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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
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1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
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1934 FOR THE TRANSITION PERIOD FROM TO
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Commission file number 1-3754
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GENERAL MOTORS ACCEPTANCE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 38-0572512
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202
- - -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-556-5000
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The registrant meets the conditions set forth in General Instruction H(1) (a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
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 .
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As of September 30, 1998, there were outstanding 10 shares of the issuer's
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
This quarterly report, filed pursuant to Rule 13a-13 of the General Rules and
Regulations under the Securities Exchange Act of 1934, consists of the following
information as specified in Form 10-Q:
PART 1. FINANCIAL INFORMATION
The required information is given as to the registrant, General Motors
Acceptance Corporation and subsidiaries (the "Company" or "GMAC").
ITEM 1. FINANCIAL STATEMENTS.
In the opinion of management, the interim financial statements
reflect all adjustments, consisting of only normal recurring items
which are necessary for a fair presentation of the results for the
interim periods presented. The results for interim periods are
unaudited and are not necessarily indicative of results which may
be expected for any other interim period or for the full year.
These financial statements should be read in conjunction with the
consolidated financial statements, the significant accounting
policies, and the other notes to the consolidated financial
statements included in the Company's 1997 Annual Report filed with
the Securities and Exchange Commission on Form 10-K.
The Financial Statements described below are submitted herein as
Exhibit 20.
1. Consolidated Balance Sheet, September 30, 1998, December
31, 1997 and September 30, 1997.
2. Consolidated Statement of Income, Net Income Retained for
Use in the Business and Comprehensive Income for the Third
Quarter and Nine Months Ended September 30, 1998 and 1997.
3. Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997.
4. Notes to Consolidated Financial Statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS
Consolidated net income for the third quarter and nine months ended September
30, 1998 was relatively unchanged when compared to the same periods during 1997.
<TABLE>
<CAPTION>
(in millions of dollars, after tax) Period Ended September 30,
Third Quarter Nine Months
----------------- ---------------------
1998 1997 1998 1997
------ ------ -------- --------
<S> <C> <C> <C> <C>
Automotive Financing Operations $249.5 $222.8 $ 784.1 $ 724.5
Insurance Operations * 54.2 50.1 187.8 170.7
Mortgage Operations** 9.4 39.7 55.2 127.1
------ ------ -------- --------
Consolidated Net Income $313.1 $312.6 $1,027.1 $1,022.3
====== ====== ======== ========
* GMAC Insurance Holdings, Inc. (GMACI)
** GMAC Mortgage Group, Inc. (GMACMG)
Consolidated Return on Average Equity 13.3% 14.4% 14.9% 16.1%
</TABLE>
Earnings were 12% higher from automotive financing operations during the third
quarter of 1998, compared to the same period in 1997, primarily due to increased
retail financing and leasing assets, reduced credit losses and a lower effective
income tax rate, partially offset by lower net interest margins and lower
wholesale volume.
Earnings from insurance operations increased by 8% during the third quarter of
1998, compared to the same period during 1997. Earnings were higher due to the
inclusion of Integon Corporation ("Integon") and increased capital gains.
Net income from mortgage operations during the third quarter of 1998 was $9.4
million. The significant decline in income, when compared to the same period
last year, is the result of widening credit spreads and increasing prepayments,
which have reduced the value of its mortgage inventory and investment positions.
UNITED STATES NEW PASSENGER CAR AND TRUCK DELIVERIES
U.S. deliveries of new General Motors ("GM") vehicles during the third quarter
and nine months ended September 30, 1998 were lower than comparable 1997 levels,
primarily due to a 54-day work stoppage from June 5, 1998 through July 28, 1998
at GM which reduced production by an estimated 545,000 units. Increased
incentive programs sponsored by GM resulted in the Company's higher retail
financing penetration.
