with the capitalized cost of the vehicle
recorded as a depreciable asset (net investment in operating leases). Dealers
are not responsible for the customer's performance during the lease period nor
for the value of the vehicle at the time of lease maturity. The SmartLease
program encourages shorter customer trading cycles. Similar operating lease
programs are offered in Germany and eleven other countries. On occasion, General
Motors Corporation may elect to sponsor retail leasing programs by supporting
special lease rates and/or guaranteeing residual values in excess of published
residual guide books used by GMAC.
FINANCE LEASES:
GMAC also offers other leasing plans directly to individual customers and other
entities. Under these plans, the leases are accounted for as finance leases and
the receivables from the customers are recorded as finance receivables. GMAC
does not assume ownership of the vehicle. These leasing receivables essentially
represent instalment sales of vehicles, with the vehicle usually being acquired
by the customer at the end of the lease contract.
LEASE FINANCING:
Dealers, their affiliates and other companies also may obtain GMAC financing to
buy vehicles that they lease or rent to others. These leases, sometimes referred
to as fleet leases, are categorized as finance receivables. GMAC generally has a
security interest in these products and in the rental payments. However,
competitive factors occasionally result in a limited security interest in this
collateral. More than half of GMAC's fleet financing receivables are covered by
General Motors programs which provide a limited payment guarantee to
participating financing institutions as consideration for extending credit to a
fleet customer. Under this program, General Motors will reimburse the financing
institution, subject to certain limitations, for losses on the sale of vehicles
which are repossessed and returned to the selling dealer.
INSURANCE
Motors Insurance Corporation and its subsidiaries ("MIC") conduct insurance
operations in the United States, Canada and Europe. MIC insures and reinsures
selected personal, mechanical, commercial and credit insurance coverages.
<PAGE>
ITEM 1. BUSINESS (CONCLUDED)
Personal lines coverages, which include automobile, homeowners and umbrella
liability insurance, are offered primarily on a direct response basis. MIC
insures mechanical coverage for new and used vehicles sold by GM dealers and
others. Commercial lines include insurance for dealer vehicle inventories as
well as other dealer property and casualty coverages. MIC also provides
collateral protection coverage to GMAC on vehicles securing GMAC retail
instalment contracts. Additionally, MIC is a reinsurer of diverse property and
casualty risks, primarily in the U.S. market. Due to continued unfavorable
industry trends for credit life and disability products, MIC ceased underwriting
such coverages effective November 1, 1995.
MORTGAGE BANKING
GMAC Mortgage Corporation ("GMACMC") and its subsidiaries, collectively the GMAC
Mortgage Group ("GMACMG"), conduct mortgage banking operations in the United
States. GMACMG originates and markets single-family and commercial mortgage
loans to investors and services these loans on behalf of investors. GMACMG also
offers other consumer products including home equity loans, insurance services
and title and trustee services.
GMACMC, through its wholly-owned subsidiary, Residential Funding Corporation
("RFC"), is engaged in the residential wholesale mortgage conduit business. RFC
purchases non-conforming, single-family residential mortgages from mortgage
lenders throughout the United States, securitizes such mortgages into AA or AAA
rated mortgage pass-through certificates, sells the certificates to investors
and performs master servicing of these securities on behalf of investors. In
addition, RFC also provides warehouse lending facilities to certain mortgage
banking customers secured by mortgage collateral as well as long-term secured
lines of credit to construction lending project managers.
SERVICING
GMAC services the retail instalment and wholesale obligations which have been
sold to third parties through its asset-backed securities program.
FINANCIAL INFORMATION
Financial information regarding industry segments and operations by geographic
area is set forth in Note 17 of the Notes to Financial Statements.
<PAGE>
ITEM 2. PROPERTIES
The Company and its subsidiaries have 366 financial service offices, 21
insurance offices and 135 mortgage offices. Of the number of financial service
offices, 284 are in the United States and the Commonwealth of Puerto Rico, 28 in
Canada and 54 in other countries. There are 13 insurance offices in the United
States, three in Canada and five in Europe. Mortgage offices are all located in
the United States. All premises are generally occupied under lease. Automobiles,
office equipment and real estate properties owned and in use by the Company are
not significant in relation to the total assets of the Company.
ITEM 3. LEGAL PROCEEDINGS
There are various claims and actions pending against the Company and its
subsidiaries with respect to commercial and consumer financing activities, taxes
and other matters arising out of the conduct of the business. Certain of these
actions are or purport to be class actions, seeking damages in very large
amounts. The probability of adverse verdicts from individual claims and actions
is determined by a periodic review conducted by management and the Company's
General Counsel which involves soliciting input from staff attorneys as well as
outside counsel. Based on these reviews and examinations, the amounts of
liability on these claims and actions at December 31, 1995, were not
determinable but, in the opinion of management, the ultimate liability resulting
therefrom should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is a wholly-owned subsidiary of General Motors Corporation and,
accordingly, all shares of the Company's common stock are owned by General
Motors Corporation. There is no market for the Company's common stock.
The Company paid cash dividends to General Motors Corporation of $950 million in
1995, $875 million in 1994 and $1,250 million in 1993.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS
<CAPTION>
1995 1994 1993 1992 1991
--------- ---------- ---------- ----------- -------
INCOME AND NET INCOME (in millions of dollars)
RETAINED FOR USE
IN THE BUSINESS
Gross revenue and
<S> <C> <C> <C> <C> <C>
other income ............ $ 14,863.2 $ 12,145.0 $ 12,483.5 $ 13,739.3 $ 14,503.1
---------- ---------- ---------- ---------- ----------
Interest and discount .... 4,936.3 4,230.9 4,721.2 5,828.6 6,844.7
Depreciation on
operating leases ........ 4,304.8 3,233.8 2,702.0 2,429.6 1,902.4
Operating expenses ....... 2,307.5 1,986.8 1,949.0 1,900.1 1,907.1
Insurance losses and loss
adjustment expenses ..... 998.3 1,030.9 1,096.6 987.9 1,061.6
Provision for
financing losses ........ 448.8 177.3 300.8 371.0 1,047.9
Amortization of
intangible assets ....... 84.3 45.5 141.1 121.1 91.2
---------- ---------- ---------- ---------- ----------
Total expenses ........ 13,080.0 10,705.2 10,910.7 11,638.3 12,854.9
---------- ---------- ---------- ---------- ----------
Income before income taxes 1,783.2 1,439.8 1,572.8 2,101.0 1,648.2
United States, foreign
and other income taxes .. 752.2 512.7 591.7 882.3 610.0
---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of accounting change 1,031.0 927.1 981.1 1,218.7 1,038.2
Cumulative effect of
accounting change ...... -- (7.4) -- (282.6) 331.5
---------- ---------- ---------- ---------- ----------
Net income ............... 1,031.0 919.7 981.1 936.1 1,369.7
Cash dividends ........... 950.0 875.0 1,250.0 1,100.0 850.0
---------- ---------- ---------- ---------- ----------
Net income retained
in the year ............. $ 81.0 $ 44.7 $ (268.9) $ (163.9) $ 519.7
========== ========== ========== ========== ==========
ASSETS
Cash and cash equivalents $ 1,448.6 $ 1,339.5 $ 4,028.1 $ 3,871.1 $ 2,412.5
Earning assets ........... 90,469.3 82,074.6 74,783.8 87,198.7 98,614.3
Other assets ............. 2,655.1 2,123.3 1,938.9 1,738.4 1,607.7
---------- ---------- ---------- ---------- ----------
Total ................. $ 94,573.0 $ 85,537.4 $ 80,750.8 $ 92,808.2 $102,634.5
========== ========== ========== ========== ==========
NOTES, LOANS AND DEBENTURES
Payable within one year .. $ 43,871.8 $ 35,114.8 $ 35,084.4 $ 41,364.4 $ 51,018.6
Payable after one year ... 31,050.6 31,539.6 27,688.8 33,174.2 34,480.9
---------- ---------- ---------- ---------- ----------
Total ................. $ 74,922.4 $ 66,654.4 $ 62,773.2 $ 74,538.6 $ 85,499.5
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the ninth time in the Company's history, consolidated net income for the
Company and its subsidiaries surpassed the $1 billion mark. The following table
summarizes the earnings of GMAC's financing and insurance businesses on a
reported and comparable year-to-year basis:
Income Cumulative
Before Effect of
Accounting Accounting Net
CHANGES CHANGES* INCOME
---------- ---------- ----------
(in millions of dollars, after tax)
1995
----
Financing Operations $ 868.4 $ -- $ 868.4
Insurance Operations** 162.6 -- 162.6
---------- ---------- ----------
Total $ 1,031.0 $ -- $ 1,031.0
========== ========== ==========
1994
----
Financing Operations $ 809.0 $ (6.8) $ 802.2
Insurance Operations** 118.1 (0.6) 117.5
---------- ---------- ----------
Total $ 927.1 $ (7.4) $ 919.7
========== ========== ==========
1993
----
Financing Operations $ 790.6 $ -- $ 790.6
Insurance Operations** 190.5 -- 190.5
---------- ---------- ----------
Total $ 981.1 $ -- $ 981.1
========== ========== ==========
* Statement of Financial Accounting Standard (SFAS) No. 112 was adopted in 1994
** Motors Insurance Corporation
On a consolidated basis, GMAC's return on average equity capital was 12.5% in
1995, compared to 11.6% in 1994, and 11.9% in 1993. Total cash dividends paid to
General Motors Corporation in 1995 were $950 million, compared with $875 million
in 1994 and $1,250 million in 1993.
In 1995, net income from financing operations, including GMAC Mortgage Group
(GMACMG) results, increased $66.2 million and $77.8 million compared to 1994 and
1993, respectively, primarily as a result of more favorable financing margins
and higher average earning asset levels, principally finance receivables and
operating leases, partially offset by increases in provisions for financing
losses and other operating costs.
The 1995 net income from insurance operations was 38% above 1994 performance
principally due to improved underwriting results and higher realized capital
gains. In comparison to both 1995 and 1994 net income, the more favorable 1993
earnings were predominately driven by a higher level of realized capital gains.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
UNITED STATES NEW PASSENGER CAR AND TRUCK DELIVERIES
New vehicle deliveries in the U.S. were slightly below 1994 levels, but above
1993 activity. GMAC's restructured U.S. field operations maintained steady
penetration of retail delivery financing amid continued competitive pressures
from other providers of vehicle financing; with 1995 market share improved over
1994.
Year Ended December 31
1995 1994 1993
---- ---- ----
(in millions of units)
Industry....................................... 15.1 15.4 14.2
General Motors................................. 4.9 5.0 4.7
New GM Vehicle Deliveries Financed by GMAC
Retail (Instalment Sale Contracts and
Operating Leases).......................... 26.4% 26.2% 27.8%
Fleet Transactions (Lease Financing)........ 11.5% 17.7% 27.7%
Total......................................... 23.6% 24.5% 27.7%
FINANCING VOLUME
The number of new vehicle deliveries financed during the three years ended
December 31, 1995 are summarized below:
1995 1994 1993
---- ---- ----
(in thousands of units)
UNITED STATES
Retail Instalment Sale Contracts 672 679 863
Operating Leases ........................... 445 448 205
Leasing .................................... 133 196 303
----- ----- -----
New Deliveries Financed ...................... 1,250 1,323 1,371
===== ===== =====
OTHER COUNTRIES
Retail Instalment Sale Contracts 361 366 326
Operating Leases ........................... 199 179 141
Leasing .................................... 68 68 60
----- ----- -----
New Deliveries Financed ...................... 628 613 527
===== ===== =====
WORLDWIDE
Retail Instalment Sale Contracts 1,033 1,045 1,189
Operating Leases ........................... 644 627 346
Leasing .................................... 201 264 363
----- ----- -----
New Deliveries Financed ...................... 1,878 1,936 1,898
===== ===== =====
The financing of new vehicles delivered has declined slightly since 1993
primarily as a result of less U.S. fleet sales by GM, partially offset by
continued growth in International markets.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The average new passenger car retail finance contract purchased by GMAC in the
United States during 1995 was $19,600 compared to $17,800 in 1994 and $16,400 in
1993. The average term for new car contracts was 56 months in 1995, compared to
55 months in 1994 and 54 months in 1993, while the average monthly payment on
new passenger car contracts increased to $350, compared to $325 in 1994 and $302
in 1993.
GMAC also provides wholesale financing for GM and other dealers' new and used
vehicle inventories. In the United States, inventory financing was provided for
3.7 million, 3.8 million and 3.6 million new GM vehicles, representing 72.0%,
75.6% and 76.8% of all GM sales to dealers during 1995, 1994 and 1993,
respectively.
ASSETS
At the end of 1995, the Company owned assets and serviced automotive receivables
for others which totaled $105.5 billion, an increase of $8.0 billion over
year-end 1994. Total consolidated assets of the Company at December 31, 1995
were $94.6 billion, $9.0 billion above the previous year. Consolidated earning
assets, which comprised $90.5 billion of the total consolidated assets,
increased $8.4 billion from 1994 year-end levels. The year-to-year increase can
be primarily attributed to growth in the finance receivables (primarily retail)
and operating lease asset portfolios.
At December 31, 1995, the value of the Company's consolidated investment
securities portfolio (principally held by MIC) was $4,328.2 million, an increase
of $436.5 million over 1994 year-end largely due to improved market conditions
for investments in general.
Consolidated worldwide retail finance receivables, net of unearned income,
amounted to $31.8 billion at December 31, 1995, a $3.8 billion increase from the
prior year-end primarily resulting from a combination of higher contract amounts
for new vehicles financed in the U.S. and stabilized liquidations. As described
in Note 3 in the Notes to Financial Statements, the Company continues to utilize
an asset securitization program as an alternative funding source and has sold
retail receivables, which it continues to service for a fee, with outstanding
principal balances (including retained subordinated interests) amounting to $6.6
billion at year-end 1995, down $3.3 billion from $9.9 billion at year-end 1994.
The decline in this portfolio primarily reflects amortization of pools sold in
prior years.
Wholesale receivables financed by GMAC, primarily dealer vehicle inventories,
totaled $21.2 billion at year-end 1995, up $1.3 billion from year-end 1994. In
addition, the Company has sold wholesale receivables, which it continues to
service for a fee, with outstanding principal balances (including retained
subordinated interests) totaling $4.7 billion and $2.6 billion at December 31,
1995 and 1994, respectively.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Consolidated worldwide capital leasing and lease financing receivables, net of
unearned income, at December 31, 1995 were $2,914.9 million, down $271.7 million
from December 31, 1994. This reduction is primarily reflective of General
Motors' reduction in fleet sales and the resultant decrease in GMAC fleet
financing transactions.
Operating lease assets, net of depreciation, acquired principally under the GMAC
SmartLease program, totaled $22.1 billion at year-end 1995, an increase of $4.3
billion when compared to year-end 1994. The increase primarily reflects a
continued trend of new lease volume exceeding maturities and terminations.