<TABLE>
<CAPTION>
Period Ended September 30,
Third Quarter Nine Months
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(in millions of units)
<S> <C> <C> <C> <C>
Industry 3.8 4.0 12.0 11.8
General Motors 0.9 1.3 3.5 3.6
New GM Vehicle Deliveries Financed by GMAC
Retail (Installment Sale Contracts and
Operating Leases) 45.6% 37.6% 44.3% 33.3%
Fleet Transactions (Lease Financing) 1.8% 1.4% 2.1% 2.8%
Total 37.7% 31.3% 36.2% 27.2%
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCING VOLUME
The number of new vehicle deliveries financed during the third quarter and nine
months ended September 30, 1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
Period Ended September 30,
Third Quarter Nine Months
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(in thousands of units)
UNITED STATES
<S> <C> <C> <C> <C>
Retail Installment Sale Contracts 207 279 756 649
Operating Leases 143 114 489 328
Leasing 5 4 18 25
--- --- ----- -----
New Deliveries Financed 355 397 1,263 1,002
=== === ===== =====
OTHER COUNTRIES
Retail Installment Sale Contracts 114 94 312 247
Operating Leases 86 80 240 241
Leasing 15 19 53 60
--- --- ----- -----
New Deliveries Financed 215 193 605 548
=== === ===== =====
WORLDWIDE
Retail Installment Sale Contracts 321 373 1,068 896
Operating Leases 229 194 729 569
Leasing 20 23 71 85
--- --- ----- -----
New Deliveries Financed 570 590 1,868 1,550
=== === ===== =====
</TABLE>
The Company financed 11% fewer new vehicles in the U.S. during the third quarter
of 1998, compared to the same period in 1997, primarily as a result of the work
stoppage mentioned earlier. However, the Company financed 26% more new vehicles
in the U.S. during the nine months ended September 30, 1998 over the comparable
period in 1997, as a result of increased incentive programs sponsored by GM.
Outside of the U.S., Canadian and Latin American retail, as well as Canadian
operating lease volume, increased as a result of similar incentive plans offered
by GM during the first nine months of 1998. These increases were partially
offset by lower operating lease volume in Europe.
GMAC also provides wholesale financing for GM and other dealers' new and used
vehicle inventories. In the United States, inventory financing was provided for
564,000 and 1,931,000 new GM vehicles during the third quarter and first nine
months of 1998, compared with 756,000 and 2,428,000 new GM vehicles during the
same periods in 1997, respectively. GMAC's wholesale financing represented 63.4%
of all GM U.S. vehicle sales to dealers during the first nine months of 1998,
down from 67.5% for the comparable period a year ago. Increased competitive
market conditions led to the decline in wholesale penetration levels. The
reduction in wholesale financing volume is primarily a result of the work
stoppage mentioned earlier that halted production of wholesale units at 26 of 29
assembly plants in North America.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INCOME AND EXPENSES
Automotive financing revenue totaled $3,150.2 million and $9,461.7 million in
the third quarter and first nine months of 1998, respectively, compared to
$3,105.8 million and $9,457.9 million for the same periods in 1997. Higher
retail financing revenues were offset by a decline in wholesale revenues,
principally as a result of the reduction in wholesale receivable balances
related to the GM work stoppage.
The Company's worldwide cost of borrowing, including the effects of derivatives,
for the third quarter and first nine months of 1998 averaged 6.06% and 6.07%,
respectively, a decrease of 31 and 26 basis points from the comparable periods
of a year ago. Total borrowing costs for U.S. operations averaged 5.93% and
6.00% for the third quarter and first nine months of 1998, compared to 6.48%
and 6.41% for the respective periods in 1997. The lower average borrowing costs
for both comparable periods of 1998 are largely a result of lower long-term
interest rates and a greater proportion of floating rate debt compared to fixed
rate debt.
Insurance premiums earned, mortgage revenue and other income totaled $1,296.3
million and $3,832.7 million for the third quarter and nine months ended
September 30, 1998, respectively, compared to $1,001.3 million and $2,848.2
million during the comparable 1997 periods. The quarterly and year-to-year
comparative increases can be primarily attributed to higher insurance premiums
and investment income resulting from the acquisition of Integon by GMACI in
October 1997, as well as an increase in mortgage investment income.
Consolidated salaries and other operating expenses totaled $922.1 million and
$2,565.3 million for the third quarter and first nine months of 1998,
respectively, compared to $694.4 million and $2,063.4 million for the comparable
periods last year. The increase is mainly attributable to the acquisition of
Integon by GMACI and continued growth at GMACMG.
Annualized net retail losses were 0.74% and 0.83% of total average serviced
automotive receivables during the third quarter and first nine months of 1998,
respectively, compared to 1.12% and 1.27% for the same periods last year. The
provision for credit losses totaled $322.6 million and $395.9 million for the
nine months ended September 30, 1998 and 1997, respectively. The decline in the
provision is primarily attributable to lower credit losses resulting from
tightened credit standards.