The real estate mortgage inventory held for sale amounted to $1,486.8 million at
December 31, 1995, $242.8 million above the prior year-end level principally due
to growth in the commercial mortgage operations as well as lending receivables
for warehouse and construction lines. The portfolio of GMACMG's other real
estate totaled $1,416.9 million at December 31, 1995, $496.3 million above the
prior year level. The increase was primarily the net effect of additions to the
portfolio as a result of increased warehouse advances, growth in operations and
an aggressive loss mitigation effort, offset by transferring $434.0 million of
loans originated for investment to the held for sale category (of which $393.3
million was sold during 1995).
The Company's due and deferred from receivable sales (net) decreased $193.2
million to $1,371.4 million at year-end 1995 compared to $1,564.6 million at
December 31, 1994, with the decrease primarily attributable to the normal
amortization of net assets on existing sales of receivables. (See Note 3.) Other
earning assets totaled $400.7 million at December 31, 1995, $538.2 million lower
than the prior year-end, with the entire decrease resulting from a lower
inventory of vehicles acquired from fleet and rental customers of General
Motors.
Intangible assets included in other assets totaled $637.1 million at the end of
1995, compared with $377.4 million at the prior year-end. Mortgage operations
contributed to most of the 1995 increase, represented by mortgage servicing
rights (both purchased and originated) as well as capitalized goodwill and
acquisition intangibles. Other nonearning assets, essentially comprised of
insurance premium receivables, excess mortgage servicing fees, foreclosed
mortgages or mortgages otherwise classified as nonearning, and repossessed
vehicles, increased $272.1 million to $2,018.0 million at December 31, 1995,
compared to $1,745.9 million at year-end 1994.
LIQUIDITY
The Company's liquidity, as well as its ability to profit from ongoing
acquisition activity, is in large part dependent upon its timely access to
capital and the costs associated with raising funds in different segments of the
capital markets. In this regard, GMAC regularly accesses the short-term,
medium-term, and long-term debt markets, principally through commercial paper,
medium-term notes and underwritten transactions.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
As of December 31, 1995, GMAC's total borrowings were $74.9 billion compared
with $66.7 billion at December 31, 1994. Approximately 78.1% represented funding
for operations in the United States, with the remaining 21.9% of borrowings for
operations in Germany (6.4%), Canada (6.0%), and other countries (9.5%). Total
short-term notes outstanding at December 31, 1995, amounted to $26.3 billion
compared with $22.3 billion at December 31, 1994. The 1995 year-end ratio of
total borrowings to equity capital was 9.1:1 compared to 8.4:1 for year-end
1994.
Intermediate and long-term funding is provided through the issuance of
underwritten debt and medium-term notes, which are offered by prospectus
worldwide on a continuous basis. GMAC sells medium-term notes worldwide through
dealer agents in book-entry form for any maturity ranging from nine months to
thirty years. Sales of medium-term notes for U.S. operations totaled $7.0
billion in 1995 compared to $8.3 billion in 1994. Outstanding medium-term notes
for U.S. operations totaled $22.6 billion at December 31, 1995, an increase of
$1.9 billion from the prior-year period. In the U.S., underwritten debt issues
totaling $1.4 billion were completed during 1995, compared with $0.7 billion in
1994, as a result of lower interest rates and improved credit ratings.
Underwritten debt issues outstanding in the U.S. at December 31, 1995 totaled
$11.9 billion, an increase of $0.8 billion from year-end 1994.
GMAC maintains substantial bank lines of credit and sells finance receivables in
the capital markets. At December 31, 1995, GMAC maintained or had access to
$30.4 billion of unused credit lines with banks worldwide, an increase of $4.7
billion from year-end 1994. Included in the unused credit lines are a committed
U.S. revolving credit facility of $10 billion which serves primarily as back-up
for GMAC's unsecured commercial paper program and a $12.2 billion U.S.
asset-backed commercial paper liquidity and receivables credit facility for New
Center Asset Trust (NCAT), a non-consolidated limited purpose business trust
established to issue asset-backed commercial paper.
Outside the United States, funding needs are met primarily by a combination of
short- and medium-term loans from banks and other financial institutions. In
addition, the Company also issues commercial paper and medium-term and long-term
debt, where cost-effective, to fund certain non-U.S. operations.
Credit facilities supporting operations of the Company's Canadian and
international subsidiaries totaled $16.6 billion at December 31, 1995 of which
$8.0 billion was unused. As of December 31, 1995, the committed and uncommitted
portion of such credit facilities totaled $5.0 billion and $11.6 billion,
respectively.
As discussed in Note 3 in the Notes to the Financial Statements, the Company has
sold finance receivables through special purpose bankruptcy-remote subsidiaries.
Net proceeds from these sales totaled $5.5 billion and $6.1 billion during 1995
and 1994, respectively.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The scope of GMAC's capability to tap the capital markets for unsecured debt is
linked to both its term debt and commercial paper ratings. This is particularly
true with respect to the Company's commercial paper ratings. These ratings are
intended to provide guidance to investors in determining the credit risk
associated with particular securities based on current information obtained by
the rating organizations from the Company or other sources that such
organizations consider to be reliable. Lower ratings generally result in higher
borrowing costs as well as reduced access to capital markets. A security rating
is not a recommendation to buy, sell, or hold securities and is subject to
revision or withdrawal at any time by the assigning rating organization. Each
rating should be evaluated independently of any other rating.
Substantially all of the Company's short-term, medium-term, and long-term debt
has been rated by four nationally recognized statistical rating organizations.
As of March 11, 1996, all of the latest ratings assigned were within the
investment grade category.
Senior Commercial
RATING AGENCY DEBT PAPER
Duff & Phelps Credit Rating Co. A- D-1
Fitch Investors Service, Inc. A- F-1
Moody's Investors Service, Inc. A3 Prime-1
Standard & Poor's Corporation A- A-2
Duff & Phelps Credit Rating Co. (D&P), has assigned a rating of A- to the senior
debt of the Company, the seventh highest among ten investment grade ratings
available, indicating adequate likelihood of timely payment of principal and
interest. The Company's commercial paper has received a rating of D-1 from D&P,
the second highest of five investment grade ratings available, signifying a very
high certainty of timely payment based on excellent liquidity factors and good
fundamental protection factors.
Fitch Investors Service, Inc. (Fitch), has assigned ratings of A- and F-1 to the
Company's senior debt and commercial paper, the seventh and second highest among
ten and four investment grade ratings available, respectively. The A- rating is
assigned by Fitch to bonds considered to be of high credit quality with the
obligor's ability to pay interest and repay principal considered to be strong.
The F-1 rating is assigned to short-term issues which possess a very strong
credit quality based primarily on the existence of liquidity necessary to meet
the obligation in a timely manner.
On May 30, 1995, Moody's Investors Service, Inc. (Moody's), raised its ratings
of the Company's senior debt to A3, seventh highest among ten investment grade
ratings available, indicating many favorable investment attributes with security
factors for principal to be adequate. At that time, Moody's also upgraded the
Company's commercial paper rating to Prime-1, the highest of three such ratings,
reflecting superior ability for repayment of senior short-term debt obligations
and assured ability to access alternative sources of
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
liquidity. Additional repayment characteristics of commercial paper issues
receiving this premium rating include leading market position in a well
established industry, high rates of return on funds employed, and broad margins
in earnings coverage of fixed financial charges.
On October 26, 1995, Standard & Poor's Corporation (S&P), raised the credit
ratings of the Company and its parent, General Motors Corporation (GM) as well
as certain related affiliates. The S&P rating of the Company's senior debt was
upgraded to A-, seventh highest among ten investment grade ratings available.
The A- rating is assigned to bonds considered to have a strong capacity to pay
interest and repay principal. At that time, S&P affirmed its A-2 rating of the
Company's commercial paper, third highest of the four investment grade ratings
available, indicating strong capacity for timely payment determined by
significant safety characteristics.
At this date, GMAC is not under review by any of the above agencies.
In managing the interest rate and foreign exchange exposures of a multinational
finance entity, the Company and its subsidiaries utilize a variety of interest
rate and currency derivative financial instruments. As an end-user of such
instruments, GMAC is in a better position to minimize its funding costs and
offer attractive, competitive financing rates to its customers. The derivative
instruments utilized by the Company are relatively straightforward and involve
little complexity -- centering on interest rate swaps, floors, and caps as well
as currency swaps which are matched to offset a companion asset or funding
obligation.
The Company does not generally use any of these classes of instruments for
trading purposes, except for limited mortgage-related transactions entered into
by GMACMG. These instruments involve, to varying degrees, elements of credit
risk in the event a counterparty should default and market risk as the
instruments are subject to rate and price fluctuations. Credit risk is managed
through the periodic monitoring and approval of financially sound counterparties
and limiting the potential exposure to individual counterparties to
predetermined notional and exposure limits. Market risk is inherently limited by
the fact that the Company holds offsetting asset or liability positions. Market
risk is also managed on an ongoing basis by determining and monitoring the fair
value of each transaction in the portfolio. GMAC employs a variety of internal
swap and option models, using mid-market rates, to calculate mark-to-market
values of its derivative positions and obtains valuations from its
counterparties for reporting purposes.
The aggregate fair value of the Company's derivatives portfolio represents a
very small percentage of its $8.3 billion equity base at December 31, 1995. The
total notional amount of off-balance sheet instruments at December 31, 1995 and
1994, including written options of $1.3 billion and $3.2 billion, respectively,
was $18.8 billion and $18.2 billion, for the respective years. Summary schedules
of outstanding contracts by type and term as well as a reconciliation of the
Company's interest rate and currency swap activities for the years ended
December 31, 1995 and 1994, are included in Note 16 in the Notes to Financial
Statements.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CASH FLOWS
Cash provided by operating and financing activities in 1995 totaled $4,998.7
million and $7,694.8 million, respectively, excluding dividend payments to GM
totaling $950.0 million. Such cash was used in net investing activities,
principally for expansion of the finance receivables and operating lease
portfolios, totaling $11,634.2 million with the residual amount of $109.1
million increasing cash and cash equivalents. In comparison, cash provided by
operating and financing activities in 1994 totaled $4,735.8 million and $3,382.5
million, respectively, excluding dividend payments to GM totaling $875.0
million. Such cash was used in net investing activities totaling $9,933.4
million, mostly for acquiring operating lease assets, with a resultant decrease
in cash and cash equivalents amounting to $2,688.6 million. The 1994 decrease in
cash and cash equivalents reflects a planned reduction in liquidity reserve
requirements due to improved access to capital markets. Also in comparison, cash
provided by operating and investing activities in 1993 amounted to $4,901.8
million and $7,824.9 million, respectively. Such cash was utilized to reduce
debt by $11,314.6 million and pay dividends to GM of $1,250.0 million, resulting
in a net increase in cash and cash equivalents totaling $157.0 million.
BORROWING COSTS
The U.S. bank prime rate began and closed the year at 8.5% but averaged 8.83%
throughout 1995, 169 basis points above the 1994 average. As a result of the
higher general level of short-term rates, GMAC's cost of short-term debt in the
United States increased 150 basis points during 1995, averaging 6.05%, compared
to 4.55% in 1994 and 3.75% in 1993. United States medium-term and long-term
money costs decreased to an average of 7.35% for 1995, 14 and 48 basis points
below 1994 and 1993, respectively. The composite cost of debt for United States
operations averaged 6.86% in 1995, up from 6.48% in 1994 and 6.51% in 1993. The
Company's worldwide cost of funds averaged 7.02% in 1995, up 33 and 8 basis
points from 6.69% and 6.94% in 1994 and 1993, respectively.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COLLECTION RESULTS
The following statistics, which include serviced assets, summarize the Company's
delinquency, repossession and loss experience during the three year period ended
December 31, 1995:
1995 1994 1993
-------- -------- -------
RETAIL AND LEASE FINANCING
Accounts past due over 30 days (average) ......... 2.7% 2.5% 2.5%
Repossessions of new vehicles .................... 1.9% 1.7% 1.7%
Repossessions of used vehicles ................... 3.7% 2.6% 2.3%
Number of Repossessed Vehicles ................... 124,000 110,000 121,000
Net retail losses as a percent of
total average serviced assets .................... 0.84% 0.54% 0.63%
RETAIL LOSSES AS PERCENT OF LIQUIDATIONS:
Total Serviced - Worldwide ....................... 1.35% 0.85% 0.97%
New serviced - United States ..................... 1.08% 0.78% 1.02%
Retail sold - United States ...................... 0.45% 0.46% 0.49%
CHARGE-OFFS (IN MILLIONS OF DOLLARS):
Serviced receivables, net of recoveries .......... $352.8 $276.5 $419.1
Owned receivables, gross ......................... 422.4 361.0 437.9
Allowance for financing losses as a percent of
net serviced assets .............................. 1.19% 1.12% 1.23%
While the 1995 loss and charge-off experience was adverse in comparison to 1994,
it was better than historical norms. The major factor influencing the higher
losses incurred in 1995 was increased retail vehicle charge-offs in the United
States.
INSURANCE OPERATIONS
Gross premiums written by Motors Insurance Corporation and its subsidiaries
("MIC") totaled $1,324.8 million in 1995 compared to $1,360.9 million in 1994
and $1,322.9 million in 1993 while net premiums written totaled $1,156.0 million
in 1995, a decrease of $55.1 million from 1994 and $48.8 million below 1993.
Capital gains at MIC for 1995 totaled $86.4 million, $21.7 million above 1994
but $117.1 million below 1993.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MORTGAGE OPERATIONS
The GMACMG maintained its position as a leading mortgage banker in the United
States. For the 1995 calendar year, loan origination, mortgage servicing
acquisitions and correspondent loan volume totaled $35.9 billion, an increase of
$18.8 billion and $12.0 billion over 1994 and 1993, respectively. This increase
resulted from acquisition activities in addition to expanded participation in
the market for residential servicing rights, reflecting an industry
consolidation trend and a favorable interest rate environment. Reflecting this
activity, the combined GMACMG servicing portfolio at December 31, 1995,
including master-serviced loans totaling $19.4 billion, was $81.2 billion, 38%
above the $58.7 billion at December 31, 1994.
FINANCING REVENUES AND OTHER INCOME
Consolidated financing revenue totaled $11,664.0 million in 1995, up $2,245.2
million and $2,912.0 million from 1994 and 1993, respectively. The improvement
from 1994 to 1995 is primarily attributable to increased revenues in all areas
of the business. Retail and lease financing revenue, at $3,291.6 million for
1995, was $336.6 million higher than 1994, but $381.8 million lower than 1993.
Operating lease revenue, net of depreciation, reached $1,980.2 million in 1995,
compared to $1,621.9 million in 1994 and $1,168.9 million in 1993, as leasing
continues to gain popularity among consumers. In 1995, wholesale and term loan
financing revenue amounted to $2,087.4 million, compared with $1,608.1 million
in 1994 and $1,207.7 million in 1993, with the increase primarily attributable
to the December 1993 resumption of wholesale inventory financing previously
transacted by General Motors as well as greater dealer inventories and higher
floorplan financing rates.