The effective income tax rate was 30.9% and 42.2% for the nine months ended
September 30, 1998 and September 30, 1997, respectively. The decrease in the
effective tax rate can be attributed to lower U.S. and foreign taxes assessed on
foreign source income and a favorable change resulting from periodic assessments
of state and local income tax accruals.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INSURANCE OPERATIONS
Net premiums earned by GMACI and its subsidiaries totaled $466.1 million and
$1,416.9 million for the third quarter and nine months ended September 30, 1998,
respectively, compared to $302.5 million and $914.3 million for the same periods
during 1997. Pre-tax capital gains and investment and other income at GMACI
totaled $118.9 million and $389.8 million for the third quarter and first nine
months of 1998 compared to $92.1 million and $302.6 million for the same periods
in 1997. Insurance losses and loss adjustment expenses totaled $360.8 million
and $1,115.9 million during the third quarter and first nine months of 1998,
compared to $248.0 million and $717.6 million for the same periods in 1997. The
increases in net premiums earned and losses are primarily a result of the
inclusion of Integon's non-standard automobile operations since its acquisition
in October 1997. The increase in capital gains and investment income is due to
the inclusion of Integon and the additional diversification of GMACI's
investment portfolio during 1998 which resulted in a higher concentration of
gains during the first nine months of 1998 compared to the same period in 1997.
MORTGAGE OPERATIONS
During the third quarter and first nine months of 1998, GMACMG loan origination,
mortgage servicing acquisitions and correspondent loan volume totaled $23.0
billion and $85.5 billion, respectively, compared to $12.1 billion and $32.1
billion for the same periods in 1997. The increase was primarily the result of
the acquisition of a $27.1 billion mortgage servicing portfolio and related
servicing assets plus the subservicing of an additional $6.4 billion in
bank-owned loans of Wells Fargo Bank, N.A. The transaction was completed
effective June 1, 1998.
Reflecting this acquisition and sustained growth over the past twelve months,
the combined GMACMG servicing portfolio, excluding GMAC term loans to dealers,
totaled $197.0 billion at September 30, 1998 compared with the $141.1 billion
and $128.6 billion serviced at December 31 and September 30, 1997, respectively.
For the first nine months of 1998, net income was $55.2 million. The significant
decline in income, when compared to the same period last year, is primarily
attributable to widening credit spreads and the effect of higher than
anticipated prepayment speeds, which resulted in the revaluation of
interest-only products and accelerated amortization of mortgage servicing
rights.
On August 28, 1998, GMACMG submitted an application to the Office of Thrift
Supervision seeking approval to organize a federal savings bank within its
operations.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1998, the Company owned assets and serviced automotive
receivables totaling $126.1 billion, $4.9 billion above year-end 1997, and $12.5
billion above September 30, 1997. The higher balance compared to year-end 1997
predominantly reflects increases in retail earning assets partially offset by
declines in wholesale receivables and off-balance sheet wholesale and retail
serviced assets.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Earning assets totaled $113.3 billion at September 30, 1998, compared to $104.5
billion and $102.3 billion at December 31 and September 30, 1997, respectively.
Finance receivables serviced by the Company, including sold receivables, totaled
$72.6 billion at September 30, 1998, $0.8 billion below December 31, 1997 levels
and $3.5 billion above September 30, 1997 levels. On-balance sheet retail
receivables were $5.9 billion higher than year-end 1997, primarily a result of
increased retail incentive programs sponsored by GM. On-balance sheet wholesale
receivables declined $2.7 billion during the same period due to the GM work
stoppages. Also contributing to the change, sold wholesale receivables decreased
$3.7 billion, attributable to the scheduled wind down of a revolving wholesale
trust and the effects of the work stoppages. Additionally, sold retail
receivables (including the retained subordinated interest portion) declined by
$1.2 billion.
Consolidated operating lease assets, net of depreciation, totaled $28.4 billion
at September 30, 1998, reflecting increases of $2.6 billion and $2.0 billion
over December 31 and September 30, 1997 periods, respectively. The increase from
year-end 1997 is primarily attributable to additional GM sponsored lease
incentive programs in the U.S. during the first nine months of 1998.
Investments in securities at September 30, 1998 totaled $8.1 billion, compared
with $7.9 billion and $6.2 billion at December 31 and September 30, 1997,
respectively. The increase from September 1997 to September 1998 is principally
the result of continued growth at GMACMG and the acquisition of Integon by
GMACI.
The Company's due and deferred from receivable sales (net) totaled $186.1
million at September 30, 1998, compared with $690.5 million and $660.9 million
at December 31 and September 30, 1997, respectively. The significant decline in
the September 30, 1998 balance was primarily due to the upgrade in GMAC's
short-term debt rating by Standard & Poor's Ratings Group ("S&P") in January
1998, which eliminated the requirement to segregate and hold in trust the daily
collections on sold receivables.