The $705.4 million interest and discount expense increase from 1994 is primarily
due to increased funding levels and higher interest rates. The $490.3 million
decrease from 1993 to 1994 was primarily due to a more favorable year to year
medium-term and long-term funding mix resulting from an increasing positive
perception of GMAC's financial position by the capital markets.
Other income, including gains and fees related to sold finance receivables as
well as mortgage banking activities, totaled $2,116.8 million for 1995, as
compared to $1,598.6 million and $2,624.3 million in 1994 and 1993,
respectively. Significantly higher fee and investment income at GMACMG produced
the majority of the 32% increase from 1994.
Pre-tax gains on sold retail receivables, excluding the related limited recourse
loss provision totaled $38.2 million during 1995 compared with $30.8 million for
the previous year and $436.4 million in 1993. Retail receivables sales generally
accelerate the recognition of income on retail contracts, net of servicing fees
and other related deferrals, into the period the receivables are sold. The
amount of such gains is affected by a number of factors and may create
variability in quarterly earnings depending on the type and amount of
receivables sold, the structure used to effect the sale, as well as the
prevailing financial market conditions.
This acceleration results in the pre-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
tax gains reflected above, and can create variability in annual earnings
depending on the amount, timing and the net margin between the average yield on
and all-in-cost of the sold receivables. The acceleration also reduces profit
potential in future periods. Although this acceleration can significantly impact
quarterly or year-to-year comparisons, it should be noted that the Company
historically recognizes approximately 70% of interest and discount revenue in
the first two years of a retail contract (reflecting the term of the underlying
contracts, revenue recognition methods and historical prepayment experience). As
such, depending on the timing of receivables sales in a given year, the net
impact on annual earnings may be substantially less than the gains indicated.
EXPENSES
Salaries and benefits increased in 1995 to $892.8 million from $813.7 million
and $825.8 million in 1994 and 1993, respectively. The higher salary costs in
1995, when compared to 1994, primarily reflect wage increases to a relatively
stable workforce, while the 1994 reduction reflected a lower employee population
partially offset by increased benefit costs primarily for retirement and
post-retirement benefits.
Other operating expenses totaled $1,414.7 million for 1995, $241.6 million and
$291.5 million higher than the respective comparable 1994 and 1993 periods. The
1995 increase is partially attributable to higher data processing costs, higher
collection and repossession costs, higher valuation adjustments related to
repossessed vehicles, and higher renovation and relocation costs related to
branch restructuring activities. Expenses in 1994 exceeded 1993 primarily due to
sales promotion expense and valuation adjustments related to repossessed
vehicles.
As noted earlier, net retail losses (as a percentage of total average serviced
assets) increased to 0.84% in 1995 from 0.54% in 1994; primarily resulting from
a rise in vehicle charge-off experience in the United States. This increase in
repossessions and losses as well as the Company's continuous review of its
reserve requirements resulted in the $448.8 million 1995 provision for financing
losses, $271.5 million and $148.0 million higher than the respective 1994 and
1993 results.
Amortization of intangible assets totaled $84.3 million in 1995, compared with
$45.5 million and $141.1 million in 1994 and 1993, respectively. The 85%
increase from 1994 is predominately attributable to higher amortization of
mortgage servicing rights concurrent with growth in the servicing portfolio.
United States, foreign and other income taxes amounted to $752.2 million for
1995, $239.5 million and $160.5 million more than 1994 and 1993, respectively.
The increase primarily reflects a larger pre-tax income and a higher effective
tax rate on a consolidated basis. The effective income tax rate for 1995 was
42.2%, compared to 35.6% in 1994 and 37.6% in 1993. The 6.6 percentage point
increase in the 1995 effective tax rate can be attributed almost entirely to
higher U.S. and foreign taxes assessed on foreign sourced income.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 112, Employers' Accounting
for Postemployment Benefits, which established a new accounting principle for
the cost of benefits provided to former or inactive employees after employment
but before retirement. The Statement was effective for fiscal years beginning
after December 15, 1993. The Company adopted this standard effective January 1,
1994; the after-tax unfavorable cumulative effect of this change was $7.4
million. The ongoing effect in subsequent periods is not material.
In May 1993, the FASB issued SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, which requires a creditor to measure impairment based on
the fair value of the collateral when it is determined that foreclosure is
probable. It also clarifies that a creditor should evaluate the collectibility
of both contractual interest and principal of all receivables when assessing the
need for a loss accrual. In October 1994, the FASB issued SFAS No. 118,
Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures, an amendment of FASB Statement No. 114. This Statement amended SFAS
No. 114 to allow a creditor to use existing methods for recognizing interest
income on an impaired loan. Both Statements apply to financial statements for
fiscal years beginning after December 15, 1994. The Company adopted both SFAS
No. 114 and SFAS No. 118 effective January 1, 1994. The Company's loans
primarily consist of large groups of smaller-balance homogeneous loans which are
collectively evaluated for impairment and to which these standards do not apply.
The loans of the Company that are affected by these Statements were previously,
and continue to be, carried at the lower of book value or the fair value of the
collateral. There was no material impact on the consolidated financial position
or results of operations as a result of adoption.
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, effective for
fiscal years beginning after December 15, 1995. This Statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable tangibles to be disposed
of. The Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In addition, the Statement requires that certain
long-lived assets and intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. The Company has determined that
the effect of adopting this accounting standard will not have a material effect
on its consolidated operating results or financial position. The Company adopted
this accounting standard effective January 1, 1996.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage Servicing
Rights, amending SFAS No. 65, Accounting for Certain Mortgage Banking
Activities. This statement eliminated the accounting distinction between rights
to service mortgage loans that are acquired through origination activities and
those acquired through purchase. The Company adopted this standard effective
January 1, 1995 and capitalized certain costs relating to its originated
mortgage servicing rights, the effect of which was not material to the
consolidated financial statements.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors Acceptance
Corporation and subsidiaries were prepared by management, which is responsible
for their integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and, as such, include
amounts based on judgments of management. Financial information elsewhere in
Part II is consistent with that in the consolidated financial statements.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books and
records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. Perhaps the most important
feature in the system of control is that it is continually reviewed for its
effectiveness and is augmented by written policies and guidelines, the careful
selection and training of qualified personnel and a strong program of internal
audit.
Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the
consolidated financial statements of General Motors Acceptance Corporation and
its subsidiaries and issue reports thereon. The audit is conducted in accordance
with generally accepted auditing standards which comprehend the consideration of
internal accounting controls and tests of transactions to the extent necessary
to form an independent opinion on the financial statements prepared by
management. The Independent Auditors' Report appears on the next page.
The Board of Directors, through its Audit Committee (the "Committee"), is
responsible for: (1) assuring that management fulfills its responsibilities in
the preparation of the consolidated financial statements; and (2) engaging the
independent auditors. The Committee reviews the scope of the audits and the
accounting principles being applied in financial reporting. The independent
auditors, representatives of management and the internal auditors meet regularly
(separately and jointly) with the Committee to review the activities of each, to
ensure that each is properly discharging its responsibilities and to assess the
effectiveness of the system of internal accounting controls. It is management's
conclusion that the system of internal accounting controls at December 31, 1995,
provides reasonable assurance that the books and records reflect the
transactions of the companies and that its established policies and procedures
are complied with. To ensure complete independence, Deloitte & Touche LLP has
full and free access to meet with the Committee, without management
representatives present, to discuss the results of the audit, the adequacy of
internal accounting controls and the quality of the financial reporting.
S/ J. R. RINES S/ E. A. FELDSTEIN
- ---------------------------- -------------------------------------
John R. Rines, President and Eric A. Feldstein, Executive Vice
Chief Executive Officer President and Chief Financial Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
General Motors Acceptance Corporation:
We have audited the Consolidated Balance Sheet of General Motors Acceptance
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
Consolidated Statement of Income and Net Income Retained for Use in the Business
and Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of General Motors Acceptance Corporation and
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
S\ DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
600 Renaissance Center
Detroit, Michigan 48243-1704
January 29, 1996
<PAGE>
<TABLE>
<CAPTION>
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31
--------- ---------
1995 1994
--------- ---------
(in millions of dollars)
<S> <C> <C>
Cash and Cash Equivalents (Note 1) ............................ $ 1,448.6 $ 1,339.5
--------- ---------
EARNING ASSETS
Investments in securities (Note 5) ............................ 4,328.2 3,891.7
Finance receivables, net (Notes 2 and 3) ...................... 59,330.4 54,625.1
Net investment in operating leases (Note 4) ................... 22,134.9 17,809.2
Notes Receivable from General Motors Corporation (Note 13) .... -- 1,080.5
Real estate mortgages - including mortgages held for resale
of $1,486.8 and $1,244.0 ..................................... 2,903.7 2,164.6
Due and deferred from receivable sales, net (Note 3) .......... 1,371.4 1,564.6
Other (Note 13) ............................................... 400.7 938.9
--------- ---------
Total earning assets ....................................... 90,469.3 82,074.6
--------- ---------
OTHER ASSETS
Intangible assets, at cost less amortization (Note 1) ......... 637.1 377.4
Other nonearning assets (Note 6) .............................. 2,018.0 1,745.9
--------- ---------
Total other assets ......................................... 2,655.1 2,123.3
--------- ---------
TOTAL ASSETS .................................................. $94,573.0 $85,537.4
========= =========
Notes, loans and debentures payable within
one year (Notes 7 and 8) ..................................... $43,871.8 $35,114.8
--------- ---------
ACCOUNTS PAYABLE AND OTHER LIABILITIES
General Motors Corporation and affiliated companies (Note 13) . 1,787.6 1,867.3
Interest ...................................................... 1,048.0 957.1
Unpaid insurance losses and loss adjustment expense ........... 1,499.7 1,563.6
Unearned insurance premiums ................................... 1,421.9 1,422.0
Deferred income taxes (Note 10) ............................... 2,175.6 1,704.5
United States and foreign income and other taxes payable ...... 294.5 20.3
Other postretirement benefits (Note 12) ....................... 600.4 574.5
Other ......................................................... 2,553.6 2,880.0
--------- ---------
Total accounts payable and other liabilities ............... 11,381.3 10,989.3
--------- ---------
Notes, loans and debentures payable after one year (Note 9) ... 31,050.6 31,539.6
--------- ---------
Common stock, $100 par value (authorized 25,000,000 shares,
outstanding 22,000,000 shares) ............................... 2,200.0 2,200.0
Net income retained for use in the business ................... 5,734.7 5,653.7
Net unrealized gains on securities ............................ 284.7 52.4
Unrealized accumulated foreign currency translation adjustment 49.9 (12.4)
--------- ---------
Total stockholder's equity ................................. 8,269.3 7,893.7
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY .................... $94,573.0 $85,537.4
========= =========
Reference should be made to the Notes to Financial Statements.
</TABLE>
<PAGE>
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND
NET INCOME RETAINED FOR USE IN THE BUSINESS
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1995 1994 1993
---------- ---------- ----------
(in millions of dollars)
FINANCING REVENUE (NOTE 1)
Retail and lease financing ............... $ 3,291.6 $ 2,955.0 $ 3,673.4
Operating leases ......................... 6,285.0 4,855.7 3,870.9
Wholesale and term loans ................. 2,087.4 1,608.1 1,207.7
---------- ---------- ----------
Total financing revenue ............... 11,664.0 9,418.8 8,752.0
Interest and discount .................... (4,936.3) (4,230.9) (4,721.2)
Depreciation on operating leases ......... (4,304.8) (3,233.8) (2,702.0)
----------- ---------- ----------
Net financing revenue ................. 2,422.9 1,954.1 1,328.8
Insurance premiums earned ................ 1,082.4 1,127.6 1,107.2
Other income (Notes 3 and 13) ............ 2,116.8 1,598.6 2,624.3
---------- ---------- ----------
NET FINANCING REVENUE AND OTHER ....... 5,622.1 4,680.3 5,060.3
---------- ---------- ----------
EXPENSES
Salaries and benefits .................... 892.8 813.7 825.8
Other operating expenses ................. 1,414.7 1,173.1 1,123.2
Insurance losses and loss adjustment
expenses ................................ 998.3 1,030.9 1,096.6
Provision for financing losses (Note 2) .. 448.8 177.3 300.8
Amortization of intangible assets (Note 1) 84.3 45.5 141.1
---------- ---------- ----------
Total expenses ........................ 3,838.9 3,240.5 3,487.5
---------- ---------- ----------
Income before income taxes ............... 1,783.2 1,439.8 1,572.8
United States, foreign and other income
taxes (Note 10) ......................... 752.2 512.7 591.7
---------- ---------- ----------
Income before cumulative effect of
accounting change ....................... 1,031.0 927.1 981.1
Cumulative effect of accounting change
(Note 12)................................ -- (7.4) --
---------- ---------- ----------
NET INCOME ............................ 1,031.0 919.7 981.1
Net income retained for use in the
business at beginning of the year ....... 5,653.7 5,609.0 5,877.9
---------- ---------- ----------
Total .................................... 6,684.7 6,528.7 6,859.0
Cash dividends ........................... 950.0 875.0 1,250.0
---------- ---------- ----------
NET INCOME RETAINED FOR USE IN THE
BUSINESS AT END OF THE YEAR .......... $ 5,734.7 $ 5,653.7 $ 5,609.0
========== ========== ==========
Reference should be made to the Notes to Financial Statements.
<PAGE>
<TABLE>
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1995 1994 1993
---------- ---------- ----------
(in millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before cumulative effect of accounting
<S> <C> <C> <C>
changes ................................................. $ 1,031.0 $ 927.1 $ 981.1
Depreciation ............................................. 4,342.7 3,267.2 2,751.5
Provision for financing losses ........................... 448.8 177.3 300.8
Mortgage loans-originations/purchases .................... (12,085.6) (10,135.7) (21,583.7)
-proceeds on sale .......................... 11,132.7 10,719.2 22,309.5
Changes in the following items
Due to General Motors Corporation and
affiliated companies .................................. (133.6) (618.1) (333.9)
Taxes payable and deferred ............................. 855.8 542.8 123.4
Interest payable ....................................... 86.6 (50.2) (180.7)
Other assets ........................................... (212.2) (598.4) (97.0)
Other liabilities ...................................... (156.2) 467.7 222.0
Other .................................................... (311.3) 36.9 408.8
---------- ---------- ----------
Net cash provided by operating activities ............. 4,998.7 4,735.8 4,901.8
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables-acquisitions ......................... (163,033.3) (156,579.8) (103,396.3)
-liquidations ......................... 132,242.6 137,598.4 92,808.6
Notes receivable from General Motors Corporation ......... 1,080.5 275.0 10,207.7
Operating leases-acquisitions ............................ (14,034.6) (13,086.8) (6,971.3)
-liquidations ............................ 5,642.5 3,569.5 2,572.7
Investments in securities-acquisitions ................... (12,723.0) (11,715.3) (10,976.1)
-liquidations ................... 12,397.3 11,495.2 10,676.7
Proceeds from sales of receivables-wholesale ............. 20,718.2 13,098.9 --
-retail ................ 5,264.3 5,701.1 13,072.2
Due and deferred from receivable sales ................... 231.9 322.9 (618.4)
Other .................................................... 579.4 (612.5) 449.1
---------- ---------- ----------
Net cash (used in)/provided by investing activities ... (11,634.2) (9,933.4) 7,824.9
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES Debt with original maturities 90 days and
over
-proceeds ........................................... 47,807.0 46,348.0 38,577.4
-liquidations ....................................... (44,138.7) (46,541.3) (45,148.0)
Debt with original maturities less than 90 days-net change 4,026.5 3,540.8 (4,744.0)
Dividends paid ........................................... (950.0) (875.0) (1,250.0)
Proceeds from issuance of stock to General Motors ........ -- 35.0 --
---------- ---------- ----------
Net cash provided by/(used in) financing activities.... 6,744.8 2,507.5 (12,564.6)
---------- ---------- ----------
Effect of exchange rate changes on cash and cash
equivalents ............................................. (0.2) 1.5 (5.1)
---------- ---------- ----------
Net increase/(decrease) in cash and cash equivalents .. 109.1 (2,688.6) 157.0
Cash and cash equivalents at the beginning of the year ... 1,339.5 4,028.1 3,871.1
---------- ---------- ----------
Cash and cash equivalents at the end of the year ......... $ 1,448.6 $ 1,339.5 $ 4,028.1
========== ========== ==========
SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid ........................................... $ 4,783.3 $ 4,223.7 $ 4,819.1
Income taxes paid/(recovered) ........................... $ 210.9 $ (16.0) $ 430.5
Reference should be made to the Notes to Financial Statements.
</TABLE>
<PAGE>
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of General Motors
Acceptance Corporation and its domestic and foreign subsidiaries (the
"Company").
The Company, a wholly-owned subsidiary of General Motors Corporation ("General
Motors"), was incorporated in 1919 under the New York Banking Law relating to
investment companies.
NATURE OF OPERATIONS
The Company is a financial services organization that principally provides
consumer and dealer vehicle financing. The principal markets for the Company's
vehicle financial products and services are North America, Latin America, Europe
and Australia.
REVENUE RECOGNITION
In the case of finance receivables in which the face amount includes the finance
charge (principally retail financing), earnings are recorded in income over the
terms of the receivables using the interest method. On finance receivables in
which the face amount represents the principal (principally wholesale,
interest-bearing financing and fleet leasing), the interest is taken into income
as earned. Certain loan origination costs are deferred and amortized to
financing revenue over the life of the related loans using the interest method.
Income from operating lease assets is recognized as scheduled payments become
due.
SALES OF RECEIVABLES
The Company sells retail and wholesale receivables through consolidated special
purpose subsidiaries which absorb all losses related to sold receivables to the
extent of their subordinated investments, as well as certain segregated
restricted cash flows. Appropriate limited recourse loss allowances associated
with sold receivables are transferred from the allowance for financing losses
and are included in "Due and deferred from receivable sales, net". Normal
servicing fees on sold receivables are earned over time on a level yield basis.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pre-tax gains on sold receivables are recorded in other income. In determining
the gain or loss for each qualifying sale of retail receivables, the investment
in the sold receivable pool is allocated between the portion sold and the
portion retained based on their relative fair values on the date of sale. The
receivables sold are removed from the balance sheet caption "Finance receivable,
net", and the Company's retained interests in such receivables are included in
"Due and deferred from receivable sales, net".
INSURANCE OPERATIONS
Insurance premiums are earned on a basis related to coverage provided over the
terms of the policies. Commission costs and premium taxes incurred in acquiring
new business are deferred and amortized over the terms of the related policies
on the same basis as premiums are earned. The liability for unpaid losses and
loss adjustment expenses includes amounts relating to coinsurance and assumed
reinsurance agreements and represents the estimated amount of reported losses,
with an experience factor added to provide for losses incurred but not reported.
Estimated salvage and subrogation recoverable is recognized at the time losses
are incurred. Insurance liabilities are necessarily based on estimates and the
ultimate liability may vary from such estimates.
Revisions in estimates are reported in the period in which they arise.
Reinsurance premiums, commissions and reserves related to reinsured business are
accounted for on a basis consistent with those used in accounting for the
original policies issued and the terms of the reinsurance contracts. Estimated
amounts recoverable from reinsurers on unpaid losses, including incurred but not
reported losses, and loss adjustment expenses pursuant to reinsurance contracts
have been reported as an asset. Amounts paid to reinsurers relating to the
unexpired portion of reinsurance contracts are also reported as an asset.
CASH EQUIVALENTS
Cash equivalents are defined as short-term, highly liquid investments with
original maturities of 90 days or less.
ALLOWANCE FOR FINANCING LOSSES
An allowance for credit losses is generally established during the period in
which receivables are acquired and is maintained in amounts considered by
management to be appropriate in relation to receivables outstanding.
Losses arising from repossession of the collateral supporting doubtful accounts
are recognized upon repossession of the collateral. Repossessed collateral is
recorded at estimated realizable value in other nonearning assets and
adjustments to the related valuation allowance are included in operating
expense. Where repossession has not been effected, losses are charged off as
soon as it is determined that the collateral cannot be repossessed, generally
not more than 150 days after default.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
Nonretail finance receivables are reduced to the estimated fair value of
collateral when determined to be impaired or uncollectible.
INTANGIBLE ASSETS
Intangible assets representing mortgage servicing rights are being amortized
over periods that generally match future net mortgage servicing revenues, while
goodwill is being amortized on a straight-line basis over periods of between 15
and 40 years. Amortization is applied directly to the asset account.
DEPRECIATION
The Company and its subsidiaries provide for depreciation of vehicles and other
equipment on operating leases or in company use generally on a straight-line
basis. The difference between the net book value and the proceeds of sale or
salvage on items disposed of is included in income as a charge against or credit
to the provision for depreciation.
FINANCIAL INSTRUMENTS
The Company is party to a variety of interest rate and foreign exchange swap
agreements and options.
The Company accounts for interest rate swap agreements using settlement
accounting as they alter the characteristics of assets or liabilities to which
they are matched. The cash flows from interest rate swaps are accounted for as
adjustments to interest income or expense depending on the underlying exposure.
Gains and losses from terminated contracts are deferred and amortized over the
remaining period of the original swap or the remaining term of the underlying
instrument whichever is shorter. Open swap positions are reviewed regularly to
ensure that they remain effective in managing interest rate risk. Written
options (including swaptions and interest rate caps) and related premiums as
well as interest rate basis swaps are marked-to-market on a current basis with
the related income or expense included in other income. Portfolio swaps are
identified with specific portfolios of assets or liabilities with any amounts
due or payable, and amounts paid or received, offset against the related
interest income or expense.
Foreign exchange swap agreements are entered into in connection with the
Company's management of its foreign currency exposures and are accounted for
using settlement accounting as it relates to periodic interest payments. The
foreign currency gains and losses associated with these contracts offset the
correlating foreign currency gains and losses related to the designated
liabilities.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2. FINANCE RECEIVABLES
The composition of finance receivables outstanding at December 31, 1995 and
1994 is summarized as follows:
DECEMBER 31
----------------------
1995 1994
---------- ----------
(in millions of dollars)
United States
Retail ........................................... $ 26,979.9 $ 23,486.8
Wholesale ........................................ 15,187.2 14,560.9
Leasing and lease financing ...................... 1,296.0 1,613.4
Term loans to dealers and others ................. 3,729.6 3,753.6
---------- ----------
Total United States ............................... 47,192.7 43,414.7
---------- ----------
Canada
Retail ........................................... 786.8 1,101.1
Wholesale ........................................ 1,471.4 1,335.1
Leasing and lease financing ...................... 714.8 671.4
Term loans to dealers and others ................. 142.0 128.0
---------- ----------
Total Canada ...................................... 3,115.0 3,235.6
---------- ----------
Europe
Retail ........................................... 5,955.9 5,340.5
Wholesale ........................................ 3,863.0 3,413.8
Leasing and lease financing ...................... 567.0 547.8
Term loans to dealers and others ................. 230.5 249.3
---------- ----------
Total Europe ...................................... 10,616.4 9,551.4
---------- ----------
Other Countries
Retail ........................................... 1,908.6 1,306.3
Wholesale ........................................ 656.1 565.9
Leasing and lease financing ...................... 451.2 447.5
Term loans to dealers and others ................. 120.8 106.9
---------- ----------
Total Other Countries ............................. 3,136.7 2,426.6
---------- ----------
Total finance receivables ......................... 64,060.8 58,628.3
---------- ----------
Deductions
Unearned income .................................. 3,922.5 3,309.9
Allowance for financing losses ................... 807.9 693.3
---------- ----------
Total deductions .................................. 4,730.4 4,003.2
---------- ----------
Finance receivables, net .......................... $ 59,330.4 $ 54,625.1
========== ==========
Retail, lease financing and leasing receivable instalments past due over 30
days amounted to $90.2 million and $55.5 million at December 31, 1995 and 1994,
respectively. Instalments on term loans to dealers and others past due over 30
days aggregated $85.2 million at December 31, 1995 and $70.7 million at December
31, 1994.
<PAGE>
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2. FINANCE RECEIVABLES (CONCLUDED)
The aggregate amount of total finance receivables maturing in each of the five
years following December 31, 1995, is as follows: 1996 - $37,094.7 million; 1997
- - $11,316.8 million; 1998 - $8,169.9 million; 1999 - $4,530.2 million; 2000
$2,245.8 million; 2001 and thereafter - $703.4 million.
The following table presents an analysis of the allowance for financing losses:
DECEMBER 31
-------------------------
1995 1994 1993
------- ------- -------
(in millions of dollars)
Allowance for financing losses at
beginning of the year ................. $ 693.3 $ 748.0 $ 817.0
------- ------- -------
Charge-offs
United States ......................... (372.2) (310.7) (365.3)
Other Countries ....................... (50.2) (50.3) (72.6)
------- ------- -------
Total charge-offs ...................... (422.4) (361.0) (437.9)
Recoveries and other
United States ......................... 102.0 111.8 58.7
Other Countries ....................... 2.5 4.2 15.8
------- ------- -------
Total recoveries and other ............. 104.5 116.0 74.5
Transfers to other nonearning assets ... -- -- (40.2)
Transfers from/(to) sold receivables
allowance ............................. (16.3) 13.0 33.8
Provisions charged to income ........... 448.8 177.3 300.8
------- ------- -------
Allowance for financing losses
at end of the year .................... $ 807.9 $ 693.3 $ 748.0
======= ======= =======
Impaired loans of the Company are carried at the lower of book value or the fair
value of the collateral. The following table presents a summary of the allowance
for financing losses on impaired loans for the years ended December 31, 1995 and
1994:
1995 1994
---------- ----------
(in millions of dollars)
Allowance for Financing Losses at
beginning of year ........................... $ 134.8 $ 173.9
Additions ............................... 6.2 30.1
Charge-offs ............................. (22.6) (69.2)
---------- ----------
Allowance for Financing Losses at
end of year ................................. $ 118.4 $ 134.8
========== ==========
The total investments in these loans were $248.6 million and $277.8 million at
December 31, 1995 and 1994, respectively. The average recorded investments
during 1995 and 1994 were $283.2 million and $326.0 million, respectively. The
Company's policy is to recognize interest income related to impaired loans on a
cash-basis.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 3. SALE OF FINANCE RECEIVABLES
The Company participates in various sales of receivables programs and has sold
retail finance receivables through special purpose subsidiaries with principal
aggregating $3.6 billion in 1995, $3.7 billion in 1994 and $13.6 billion in
1993. These subsidiaries generally retain a subordinated investment of no
greater than 9% of the total receivables pool and market the remaining portion.
These subordinated investments absorb losses related to sold receivables to the
extent that such losses are greater than the excess cash flows from those
receivables and cash reserves related to the sale transaction. Pre-tax gains
relating to such sales recorded in "Other income" (excluding limited recourse
loss provisions which generally have been provided at the time the contracts
were originally acquired) amounted to $38.2 million in 1995, $30.8 million in
1994 and $436.4 million in 1993. The Company continues to service these
receivables for a fee and earns other related ongoing income. The Company's
retail finance receivable servicing portfolio amounted to $6.6 billion and $9.9
billion at December 31, 1995 and 1994, respectively.
The Company has sold wholesale receivables resulting in decreases in wholesale
outstandings of $4.7 billion and $2.6 billion at December 31, 1995 and 1994,
respectively. The Company continues to service these receivables for a fee and
is committed to sell eligible wholesale receivables arising in certain dealer
accounts.
The Company's interest in excess servicing cash flows, subordinated interest in
trusts, cash deposits and other related amounts are generally restricted assets
and subject to limited recourse provisions. The following is a summary of
amounts included in "Due and deferred from receivable sales, net."
DECEMBER 31
----------------------
1995 1994
---------- ----------
(in millions of dollars)
Excess servicing ............................ $ 214.3 $ 392.3
Other restricted amounts:
Subordinated interest in trusts ............ 393.3 526.6
Cash deposits held by trusts ............... 786.2 710.8
Other ...................................... 21.8 (2.3)
Allowance for estimated credit losses on sold
receivables ................................ (44.2) (62.8)
---------- ----------
Total ....................................... $ 1,371.4 $ 1,564.6
========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 3. SALE OF FINANCE RECEIVABLES (CONCLUDED)
The following table presents a summary of the allowance for estimated credit
losses on sold receivables:
DECEMBER 31
----------------------------
1995 1994 1993
-------- -------- --------
(in millions of dollars)
Allowance for estimated credit
losses at beginning of the year ..... $ 62.8 $ 107.3 $ 196.8
Transfers from/(to) allowance for
financing losses .................... 16.3 (13.0) (33.8)
Charge-offs .......................... (34.9) (31.5) (55.7)
-------- -------- --------
Allowance for estimated credit
losses at end of the year ........... $ 44.2 $ 62.8 $ 107.3
======== ======== ========
NOTE 4. INVESTMENT IN OPERATING LEASES
Operating leases at year-end were as follows:
DECEMBER 31
----------------------
1995 1994
---------- ----------
(in millions of dollars)
Investment in operating leases
Vehicles and other equipment, at cost ... $ 28,747.9 $ 22,876.1
Less: Accumulated depreciation ........ 6,613.0 5,066.9
---------- ----------
Net investment in operating leases ......... $ 22,134.9 $ 17,809.2
========== ==========
The value of the Company's investment in operating leases is based on estimated
residual values of the leased equipment, which are calculated at the lease
inception date. Realization of the residual values is dependent on GMAC's future
ability to market the vehicles under then prevailing market conditions. Although
realization is not assured, management believes it is more likely than not that
the estimated residual values will be realized.