As of September 30, 1998, GMAC's total borrowings were $91.9 billion, compared
with $86.7 billion and $82.9 billion at December 31, 1997 and September 30,
1997, respectively. The higher borrowings were used to fund increased earning
asset levels. GMAC's ratio of debt to total stockholder's equity at September
30, 1998 was 9.7:1, compared to 9.9:1 at December 31, 1997 and 9.6:1 at
September 30, 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company and its subsidiaries maintain substantial bank lines of credit which
totaled $42.7 billion at September 30, 1998, compared to $39.8 billion at
year-end 1997 and $39.6 billion at September 30, 1997. The unused portion of
these credit lines totaled $33.8 billion at September 30, 1998, $3.4 billion and
$2.7 billion higher than December 31 and September 30, 1997, respectively.
Included in the unused credit lines are a committed U.S. revolving credit
facility of $10.0 billion which serves primarily as back-up for GMAC's unsecured
commercial paper program and a $12.0 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.
Effective August 3, 1998, S&P affirmed its current ratings on GMAC and revised
its outlook on GMAC from stable to negative.
As discussed in the Company's 1997 Annual Report on Form 10-K, the Company
utilizes a variety of interest rate and currency derivative instruments in
managing its interest rate and foreign exchange exposures. The notional amount
of derivatives increased from $56.4 billion at December 31, 1997 to $63.5
billion at September 30, 1998. The change is primarily attributable to an
increase in financial instruments associated with mortgage related securities
and mortgage related commitments.
YEAR 2000
Many computerized systems and microprocessors that are used by GMAC have the
potential for operational problems if they lack the ability to handle the
transition to the Year 2000. This issue has the potential to cause disruption
to the business of GMAC and its customers. In its capacity as a wholly-owned
subsidiary of GM, GMAC is part of GM's comprehensive worldwide Year 2000
program. As part of that program, GMAC is identifying and remediating potential
Year 2000 problems in its business information systems and other equipment in
its operations. GMAC has also initiated communications with its service and
technology providers, landlords, dealers and other third parties in order to
assess and reduce the risk that GMAC's operations could be adversely affected
by the failure of these third parties to adequately address the Year 2000 issue.
GMAC's Year 2000 program teams are responsible for remediating all of GMAC's
information technology. Information technology principally consists of business
information systems (such as mainframe and other shared computers and associated
business application software) and infrastructure (such as personal computers,
operating systems, networks and devices like switches and routers). GMAC's Year
2000 program includes assessment and remediation services provided by Electronic
Data Systems Corporation (EDS) pursuant to a Master Service Agreement with GM.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONTINUED)
The Year 2000 program is being implemented in seven phases, some of which are
being conducted concurrently:
Inventory - identification and validation of an inventory of all systems
and infrastructure components that could be affected by the Year 2000
issue. The inventory phase commenced in earnest in 1996 and is
substantially complete. It has identified approximately 2,000 business
information systems/applications.
Assessment - initial testing, code scanning, and technology provider
contacts to determine whether remediation is needed and to develop
a remediation plan, if applicable. The assessment of business
information systems is substantially complete and included a
determination that approximately one half of such systems should be
regarded as "critical" based on criteria such as the potential for
business disruption. The assessment of infrastructure is also
substantially complete.
Remediation - design and execution of a remediation plan, followed by
testing for adherence to the design. GMAC is targeting the end of 1998
for remediation of its critical systems and will continue to address
remediation of other systems on a prioritized basis thereafter
(unimportant systems have been, and will continue to be, removed from
our Year 2000 inventory and will not be remediated). While a few
critical systems will not be remediated until after the target date,
GMAC believes that it is substantially on track to meet its target.
In the normal course of its business plans, GMAC is also incrementally
implementing enterprise software and other "common" applications that
will replace and thereby eliminate the need to remediate certain
existing systems. Implementation of this software at several sites is
scheduled for completion in the first quarter of 1999, with a few not
expected to be complete until the second quarter of 1999.
System Testing - testing of remediated items to ensure that they
function normally after being placed back in their original operating
environment. This phase is closely related to the remediation phase
and follows essentially the same schedule.
Implementation - return of items to normal operation after satisfactory
performance in system testing. This phase follows essentially the same
schedule as remediation and system testing.
Readiness Testing - planning for and testing of integrated systems in a
Year 2000 ready environment, including ongoing auditing and follow-up.
Readiness testing is currently underway and is expected to be largely
completed in 1998, or early 1999, with a few exceptions as noted above.