The lease payments applicable to equipment on operating leases maturing in each
of the five years following December 31, 1995, are as follows: 1996 - $5,197.2
million; 1997 - $3,272.8 million; 1998 - $1,269.8 million; 1999 - $118.8 million
and 2000 - $7.3 million.
Each of these assets is depreciated on a straight-line basis over a period of
time which is consistent with the term of the underlying operating lease
agreement.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 5. INVESTMENTS IN SECURITIES
Bonds, equity securities, notes, certificates of deposit, other investments and
preferred stocks with mandatory redemption terms are carried at fair value. For
available for sale investments, the aggregate excess of market value over cost,
net of related income taxes, is included as a separate component of
stockholder's equity. For trading securities the excess of market value over
cost is included in income. The Company determines cost on the specific
identification basis. The Company's investments listed below consist primarily
of securities classified as available for sale. The Company also had $484.8
million and $502.0 million of mortgage-backed securities included in other debt
securities which were classified as trading securities at December 31, 1995 and
1994, respectively. The fair value of the investments, except for the trading
securities portfolio, presented herein is based on quoted market prices. The
fair value of the trading securities is based on estimated market value.
DECEMBER 31, 1995
----------------------------------------------
Fair Unrealized Unrealized
TYPE OF SECURITY COST VALUE GAINS LOSSES
---------- ---------- ---------- ----------
(in millions of dollars)
Bonds, notes and
other securities
United States government
and governmental agencies
and authorities ........... $ 268.0 $ 279.4 $ 11.5 $ (0.1)
States, municipalities and
political subdivisions .... 1,720.8 1,825.0 112.7 (8.5)
Other ...................... 1,621.3 1,674.1 54.5 (1.7)
---------- ---------- ---------- ----------
Total debt securities ....... $ 3,610.1 $ 3,778.5 $ 178.7 $ (10.3)
---------- ---------- ---------- ----------
Equity securities ........... $ 280.0 $ 549.7 $ 284.6 $ (14.9)
---------- ---------- ---------- ----------
Total investment in securities $ 3,890.1 $ 4,328.2 $ 463.3 $ (25.2)
========== ========== ========== ==========
DECEMBER 31, 1994
----------------------------------------------
Fair Unrealized Unrealized
TYPE OF SECURITY COST VALUE GAINS LOSSES
---------- ---------- ---------- ----------
(in millions of dollars)
Bonds, notes and
other securities
United States government
and governmental agencies
and authorities ........... $ 298.5 $ 285.0 $ 0.3 $ (13.8)
States, municipalities and
political subdivisions .... 1,813.3 1,747.4 38.0 (103.9)
Other ...................... 1,417.0 1,387.3 4.2 (33.9)
---------- ---------- ---------- ----------
Total debt securities ....... $ 3,528.8 $ 3,419.7 $ 42.5 $ (151.6)
---------- ---------- ---------- ----------
Equity securities ........... $ 280.9 $ 472.0 $ 203.2 $ (12.1)
---------- ---------- ---------- ----------
Total investment in securities $ 3,809.7 $ 3,891.7 $ 245.7 $ (163.7)
========== ========== ========== ==========
<PAGE>
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 5. INVESTMENTS IN SECURITIES (CONCLUDED)
The distribution of maturities of debt securities outstanding at December 31,
1995 is summarized as follows:
DECEMBER 31, 1995
----------------------
Fair
MATURITY COST VALUE
---------- ----------
(in millions of dollars)
Due in one year or less ................. $ 265.5 $ 269.6
Due after one year through five years ... 900.8 935.2
Due after five years through ten years .. 1,020.4 1,084.5
Due after ten years ..................... 861.9 925.7
Mortgage-backed securities .............. 561.5 563.5
---------- ----------
Total debt securities ................... $ 3,610.1 $ 3,778.5
========== ==========
The following table summarizes proceeds, gains and losses realized from the sale
of investment securities during the three year period ended December 31, 1995:
1995 1994 1993
-------- -------- --------
(in millions of dollars)
DEBT SECURITIES:
Sale Proceeds ............$1,370.9 $1,036.4 $2,093.4
Gross Realized Gains ..... 21.4 15.0 58.6
Gross Realized Losses .... 15.5 18.9 13.3
EQUITY SECURITIES:
Sale Proceeds ............$ 202.7 $ 185.1 $ 258.6
Gross Realized Gains ..... 87.4 80.5 160.5
Gross Realized Losses .... 6.9 11.9 2.3
NOTE 6. OTHER NONEARNING ASSETS
Other nonearning assets consist of:
DECEMBER 31
----------------------
1995 1994
---------- ----------
(in millions of dollars)
Property and equipment at cost ............. $ 258.7 $ 257.6
Accumulated depreciation ................... (123.6) (127.8)
---------- ----------
Net property ............................... $ 135.1 $ 129.8
Nonperforming assets (net of valuation
reserves) ................................. 339.1 304.8
Insurance premiums receivable .............. 180.1 209.4
Residential servicing advances and excess
servicing fees ............................ 151.2 217.7
Deferred policy acquisition cost ........... 228.8 200.3
Other assets ............................... 983.7 683.9
---------- ----------
Total ...................................... $ 2,018.0 $ 1,745.9
========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 7. LINES OF CREDIT WITH BANKS
The Company maintains four syndicated bank credit facilities in the U.S. and
Europe.
As of December 31, 1995, syndicated bank credit facilities in the U.S. included
a five year, $10.0 billion revolving credit facility which expires in May, 2000,
and a $12.2 billion 364-day asset-backed commercial paper liquidity and
receivables credit facility for New Center Asset Trust (NCAT), a
non-consolidated limited purpose business trust established to issue
asset-backed commercial paper.
In Europe, the syndicated facilities are used as needed to fund GMAC's financing
operations in line with the Company's historical reliance on bank debt outside
the U.S. and Canada. In this regard, these five-year syndicated facilities
expire in May, 2000, and are comprised of a $500 million revolving credit
facility to GMAC International Finance in the Netherlands and a 400 million
United Kingdom Pound Sterling revolving credit facility to GMAC (UK) plc.
With respect to the $10.0 billion revolving credit facility, GMAC has agreed to
a covenant such that, so long as the commitments remain in effect or any amount
is owing to any lender under such commitments, the ratio of consolidated debt to
total stockholder's equity at the last day of any fiscal quarter shall not
exceed 11.0:1. At December 31, 1995 and 1994, this ratio amounted to 9.1:1 and
8.4:1, respectively.
Inclusive of these syndicated agreements, credit facilities maintained worldwide
totaled $40,039.5 million at December 31, 1995, compared to $34,007.6 million at
December 31, 1994. Facilities available for use as commercial paper back-up in
the United States amounted to $22,150.0 million and $18,505.0 million at
December 31, 1995 and 1994, respectively, all of which were unused. GMAC
Mortgage Corporation had $1,300.0 million of bank lines of credit at December
31, 1995, compared with $965.0 million at December 31, 1994, which are utilized
in the normal course of business. Of these lines, $311.0 million and $465.0
million were unused at December 31, 1995 and 1994, respectively.
Credit facilities supporting operations in Canada, Europe, Latin America and
Asia Pacific totaled $16,584.5 million at December 31, 1995 and $14,537.6
million at December 31, 1994 of which $8,001.3 million and $6,682.1 million were
unused at December 31, 1995 and 1994, respectively. As of December 31, 1995, the
committed and uncommitted portion of such credit facilities totaled $5,014.3
million and $11,570.2 million, respectively. As of December 31, 1994, the
committed and uncommitted portion of such credit facilities totaled $4,812.1
million and $9,725.5 million, respectively.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 8. NOTES, LOANS AND DEBENTURES PAYABLE WITHIN ONE YEAR
DECEMBER 31
----------------------
1995 1994
---------- ----------
(in millions of dollars)
Short-term notes
Commercial paper .......................... $ 21,926.0 $ 18,644.4
Master notes .............................. 253.5 500.9
Demand notes .............................. 3,037.4 2,542.6
Other ..................................... 1,433.9 742.2
---------- ----------
Total principal amount ..................... 26,650.8 22,430.1
Unamortized discount ....................... (343.8) (131.5)
---------- ----------
Total ...................................... 26,307.0 22,298.6
---------- ----------
Bank loans and overdrafts
United States ............................. 1,014.0 552.0
Other Countries ........................... 7,031.7 5,271.4
---------- ----------
Total ...................................... 8,045.7 5,823.4
---------- ----------
Other notes, loans and debentures
payable within one year
United States:
Medium-term notes ...................... 6,920.9 5,072.0
Other (net) ............................ 1,776.1 1,164.6
Other countries .......................... 822.1 756.2
---------- ----------
Total ...................................... 9,519.1 6,992.8
---------- ----------
Total payable within one year .............. $ 43,871.8 $ 35,114.8
========== ==========
The weighted average interest rates on short-term borrowings outstanding
(original term of one-year of less) at December 31, 1995 and 1994 were 6.04% and
6.10%, respectively.
After consideration of foreign currency swaps, the above maturities denominated
in currencies other than the U.S. Dollar primarily consist of Canadian Dollar
($2,818.3 million), German Mark ($3,217.6 million), Australian Dollar ($1,202.7
million) and United Kingdom Pound Sterling ($1,541.4 million). The Company and
its subsidiaries have entered into foreign currency swap agreements to hedge
exposures related to notes and loans payable in currencies other than the local
currency of the debt issuing entity.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 8. NOTES, LOANS AND DEBENTURES PAYABLE WITHIN ONE YEAR (CONCLUDED)
To achieve its desired balance between fixed and variable rate debt, the Company
has entered into interest rate swap, interest rate cap and swaption agreements.
The breakdown between the fixed and variable (predominately based on London
Interbank Offering Rate or LIBOR) interest rate amounts based on contractual
terms and after the effect of interest rate derivatives is as follows:
December 31
1995 1994
--------- ---------
(in millions of dollars)
DEBT BALANCES BASED ON CONTRACTUAL TERMS:
Fixed amount ............................. $37,337.3 $31,676.9
Variable amount .......................... 6,878.3 3,569.4
DEBT BALANCES AFTER EFFECT OF DERIVATIVES:
Fixed amount ............................. $37,711.0 $31,696.7
Variable amount .......................... 6,504.6 3,549.6
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 9. NOTES, LOANS AND DEBENTURES PAYABLE AFTER ONE YEAR
Weighted average
interest rates at December 31
MATURITY DECEMBER 31, 1995 1995 1994
----------------- ---------- ----------
Notes, Loans And Debentures (in millions of dollars)
United States currency
1996 ...................... -- $ -- $ 8,588.5
1997 ...................... 6.8% 8,522.5 6,539.7
1998 ...................... 6.7% 4,975.3 2,048.3
1999 ...................... 7.1% 3,680.0 3,209.1
2000 ...................... 7.8% 2,453.2 1,443.1
2001 ...................... 8.0% 1,323.9 1,052.9
2002 - 2006 ............... 7.1% 3,777.6 1,650.4
2007 - 2011 ............... 10.3% 900.0 900.0
2012 - 2016 ............... 9.6% 977.2 977.2
2017 - 2049 ............... 5.9% 75.0 75.0
---------- ----------
Total United States currency 26,684.7 26,484.2
Other currencies
1996 - 2004 ............... 7.8% 5,130.0 5,844.9
---------- ----------
Total notes, loans and
debentures ................ 31,814.7 32,329.1
Unamortized discount ....... (764.1) (789.5)
---------- ----------
Total notes, loans and
debentures payable after
one year .................. $ 31,050.6 $ 31,539.6
========== ==========
The aggregate principal amounts of notes, loans and debentures with terms of
more than one year from dates of issue, maturing in the years following December
31, 1996, are as follows: 1997 - $11,013.5 million; 1998 - $6,363.5 million;
1999 - $4,426.5 million; 2000 - $2,791.5 million; and 2001 and after - $7,219.7
million.
After consideration of foreign currency swaps, the above maturities which are
denominated in currencies other than the U.S. Dollar, primarily consist of the
Canadian Dollar ($1,636.8 million), German Mark ($1,612.6 million), Australian
Dollar ($554.0 million) and United Kingdom Pound Sterling ($871.4 million). The
Company and its subsidiaries have entered into foreign currency swap agreements
to hedge exposures related to notes and loans payable in currencies other than
the local currency of the debt issuing entity.
The Company has issued warrants to subscribe for up to $75 million aggregate
principal amount of 7.00% notes due August 15, 2001. The warrants are
exercisable up to and including August 15, 2000.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 9. NOTES, LOANS AND DEBENTURES PAYABLE AFTER ONE YEAR (CONCLUDED)
The Company has issued warrants to subscribe for up to $300 million aggregate
principal amount of 6.50% Notes due October 15, 2009. The warrants are
exercisable up to and including October 15, 2007.
Debt issues totaling $1,952.2 million are redeemable, at par or slightly above,
at the Company's option. The debt issues are redeemable anytime until prior to
their maturity dates -- the latest date being November 2049.
The Company's debt includes $775.0 million in notes with fixed rates and
$1,580.0 million in notes with variable rates which provide investors the option
to cause GMAC to repurchase them at specific dates through November 2049.
Generally, the probability of exercising an option would increase in the event
of a reduction in one or more of the Company's security ratings or, where the
notes are subject to fixed interest rates, an increase in market interest rates.
For purposes of the above maturities, it is assumed that no repurchase will
occur.
To achieve its desired balance between fixed and variable rate debt, the Company
has entered into interest rate swap, interest rate cap and swaption agreements.
The breakdown between the fixed and variable (predominately based on London
Interbank Offering Rate or LIBOR) interest rate amounts based on contractual
terms and after the effect of interest rate instruments is as follows:
December 31
1995 1994
--------- ---------
(in millions of dollars)
DEBT BALANCES BASED ON CONTRACTUAL TERMS:
Fixed amount ............................. $26,919.0 $27,372.6
Variable amount .......................... 4,895.7 4,956.5
DEBT BALANCES AFTER EFFECT OF DERIVATIVES:
Fixed amount ............................. 27,003.9 27,255.7
Variable amount .......................... $ 4,810.8 $ 5,073.4
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10. UNITED STATES, FOREIGN AND OTHER INCOME TAXES
The Company and its domestic subsidiaries join with General Motors Corporation
in filing a consolidated United States Federal income tax return. The portion of
the consolidated tax recorded by the Company and its subsidiaries included in
the consolidated tax return generally is equivalent to the liability that would
have been incurred on a separate return basis. Provisions are made for estimated
United States and foreign income taxes, less available tax credits and
deductions, which may be incurred on remittance of the Company's share of
subsidiaries' undistributed earnings not deemed to be indefinitely reinvested.
Taxes have not been provided on foreign subsidiaries' earnings which are deemed
indefinitely reinvested of approximately $719.1 million at December 31, 1995 and
$524.5 million at December 31, 1994. Quantification of the deferred tax
liability, if any, associated with permanently reinvested earnings is not
practicable.
Deferred income taxes reflect the impact of "temporary differences" between
values recorded for assets and liabilities for financial reporting purposes and
values utilized for measurement in accordance with tax laws.
The tax effects of the primary temporary differences giving rise to the
Company's deferred tax assets and liabilities for 1995 and 1994 are as follows:
DECEMBER 31, 1995
----------------------
ASSET LIABILITY
---------- ----------
(in millions of dollars)
Lease transactions ......................... $ -- $ 1,980.5
Provision for financing losses ............. 299.2 --
Debt transactions .......................... -- 311.9
Unrealized gain on securities .............. -- 158.9
Sales of finance receivables ............... 4.8 --
State and local taxes ...................... -- 186.3
Insurance loss reserve discount ............ 90.3 --
Unearned insurance premiums ................ 88.1 --
Other postretirement benefits .............. 213.3 --
Alternative minimum tax .................... 54.7 --
Other ...................................... 155.6 444.0
---------- ----------
Total deferred income taxes ................ $ 906.0 $ 3,081.6
========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10. UNITED STATES, FOREIGN AND OTHER INCOME TAXES (CONTINUED)
DECEMBER 31, 1994
----------------------
ASSET LIABILITY
---------- ----------
(in millions of dollars)
Lease transactions ......................... $ -- $ 1,707.2
Provision for financing losses ............. 250.0 --
Debt transactions .......................... -- 298.1
Unrealized gain on securities .............. 17.0
Sales of finance receivables ............... -- 57.0
State and local taxes ...................... -- 145.5
Insurance loss reserve discount ............ 89.8 --
Unearned insurance premiums ................ 90.0 --
Other postretirement benefits .............. 201.5 --
Alternative minimum tax .................... 180.3 --
Other ...................................... 76.1 367.4
---------- ----------
Total deferred income taxes ................ $ 887.7 $ 2,592.2
========== ==========
The significant components of income tax expense are as follows:
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1995 1994 1993
---------- ---------- ----------
(in millions of dollars)
Income taxes estimated to be
currently payable/(refundable)
United States Federal ......... $ 150.7 $ (129.5) $ 32.9
Foreign ....................... 103.3 147.3 162.8
United States state and local . 27.1 (31.3) 28.9
---------- ---------- ----------
Total income taxes payable/
(recoverable) currently ....... 281.1 (13.5) 224.6
---------- ---------- ----------
Deferred income taxes:
United States Federal ......... 248.8 352.9 343.7
Foreign ....................... 185.6 104.1 (3.0)
United States state and local . 36.7 69.2 26.4
---------- ---------- ----------
Total deferred income taxes
(credits) ..................... 471.1 526.2 367.1
---------- ---------- ----------
Income tax expense ............. $ 752.2 $ 512.7* $ 591.7
========== ========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10. UNITED STATES, FOREIGN AND OTHER INCOME TAXES (CONCLUDED)
Income tax provisions recorded by the Company differ from the computed amounts
developed by applying the statutory United States Federal income tax rate to
income before income taxes. The following schedule reconciles the U.S. statutory
income tax rate to the actual income tax rate recorded by the Company:
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1995 1994 1993
---------- ---------- --------
United States Federal statutory
income tax rate.................. 35.0% 35.0% 35.0%
Effect of (in percentage points)
State and local income taxes .... 2.4 1.7 2.8
Tax exempt interest and
dividends received which are not
fully taxable .................. (1.7) (2.5) (1.9)
Adjustment to U.S. taxes on
foreign income ................. 3.3 0.9 3.4
Foreign income tax rate
differential .................. 4.4 2.3 (0.4)
Other ........................... (1.2) (1.8) (1.3)
---------- ---------- --------
Effective tax rate ............... 42.2% 35.6%* 37.6%
========== ========== ========
- ----------
* Excludes cumulative effects of changes in accounting principles.
NOTE 11. PENSION PROGRAM
The Company and certain of its subsidiaries participate in various pension plans
of General Motors Corporation and its domestic and foreign subsidiaries, which
cover substantially all of their employees. Benefits under the plans are
generally related to an employee's length of service, salary and, where
applicable, contributions. GMAC Mortgage Corporation and NAVCO Corp., two
wholly-owned subsidiaries, have separate retirement plans which provide for
pension payments to their eligible employees upon retirement. Pension expense of
Company and its subsidiaries amounted to $27.9 million in 1995, $17.6
million in 1994 and $38.9 million in 1993.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 12. OTHER POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries participate in various
postretirement medical, dental, vision and life insurance plans of General
Motors Corporation. These benefits are funded as incurred from the general
assets of the Company.
The Company accrues postretirement benefit costs over the active service period
of employees to the date of full eligibility for such benefits. The Company has
provided for certain amounts associated with estimated future postretirement
benefits other than pensions and characterized such amounts as "other benefit
obligations." Notwithstanding the recording of such amounts and the use of these
terms, the Company does not admit or otherwise acknowledge that such amounts or
existing postretirement benefit plans of the Company (other than pensions)
represent legally enforceable liabilities of the Company.
In November 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 112, Employers' Accounting
for Postemployment Benefits, which established a new accounting principle for
the cost of benefits provided to former or inactive employees after employment
but before retirement. The Statement was effective for fiscal years beginning
after December 15, 1993. The Company adopted this standard effective January 1,
1994; the after-tax unfavorable cumulative effect of this change was $7.4
million. The ongoing effect in subsequent periods is not material.
The total non-pension postretirement benefits expense of the Company amounted to
$57.0 million, $70.7 million and $65.8 million in 1995, 1994, and 1993
respectively, and included the components set forth below:
DECEMBER 31
----------------------
1995 1994 1993
------ ------ ------
(in millions of dollars)
Benefits attributed to
the current year .............. $ 12.7 $ 19.9 $ 14.7
Interest accrued on benefits
attributed to prior years ..... 44.3 50.8 51.1
------ ------ ------
Total non-pension postretirement
benefits expense .............. $ 57.0 $ 70.7 $ 65.8
====== ====== ======
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 13. TRANSACTIONS WITH AFFILIATES
The Company is wholly-owned by General Motors Corporation and as such, the
Company may receive support from the parent corporation if necessary to maintain
competitive leverage levels and its fixed charge coverage ratio. No such
payments were received during 1995, 1994 or 1993.
Under special rate programs sponsored by General Motors, an interest rate
differential is provided as reimbursement for amounts advanced to dealers on
behalf of GM. The earned portion of such amounts constituted 6.1% of gross
revenue in 1995, compared with 7.1% in 1994 and 6.1% in 1993.
The amounts due General Motors Corporation and affiliated companies at the
balance sheet dates relate principally to current wholesale financing of sales
of General Motors products and a nonrecourse transfer for consideration of a
portion of future lease revenues. To the extent that wholesale settlements with
General Motors are made prior to the transit time (which may occur from
time-to-time due to seasonal or other factors), interest is received from
General Motors.
On occasion, the Company may also extend loans to General Motors Corporation,
its subsidiaries and affiliates. At December 31, 1995, there were no such loans
outstanding. Outstanding loans to General Motors Corporation and affiliates
totaled $1,080.5 million at December 31, 1994. Total interest income from these
loans amounted to $73.4 million in 1995, $92.6 million in 1994 and $619.2
million in 1993.
The Company purchases certain vehicles which General Motors acquired from its
fleet and rental customers. The cost of these vehicles held for resale, which is
included in other earning assets, was $400.7 million at December 31, 1995,
compared with $938.9 million at December 31, 1994. Total service fee income
received from General Motors on these vehicles amounted to $41.2 million in
1995, $24.7 million in 1994 and $30.5 million in 1993.
The Company purchases data processing and communications services from
Electronic Data Systems Corporation, a subsidiary of General Motors Corporation.
Such purchases, which are included in operating expenses, amounted to $324.4
million in 1995, compared with $268.8 million in 1994 and $272.5 million in
1993.
Insurance premiums earned by Motors Insurance Corporation on certain coverages
provided to General Motors totaled $253.0 million, $278.3 million and $322.1
million in 1995, 1994 and 1993, respectively.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 14. MORTGAGE BANKING
The Company's mortgage subsidiaries, collectively the GMAC Mortgage Group
(GMACMG), perform a wide array of mortgage banking activities including the
origination, purchase and servicing of residential, commercial and multifamily
mortgage loans and the issuance of private mortgage-backed securities. In
addition, GMACMG actively pursues the acquisition of mortgage servicing rights
from other mortgage bankers and financial institutions. Effective January 1,
1995, GMACMG adopted SFAS No. 122, Accounting for Mortgage Servicing Rights.
There was no material impact on the Company's consolidated financial position or
results of operations as a result of adoption.
The following summarizes GMACMG's origination and purchase of mortgage loans and
acquisition of mortgage servicing rights for the years ended December 31, 1995
and 1994, respectively.
1995 1994
---------- ----------
(in millions of dollars)
Loans originated/brokered:
Residential ............................... $ 3,451.2 $ 4,438.7
Commercial ................................ 2,139.6 405.0
Loan purchases ............................. 8,472.3 6,538.0
Bulk servicing acquisitions:
Residential ............................... 11,801.9 4,676.2
Commercial ................................ 10,084.3 1,015.2
GMACMG sells a majority of its originated loans into agency (FHLMC, FNMA and
GNMA) mortgage-backed securities and whole loans to private investors while
maintaining the right to service such mortgage loans. GMACMG packages its
purchased mortgage loans into AA or AAA rated private mortgage-backed securities
for sale to investment bankers and private mortgage investors.
As part of its conduit mortgage banking activities, GMACMG retains subordinated
and stripped mortgage-backed securities which are classified as trading
securities and held at estimated market value. On certain transactions, GMACMG
will retain full or limited recourse for credit or other losses incurred by the
purchaser of the loans sold. GMACMG establishes allowances for estimated future
losses related to the outstanding recourse obligations which management
considers adequate. In addition, GMACMG provides appropriate loss allowances on
warehouse lines and other loans held as investments.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 14. MORTGAGE BANKING (CONCLUDED)
The right to service loans is contracted under primary or master servicing
agreements. Under primary servicing agreements, GMACMG collects monthly
principal, interest and escrow payments from individual mortgagors and performs
certain accounting and reporting functions on behalf of the mortgage investors.
As master servicer, GMACMG collects monthly payments from various sub-servicers
and performs certain accounting and reporting functions on behalf of the
mortgage investors. As compensation for such servicing activities, the Company
earns a servicing fee. With the exception of serviced mortgages owned by GMACMG,
the servicing portfolio and its related escrow balances are not reflected in
GMACMG's financial statements.
Following are selected financial and statistical information of GMACMG as of
December 31, 1995 and 1994:
1995 1994
---------- ----------
(in millions of dollars)
Servicing portfolio
Residential ............................... $ 46,776.7 $ 34,477.6
Commercial ................................ 15,013.0 4,872.5
Master Servicing* ......................... 19,399.4 19,374.5
---------- ----------
Total ...................................... $ 81,189.1 $ 58,724.6
========== ==========
Number of serviced loans ................... 604,220 471,029
======= =======
* Represents loans for which GMACMG performs solely a master servicing function.
Financial Information
FOR THE YEARS ENDED
----------------------
1995 1994
---------- ----------
(in millions of dollars)
Mortgage servicing rights
and excess servicing fees ................. $ 585.2 $ 372.6
---------- ----------
Loans sold with recourse ................... $ 14,142.6 $ 6,811.6
---------- ----------
Maximum exposure on loans sold
Full recourse ............................. $ 390.4 $ 299.9
Limited recourse .......................... 553.8 703.1
---------- ----------
Total ...................................... $ 944.2 $ 1,003.0
========== ==========
Allowance for losses on loans sold
with recourse ............................. $ 25.8 $ 18.3
---------- ----------
The maximum recourse exposure shown above is net of amounts reinsured with third
parties which totaled $327.7 million and $238.0 million at December 31, 1995 and
1994, respectively.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has developed the following fair value estimates by utilization of
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value, so the estimates are not necessarily indicative
of the amounts that could be realized or would be paid in a current market
exchange. The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts.
Fair value information presented herein is based on information available at
December 31, 1995 and 1994. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts, such amounts have
not been updated since those dates and, therefore, the current estimates of fair
value at dates subsequent to December 31, 1995 and 1994 may differ significantly
from these amounts. The estimated fair value of financial instruments held by
the Company, for which it is practicable to estimate that value, were as
follows:
Balance sheet financial instruments:
1995 1994
---------------------- ----------------------
Estimated Estimated
Book Fair Book Fair
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(in millions of dollars)
Assets
Cash and cash
equivalents ...... $ 1,448.6 $ 1,448.6 $ 1,339.5 $ 1,339.5
Investments in
securities ....... 4,328.2 4,328.2 3,891.7 3,891.7
Finance receivables 59,330.4 59,711.5 54,625.1 54,446.5
Other earning assets -- -- 1,080.5 1,091.3
Real estate mortgages
held for resale .. 1,486.8 1,502.6 1,244.0 1,244.0
held as investing
and lending
receivables ..... 1,416.9 1,403.4 920.6 920.6
excess servicing . 114.9 115.0 156.1 156.1
Due and deferred from
receivable sales . 1,371.4 1,452.6 1,564.6 1,730.9
Liabilities
Debt ............... $ 74,922.4 $ 78,461.9 $ 66,654.4 $ 67,199.7
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Off-balance sheet financial instruments:
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------- -----------------------
Contract/ Contract/
Notional Unrealized Notional Unrealized
AMOUNT GAIN/(LOSS) AMOUNT GAIN/(LOSS)
---------- ---------- ---------- -----------
(in millions of dollars)
Commitments to
originate/purchase
mortgages ........ $ 2,895.9 $ 10.0 $ 689.5 $ (2.4)
Commitments to sell
mortgages ........ 2,153.7 (9.6) 694.1 (4.2)
Mortgage-related
Futures .......... 201.0 -- 4,399.0 2.5
Unused mortgage
lending
commitments ...... 1,817.9 3.4 1,801.3 --
Unused revolving
credit lines
to dealers ....... 239.7 -- 400.0 --
Interest rate
instruments (1) .. 16,135.4 47.9 9,829.5 (68.3)
Foreign currency
instruments (2) .. $ 2,484.7 $ 4.1 $ 1,757.1 $ 88.2
(1) The 1995 notional balances include $10,950.8 million in financial
instruments that are recorded at their fair value on the balance sheet. The
related net asset recorded on the balance sheet for these financial instruments
totaled $10.9 million at December 31, 1995.
(2) Includes $1,219.4 million and $907.0 million in cross currency interest rate
swaps with unrealized gains of $30.9 million and $65.8 million at December 31,
1995 and 1994, respectively.
CASH AND CASH EQUIVALENTS
The book value approximates fair value because of the short maturity of these
instruments.
INVESTMENTS IN SECURITIES
Certificates of deposit, bonds, notes, and other temporary investments are
carried at market value. Equity securities are carried at fair value. The
aggregate excess of fair value over cost, net of related income taxes, is
included as a separate component of stockholder's equity. The fair value of the
financial instruments reflected above is based on quoted market prices.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
FINANCE RECEIVABLES
The fair value is estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to each category of
finance receivables. The carrying value of wholesale receivables and other
receivables whose interest rates adjust on a short-term basis with applicable
market indices (generally the prime rate) are assumed to approximate fair value
either due to their short maturities or due to the interest rate adjustment
feature.
OTHER EARNING ASSETS
The fair value is estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to certain categories
of other earning assets.
REAL ESTATE MORTGAGES AND EXCESS SERVICING FEES
The fair values of real estate mortgages held for sale (including warehouse
lines) and loans held for investment and lending receivables was determined
through a review of published market information associated with similar
instruments. The fair value of excess servicing fees was determined by
discounting net future cash flows at a risk adjusted discount rate.
DUE AND DEFERRED FROM RECEIVABLE SALES
The fair value of retained subordinated interests in trusts and excess servicing
assets (net of deferred costs) was derived by discounting expected cash flows
using current market rates.
DEBT
The fair value of the debt payable within one year is determined by using quoted
market prices, if available, or calculating the estimated value of each bank
loan, note or debenture in the portfolio at the applicable rate in effect.
Commercial paper, master notes, and demand notes have an original term of less
than 90 days and, therefore, the carrying amount of these liabilities is
considered fair value. Debt payable beyond one year has an estimated fair value
based on quoted market prices for the same or similar issues or based on the
current rates offered to the Company for debt with similar remaining maturities.
COMMITMENTS TO ORIGINATE/PURCHASE MORTGAGES
The fair value of commitments is estimated using quoted market prices associated
with commitments to sell similar mortgages in estimated future periods.
COMMITMENTS TO SELL MORTGAGES
The fair value of commitments is estimated using quoted market prices associated
with similar commitments.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONCLUDED)
UNUSED MORTGAGE LENDING COMMITMENTS
The fair value determination of unused commitments on mortgages and lending
commitments is not seperately determinable and is reflected in the underlying
assets with which they are associated.
UNUSED REVOLVING CREDIT LINES TO DEALERS
The contractual value of the unused portion of inventory floorplan lines of
credit extended to dealers will approximate market value since they reprice at
prevailing market rates.
INTEREST RATE INSTRUMENTS
The fair value of the existing interest rate swaps is estimated by discounting
expected cash flows using quoted market interest rates. The fair value of the
written options is estimated using quoted market prices.
FOREIGN CURRENCY INSTRUMENTS
The estimated fair value of the foreign currency swaps is derived by discounting
expected cash flows using market exchange rates over the remaining term of the
agreement.
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company is a party to derivative financial instruments with
off-balance-sheet risk which it uses in the normal course of business to reduce
its exposure to fluctuations in interest and foreign exchange rates. The
objectives of the derivative financial instruments portfolio are to manage
interest rate and currency risks by offsetting a companion asset or funding
obligation; adjusting fixed and floating rate funding levels; and facilitation
of securitization transactions. The primary classes of derivatives used by the
Company are interest rate and foreign exchange swaps and interest rate caps.
Those instruments involve, to varying degrees, elements of credit risk in the
event a counterparty should default and market risk as the instruments are
subject to rate and price fluctuations. Credit risk is managed through the
periodic monitoring and approval of financially sound counterparties. Market
risk is mitigated because the derivatives are generally used to hedge underlying
transactions. The financial instrument transactions include some embedded
options and structured interest rate swaps of which all are either
marked-to-market or specifically matched, respectively. Cash receipts or
payments on these agreements normally occur at periodic contractually defined
intervals.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
INTEREST RATE INSTRUMENTS
The Company's financing and cash management activities subject it to market risk
from exposure to changes in interest rates. To manage these exposures, the
Company has entered into various financial instrument transactions. The
Company's objective of entering into these transactions is to minimize interest
expense while maintaining the desired level of exposure to the risk of interest
rate fluctuations. Interest rate swaps are contractual agreements between the
Company and another party to exchange the net difference between a fixed and
floating interest rate periodically over the life of the contract without the
exchange of the underlying principal amount. The Company will at times use
written options (including swaptions and interest rate caps). Interest rate
options such as swaptions generally permit but do not require the purchaser of
the option to exchange interest payments in the future. Interest rate cap
agreements provide the holder protection against interest rate movements above
the established rate. In exchange for assuming this risk, the writer receives a
premium at the outset of the agreement.
The Company uses swaps to alter its fixed and floating interest rate exposures.
As such, the majority of swaps are executed as an integral element of a specific
financing transaction. In a limited number of cases, swaps, matched to specific
portfolios of wholesale assets or debt, are executed on a portfolio basis to
achieve specific interest rate management objectives. The differential paid or
received on such swaps is recorded as an adjustment to interest expense or
income over the term of the underlying debt agreement or matched portfolio.
Written interest rate caps, swaptions and basis swaps are marked to market with
related gains and losses recognized in other income on a current basis.
In the normal course of managing its interest rate liabilities, the Company
occasionally enters into forward starting swaps in anticipation of future debt
issuance. At December 31, 1995, the Company had entered into forward starting
swaps with notional amounts totaling $1 billion to hedge anticipated 1996 debt
issuance. At the time at which the Company issues debt, these swaps will be
terminated and any realized profit or loss related to such swaps will be
recognized as either a reduction or increase of interest expense and will be
amortized over the life of the debt or the original term of the swap, whichever
is shorter.
Derivative activities resulted in interest expense decreases of $1.4 million,
$5.2 million and $16.6 million for the years ended December 31, 1995, 1994 and
1993, respectively. The effect of these transactions on the Company's weighted
average borrowing rates were basis point decreases of less than one, one and two
for 1995, 1994 and 1993, respectively.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Summaries of the Company's interest rate swaps and written options by maturity
and weighted average rate (predominately based on London Interbank Offering Rate
or LIBOR) at December 31, 1995 and 1994, are as follows:
INTEREST RATE SWAPS DECEMBER 31, 1995
Year Notional Amount GMAC Receives GMAC Pays
DUE (IN MILLIONS) FLOATING FIXED
---- --------------- ------------- ---------
1996 $ 158.4 5.61% 4.61%
1997 163.1 7.05% 7.87%
1998 137.8 6.94% 7.98%
1999 233.0 5.37% 6.37%
2000 104.3 5.47% 6.02%
2001 500.0 5.49% 6.21%
2002-2006 600.0 5.62% 6.34%
-------------
Subtotal $ 1,896.6
-------------
GMAC Pays GMAC Receives
FLOATING FIXED
--------- -------------
1996 $ 1,300.9 5.54% 7.43%
1997 806.0 5.41% 7.37%
1998 690.7 5.39% 7.16%
1999 353.9 5.75% 8.45%
2000 3.5 5.57% 7.15%
-------------
Subtotal $ 3,155.0(2)
-------------
GMAC Pays GMAC Receives
FLOATING FLOATING
--------- -------------
1999 $ 2,632.0 7.27% 8.17%
2000 2,072.7 8.40% 8.21%
-------------
Subtotal $ 4,704.7
-------------
Total $ 9,756.3(1)
=============
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
INTEREST RATE SWAPS DECEMBER 31, 1994
-----------------------------------------------------------------
Year Notional Amount GMAC Receives GMAC Pays
DUE (IN MILLIONS) FLOATING FIXED
---- --------------- ------------- ---------
1995 $ 207.8 6.59% 8.03%
1996 157.9 7.93% 4.57%
1997 33.9 8.09% 7.68%
1998 43.3 11.44% 10.50%
1996 152.0 8.77% 7.51%
-------------
Subtotal $ 594.9
-------------
GMAC Pays GMAC Receives
FLOATING FIXED
--------- -------------
1995 $ 968.0 7.94% 7.19%
1996 651.3 8.52% 7.37%
1997 626.2 8.42% 7.32%
1998 205.7 8.56% 7.34%
1999 245.9 8.85% 8.72%
2002 500.0 8.17% 6.67%
-------------
Subtotal $ 3,197.1(2)
-------------
GMAC Pays GMAC Receives
FLOATING FLOATING
--------- -------------
1996 $ 250.0 8.53% 8.33%
1999 2,578.0 8.13% 8.75%
-------------
Subtotal $ 2,828.0
-------------
Total $ 6,620.0(1)
=============
(1) Excludes GMAC Mortgage Corporation derivatives that are discussed under
Mortgage Contracts.
(2) Includes notional amounts for swaps with amortizing balances. The swap
balances amortize in relation to expected prepayments on the principal balances
of the matched assets.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
WRITTEN OPTIONS
---------------
December 31
------------------------
YEAR DUE 1995 1994
-------- ---------- ----------
Notional Amounts
(in millions of dollars)
Interest Rate Caps:
1995 $ -- $ 133.8
1996 809.8 300.0
1998 382.5 2,475.7
2000 66.8 --
---------- ----------
Subtotal $ 1,259.1 $ 2,909.5
---------- ----------
Swaptions:
2000 $ -- $ 300.0
---------- ----------
Total Options $ 1,259.1(1) $ 3,209.5
========== ==========
(1) Includes notional amounts for options with amortizing balances. The option
balances amortize in relation to expected prepayments on the principal balances
of the matched assets.
FOREIGN CURRENCY INSTRUMENTS
The Company's financing activities subject it to market risk from exposure to
changes in foreign exchange rates. Currency swaps are used to hedge foreign
exchange exposure on foreign currency denominated debt by converting the funding
currency to the currency of the assets being financed. Foreign exchange swaps
are legal agreements between two parties to purchase and sell a foreign
currency, for a price specified at the contract date, with delivery and
settlement in the future.
The notional maturities of currency swaps as of December 31, 1995 and 1994 are
as follows:
CURRENCY SWAPS
-------------------------------------------
December 31
1995 1994
---------- ----------
(in millions of dollars)
Year Due:
1995 $ -- $ 310.0
1996 796.1 329.2
1997 732.4 660.5
1998 337.8 234.7
1999 529.8 222.7
2000 2.0 --
2001 86.6 --
---------- ----------
Total $ 2,484.7 $ 1,757.1
========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
A reconciliation of the Company and its subsidiaries' interest rate and currency
swaps activities for the years ended December 31, 1995 and 1994, is as follows:
INTEREST RATE SWAPS CURRENCY SWAPS
-------------------- --------------------
December 31 December 31
1995 1994 1995 1994
--------- --------- --------- ---------
(in millions of dollars)
Beginning notional amount $ 6,620.0 $ 1,760.2 $ 1,757.1 $ 1,564.9
Add:
New contracts 5,636.0 5,408.9 2,624.2 561.3
Less:
Terminated contracts 1,000.0 -- -- --
Expired contracts 1,499.7 549.1 1,896.6 369.1
--------- --------- --------- ---------
Ending notional amount $ 9,756.3 $ 6,620.0 $ 2,484.7 $ 1,757.1
========= ========= ========= =========
The following table summarizes the notional amounts of the Company and its
subsidiaries' currency and interest rate swaps by major currency:
December 31
1995 1994
---------- ----------
(in millions of dollars)
Currency Swaps (by currency paid):
Australian dollars $ 810.9 $ 510.4
Canadian dollars 728.0 393.2
United Kingdom pounds sterling 559.0 464.9
United States dollars 97.8 258.9
Other 289.0 129.7
---------- ----------
Total currency swaps $ 2,484.7 $ 1,757.1
---------- ----------
Interest Rate Swaps:
United States $ 9,230.1 $ 6,363.9
Canada 212.7 206.5
Other 313.5 49.6
---------- ----------
Total interest rate swaps $ 9,756.3 $ 6,620.0
---------- ----------
Total currency and interest rate swaps $ 12,241.0 $ 8,377.1
========== ==========
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
MORTGAGE CONTRACTS
GMACMG uses various off-balance sheet financial instruments in the normal course
of business to manage inherent risk. The derivative financial instruments are
held for purposes other than trading and consist primarily of interest rate
floors and caps, written and purchased option contracts, futures contracts, and
individually tailored swap products.
GMACMG uses derivative financial instruments to hedge price risk associated with
its mortgage loans held for sale. At December 31, 1995 and 1994, the notional
amount of such instruments totaled $100.0 million and $4,954.0 million,
respectively. Realized and unrealized gains and losses associated with these
instruments are considered in the lower of cost or market valuation of the
mortgage loans. At December 31, 1995, GMACMG had options contracts outstanding
on U.S. Treasury instruments and mortgage-backed securities.
GMACMG uses derivative financial instruments to hedge price and interest rate
risk associated with its mortgage related securities. At December 31, 1995 and
1994, the notional amount of such instruments totaled $66.0 million and $667.0
million, respectively. Gains and losses associated with these instruments are
recognized in the current period on a mark-to-market basis. At December 31,
1995, GMACMG had options and futures contracts outstanding on U.S. Treasury
instruments and had entered into an interest rate swap agreement.
GMACMG enters into interest rate swap contracts in an effort to stabilize
short-term borrowing costs and maintain a minimum return on certain loans held
for investment. At December 31, 1995 and 1994, the notional amount of such
instruments totaled $133.0 million and $461.0 million, respectively. The
contracts involve the delivery of fixed payments to a counterparty in return for
variable payments based upon a published index. The contracts' value fluctuate
inversely to the values of the related loan portfolio. The contracts have
maturities ranging from two to seven years. Amounts paid or received under such
contracts are recorded as an adjustment to interest expense.
GMACMG uses interest rate caps and floors and futures contracts to manage
potential prepayment activity associated with mortgage servicing rights. At
December 31, 1995 and 1994, the notional amount of such instruments totaled
$5,022.0 million and $482.0 million, respectively. The maturities of these
instruments range between two and five years. These instruments are carried at
fair value, with adjustments recorded to amortization expense.
GMACMG enters into various commitments to purchase or originate mortgage loans
in the normal course of business. Commitments to purchase or originate mortgage
loans totaled $2,895.9 million and $689.5 million at December 31, 1995 and 1994,
respectively. These commitment obligations are considered in conjunction with
the lower of cost or market valuation of mortgage inventory held for sale.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Warehouse lending involves the extension of short-term secured lines of credit
to mortgage originators to finance mortgage loans until such loans are purchased
by a permanent investor. Advances under the lines of credit are fully secured by
the underlying mortgages and bear interest at a rate which is tied to a
short-term index. At December 31, 1995 and 1994, unused warehouse lending
commitments totaled $1,234.3 million and $1,418.9 million, respectively.
Construction lending involves the extension of long-term secured lines of credit
to construction project managers. At December 31, 1995 and 1994, unused
construction lending commitments totaled $239.9 million and $150.8 million,
respectively. In addition, GMACMG also has outstanding commitments to lend on
available credit lines, primarily home equity lines of credit. At December 31,
1995 and 1994, unused lending commitments on these lines totalled $343.7 million
and $231.6 million, respectively.
GMACMG sells a majority of its originated loans into agency (FHLMC, FNMA and
GNMA) mortgage-backed securities and whole loans to private investors. GMACMG
packages its purchased mortgage loans into AA or AAA rated private
mortgage-backed securities for sale to investment bankers and private mortgage
investors. Commitments to sell mortgage loans totaled $2,153.7 million and
$694.1 million at December 31, 1995 and 1994, respectively.
CREDIT RISK
These aforementioned instruments contain an element of risk in the event the
counterparties are unable to meet the terms of the agreements. However, the
Company minimizes the risk exposure by limiting the counterparties to those
major banks and financial institutions who meet established credit guidelines.
Management also reduces its credit risk for unused lines of credit it extends by
applying the same credit policies in making commitments as it does for extending
loans. Management does not expect any counterparty to default on its obligations
and, therefore, does not expect to incur any cost due to counterparty default.
The Company does not require or place collateral for these financial
instruments, except for the lines of credit it extends.
CONCENTRATIONS OF CREDIT RISK
The Company's primary business is to provide vehicle financing for GM products
and GM dealers. Wholesale and dealer loan financing relates primarily to GM
dealers, with collateral primarily GM vehicles (for wholesale) and GM dealership
property (for loans). In wholesale financing, GMAC is also provided further
protection by GM factory repurchase programs. Retail contracts and operating
lease assets relate primarily to the secured sale and lease, respectively, of
vehicles (primarily GM).
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONCLUDED)
In terms of geographic concentrations as of December 31, 1995, 75.0% of GMAC's
consolidated financing assets were U.S. based; 6.4% were in Canada; 15.0% were
in Europe (of which 52.6% reside in Germany); 0.8% were in Latin America; and
2.8% were in Asia Pacific (of which Australia represents 83.2%). Reflecting
general U.S. population patterns and GM sales activities, GMAC's five largest
U.S. state concentrations, which in aggregate total 38.2% of U.S. financing
assets, are as follows: 9.9% in Texas; 8.9% in California; 7.5% in Florida; 6.8%
in Michigan; and 5.1% in Illinois.
NOTE 17. SEGMENT INFORMATION
INDUSTRY SEGMENTS
The business of the Company and its subsidiaries is comprised primarily of
financing and insurance operations.
Gross revenue, income before income taxes and assets applicable to financing and
insurance operations are as follows:
1995 1994 1993
---------- ---------- ----------
(in millions of dollars)
Gross revenue
Financing operations .......... $ 13,359.6 $ 10,638.5 $ 10,871.2
Insurance operations .......... 1,604.0 1,536.2 1,651.2
Eliminations (a) .............. (100.4) (29.7) (38.9)
---------- ---------- ----------
Total .......................... $ 14,863.2 $ 12,145.0 $ 12,483.5
========== ========== ==========
Income before income taxes and
cumulative effect of accounting
changes
Financing operations .......... $ 1,574.8 $ 1,298.6 $ 1,324.1
Insurance operations .......... 208.4 141.2 248.7
---------- ---------- ----------
Total .......................... $ 1,783.2 $ 1,439.8 $ 1,572.8
========== ========== ==========
Assets at end of the year
Financing operations .......... $ 89,752.7 $ 81,208.4 $ 76,394.6
Insurance operations .......... 4,871.4 4,390.7 4,415.0
Eliminations (b) .............. (51.1) (61.7) (58.8)
---------- ---------- ----------
Total .......................... $ 94,573.0 $ 85,537.4 $ 80,750.8
========== ========== ==========
(a) Primarily intersegment insurance premiums earned.
(b) Intersegment insurance receivables.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 17. SEGMENT INFORMATION (CONCLUDED)
GEOGRAPHIC SEGMENTS
Although the majority of its business is done in the United States, the Company
also operates directly or through subsidiaries in many other countries around
the world.
Gross revenue, income before income taxes and assets applicable to the Company's
geographic areas of operations are as follows:
1995 1994 1993
---------- ---------- ----------
(in millions of dollars)
Gross revenue
United States ................. $ 11,130.2 $ 9,069.6 $ 9,472.1
Canada ........................ 1,027.2 835.3 730.8
Europe ........................ 2,318.0 1,973.1 2,020.6
Other countries ............... 402.1 278.6 264.3
Eliminations (a) .............. (14.3) (11.6) (4.3)
---------- ---------- ----------
Total .......................... $ 14,863.2 $ 12,145.0 $ 12,483.5
========== ========== ==========
Income before income taxes and
cumulative effect of accounting
changes
United States ................. $ 1,234.3 $ 878.2 $ 1,166.5
Canada ........................ 64.0 45.1 18.4
Europe ........................ 430.5 480.2 333.5
Other countries ............... 54.4 36.3 54.4
---------- ---------- ----------
Total .......................... $ 1,783.2 $ 1,439.8 $ 1,572.8
========== ========== ==========
Assets at end of the year
United States ................. $ 73,516.9 $ 66,987.1 $ 64,755.2
Canada ........................ 5,533.1 5,023.7 4,657.7
Europe ........................ 12,424.7 11,118.8 9,352.0
Other countries ............... 3,432.8 2,742.3 2,146.8
Eliminations (b) .............. (334.5) (334.5) (160.9)
---------- ---------- ----------
Total .......................... $ 94,573.0 $ 85,537.4 $ 80,750.8
========== ========== ==========
(a) Intersegment interest income.
(b) Intersegment finance receivables.
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 18. COMMITMENTS AND CONTINGENT LIABILITIES
Minimum future commitments under operating leases having noncallable lease terms
in excess of one year, primarily for real property, aggregating $188.8 million,
are payable $54.5 million in 1996, $41.7 million in 1997, $31.1 million in 1998,
$24.2 million in 1999, $13.6 million in 2000, and $23.7 million in 2001 and
thereafter. Certain of the leases contain escalation clauses and renewal or
purchase options. Rental expenses under operating leases were $70.8 million in
1995, $57.6 million in 1994 and $55.4 million in 1993.
There are various claims and pending actions against the Company and its
subsidiaries with respect to commercial and consumer financing matters, taxes
and other matters arising out of the conduct of the business. Certain of these
actions are or purport to be class actions, seeking damages in very large
amounts. The amounts of liability on these claims and actions at December 31,
1995 were not determinable but, in the opinion of management, the ultimate
liability resulting therefrom should not have a material adverse effect on the
Company's consolidated financial position or results of operations.
SUPPLEMENTARY FINANCIAL DATA
SUMMARY OF CONSOLIDATED QUARTERLY EARNINGS
1995 QUARTERS
----------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(in millions of dollars)
Total financing revenue .... $ 2,717.4 $ 2,917.6 $ 2,959.6 $ 3,069.4
Interest and discount
expense ................... 1,219.8 1,275.3 1,222.9 1,218.3
Net financing revenue and
other income .............. 1,278.2 1,426.9 1,361.3 1,555.7
Provision for financing
losses .................... 55.0 133.3 118.9 141.6
Net income ................. $ 254.9 $ 259.2 $ 253.7 $ 263.2
- --------------------------------------------------------------------------------
1994 QUARTERS
----------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(in millions of dollars)
Total financing revenue .... $ 2,163.0 $ 2,304.7 $ 2,351.5 $ 2,599.6
Interest and discount
expense ................... 1,010.0 1,045.3 1,041.6 1,134.0
Net financing revenue and
other income .............. 1,155.2 1,158.2 1,157.3 1,209.6
Provision for financing
losses .................... 64.1 54.8 (8.5) 66.9
Income before cumulative
effect of accounting
change .................... 224.9 216.1 244.6 241.5
Cumulative effect of accounting
change .................... (7.4)* -- -- --
Net Income ................. $ 217.5 $ 216.1 $ 244.6 $ 241.5
- --------------------------------------------------------------------------------
* Effective January 1, 1994, the Company adopted SFAS No. 112 - Employer's
Accounting for Postemployment Benefits.
1993 QUARTERS
----------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(in millions of dollars)
Total financing revenue .... $ 2,267.8 $ 2,219.8 $ 2,187.2 $ 2,077.2
Interest and discount
expense ................... 1,300.0 1,221.5 1,114.1 1,085.6
Net financing revenue and
other income .............. 1,267.0 1,378.9 1,313.3 1,101.1
Provision for financing
losses .................... 57.0 118.9 116.7 8.2
Net income ................. $ 284.1 $ 285.4 $ 204.8 $ 206.8
- --------------------------------------------------------------------------------
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS.
Included in Part II, Item 8 of Form 10-K.
(a) (2) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted because they are inapplicable or
because the information called for is shown in the financial
statements or notes thereto.
(a) (3) EXHIBITS (Included in Part IV of this report). PAGE
12 -- Statement of Ratio of Earnings to Fixed 67
Charges for the years 1995, 1994, 1993,
1992 and 1991.
23.1 -- Consent of Independent Auditors. 68
27 -- Financial Data Schedule (for SEC electronic --
filing information only).
(b) REPORTS ON FORM 8-K.
No current reports on Form 8-K have been filed by the Company during the fourth
quarter of 1995.
ITEMS 4, 9, 10, 11, 12 and 13 are inapplicable and have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GENERAL MOTORS ACCEPTANCE CORPORATION
-------------------------------------
(Registrant)
By
S/ J. M. LOSH
---------------------------------------
DATE: MARCH 11, 1996 (J. Michael Losh, Chairman of the Board)
- --------------------
Pursuant to the Requirements of the Securities Exchange Act of 1934, this report
has been signed below on the 11th day of March, 1996, by the following persons
on behalf of the Registrant and in the capacities indicated.
SIGNATURE TITLE
--------- -----
S/ J. M. LOSH
- ------------------------
(J. Michael Losh) Chairman of the
Board of Directors
S/ J. R. RINES
- ------------------------
(John R. Rines) President and (Signing as
Director Chief
Executive
Officer)
S/ E. A. FELDSTEIN
- ------------------------
(Eric A. Feldstein) Executive Vice (Chief
President and Director Financial
Officer)
S/ G. E. GROSS
- ------------------------
(Gerald E. Gross) Comptroller (Signing as
Chief
Accounting
Officer)
S/ R. J. S. CLOUT
- ------------------------
(Richard J. S. Clout) Executive Vice
President and Director
S/ J. E. GIBSON
- ------------------------
(John E. Gibson) Executive Vice
President and Director
<PAGE>
SIGNATURES (CONCLUDED)
S/ J. D. FINNEGAN
- ------------------------
(John D. Finnegan) Director
S/ L. J. KRAIN
- ------------------------
(Leon J. Krain) Director
S/ H. J. PEARCE
- ------------------------
(Harry J. Pearce) Director
S/ W. A. REED
- ------------------------
(W. Allen Reed) Director
S/ J. F. SMITH, JR.
- ------------------------
(John F. Smith, Jr.) Director
S/ R. L. ZARRELLA
- ------------------------
(Ronald L. Zarrella) Director
EXHIBIT INDEX
Exhibit
NUMBER EXHIBIT NAME
- ------- --------------------------------------
12 Ratio of Earnings to Fixed Charges
23.1 Consent of Independent Auditors,
Deloitte & Touche LLP
27 Financial Data Schedule (for SEC
electronic filing information only)
EXHIBIT 12
GENERAL MOTORS ACCEPTANCE CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
For the Years ended December 31
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------
(in millions of dollars)
Consolidated net
income* ......... $ 1,031.0 $ 927.1 $ 981.1 $ 1,218.7 $ 1,038.2
Provision for
income taxes .... 752.2 512.7 591.7 882.3 610.0
---------- ---------- ---------- ---------- ----------
Consolidated income
before income
taxes ........... 1,783.2 1,439.8 1,572.8 2,101.0 1,648.2
---------- ---------- ---------- ---------- ----------
Fixed charges
Interest, debt
discount and
expense ........ 4,936.3 4,230.9 4,721.2 5,828.6 6,844.7
Portion of rentals
representative of
the interest
factor ......... 54.5 51.2 43.6 31.7 30.3
---------- ---------- ---------- ---------- ----------
Total fixed charges 4,990.8 4,282.1 4,764.8 5,860.3 6,875.0
---------- ---------- ---------- ---------- ----------
Earnings available
for fixed charges $ 6,774.0 $ 5,721.9 $ 6,337.6 $ 7,961.3 $ 8,523.2
========== ========== ========== ========== ==========
Ratio of earnings
to fixed charges 1.36 1.33 1.33 1.35 1.23
==== ==== ==== ==== ====
* Before cumulative effect of accounting change of ($7.4) million in 1994,
($282.6) million in 1992 and $331.5 million in 1991.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
GENERAL MOTORS ACCEPTANCE CORPORATION:
We consent to the incorporation by reference of our report dated January 29,
1996, appearing in this Annual Report on Form 10-K of General Motors Acceptance
Corporation for the year ended December 31, 1995, in the following Registration
Statements:
Registration
FORM STATEMENT NO DESCRIPTION
---- ------------- -----------------------------
S-3 33-31596 $5,000,000,000 General Motors
Acceptance Corporation GMAC
Variable Denomination
Adjustable Rate Demand Notes
S-3 33-64235 $5,000,000,000 General Motors
Acceptance Corporation Debt
Securities
S-3 33-63463 $10,000,000,000 General Motors
Acceptance Corporation
Medium-Term Notes
s/ DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
600 Renaissance Center
Detroit, Michigan 48243-1704
March 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000040729
<NAME> GMAC
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1449
<SECURITIES> 4328
<RECEIVABLES> 64061
<ALLOWANCES> 808
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29007<F1>
<DEPRECIATION> 6737
<TOTAL-ASSETS> 94573
<CURRENT-LIABILITIES> 49924<F2>
<BONDS> 31051
0
0
<COMMON> 2200
<OTHER-SE> 6069
<TOTAL-LIABILITY-AND-EQUITY> 8269
<SALES> 0
<TOTAL-REVENUES> 14863
<CGS> 0
<TOTAL-COSTS> 5303<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 449
<INTEREST-EXPENSE> 4936
<INCOME-PRETAX> 1783
<INCOME-TAX> 752
<INCOME-CONTINUING> 1031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1031
<EPS-PRIMARY> 47
<EPS-DILUTED> 47
<FN>
<F1>Gross Operating Leases (Note 4) + Gross PPE listed under Other Nonearning
Assets (Note 6)
<F2>Includes debt due <1yr. plus other current payables. Excludes deferred
income taxes, OPEB and other liabilities. The current portion of such amounts
are not determinable in the footnotes.
<F3>Includes depreciation on operating leases and insurance loss and loss
adjustments.
</FN>
</TABLE>