Contingency Planning - development and execution of plans that focus on
specific areas of significant concern and concentrate resources to
address them. GMAC currently believes that the most reasonably likely
worst case scenario is that there will be some localized disruptions
of systems that will affect individual business processes, facilities
or service and technology providers for a short time rather than
systematic or long-term problems affecting our business operations as a
whole. GMAC contingency planning will continue to identify systems
or other aspects of its business that it believes would be most
likely to experience Year 2000 problems as well as those business
operations in which a localized disruption could have the potential for
causing a wider problem by interrupting the flow of data or services to
other operations. Because there is an uncertainty as to which
activities may be affected, and the exact nature of the problems which
may arise, contingency planning will focus on minimizing the scope and
duration of any disruption by having sufficient personnel and other
resources in place to permit a flexible, real-time response to specific
problems as they may arise at individual locations around the world.
Some of the actions that may be considered include the deployment of
emergency response teams on a regional or local basis, the establishment
of a Year 2000 Command Center and development of detailed manual
procedures. GMAC is leveraging off its existing Disaster Recovery
and Business Resumption Plans and Processes, while expanding its scope
to encompass Year 2000 concerns. The target for completion of these
plans is the first half of 1999, with subsequent testing and refinement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONTINUED)
GMAC's communication with its service and technology providers is a focused
element of the assessment phase described above. GMAC is a leading participant
in the Financial Services Sub-Group of the Automotive Industry Action Group
(AIAG), an automotive industry trade association, which has distributed Year
2000 compliance questionnaires to many critical financial service providers that
supply GMAC with services throughout the world. Responses to these
questionnaires have been received from approximately three quarters of the North
American providers and one quarter of the international providers to which they
were sent. In addition, GMAC has initiated its own contact and review of these
providers and other non-financial service providers considered to be critical
to GMAC's operations, including follow-up to the AIAG questionaire. GMAC
has also initiated contact with the landlords or property managers of its
facilities throughout the world, to assess the ongoing functionality of the
space it rents from others. Responses have been received from more than 90% of
the contacts.
GMAC also has a program to work with some of its largest customers, primarily
automotive dealers and lease/rental companies, on their Year 2000 readiness.
This program, developed in conjunction with GM, includes distributing materials
that assist them in designing and executing their own assessment and remediation
efforts.
The cost of GMAC's Year 2000 program is being expensed as incurred with the
exception of capitalizable replacement hardware. Total incremental spending by
GMAC is not expected to be material to the Company's operations, liquidity or
capital resources. GMAC incurred approximately $5 million of Year 2000 expense
during 1997 and $20 million in the first nine months of 1998. GMAC currently
expects its total Year 2000 expense to be approximately $75 million, with peak
spending occurring late in 1998 and early in 1999. This total spending also
includes an additional payment to EDS of approximately $15 million (part of GM's
overall additional payment to EDS of $75 million) at the end of the first
quarter of 2000 if systems remediated by EDS under its Master Service Agreement
with GM are capable of continued operation before, on and after January 1, 2000
without causing a significant business disruption that results in a material
financial loss to GM due to the millennium change.
The estimated value of the services EDS is required to provide to GMAC under the
Master Services Agreement with GM that are included in normal fixed price
services and other on-going payments to EDS that are attributable to work being
performed in connection with GMAC's Year 2000 program is approximately $30
million. This does not represent incremental spending to GMAC. GMAC Year 2000
program costs do not include information technology projects that have been
delayed due to Year 2000, which are estimated to be $15 million, or information
technology projects that have been accelerated due to Year 2000, which are
estimated to be less than $5 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONCLUDED)
In view of the foregoing, GMAC does not currently anticipate that it will
experience a significant disruption of its business as a result of the Year 2000
issue. However, there is still uncertainty about the broader scope of the Year
2000 issue as it may affect GMAC and third parties that are critical to GMAC's
operations. For example, lack of readiness by electrical and water utilities,
financial institutions, governmental agencies or other providers of general
infrastructure could, in some geographic areas, pose significant impediments to
GMAC's ability to carry on its normal operations in the area or areas so
affected. In the event that GMAC is unable to complete its remedial actions as
described above and is unable to implement adequate contingency plans in the
event that problems are encountered, there could be a material adverse effect
on GMAC's business, results of operations or financial condition.
EURO CONVERSION
On January 1, 1999, eleven of fifteen member countries of the European Monetary
Union will establish fixed conversion rates between their existing currencies
and adopt the euro as their new common currency. The euro will trade on currency
exchanges and the legacy currencies will remain legal tender in the
participating countries for a transition period between January 1, 1999 and
January 1, 2002. Beginning on January 1, 2002, euro denominated bills and coins
will be issued and legacy currencies will be withdrawn from circulation.
The Company has established plans to assess and address the potential impact to
GMAC, which may result from the euro conversion. These issues include, but are
not limited to: 1)the technical challenges to adapt information systems to
accommodate euro transactions; 2)the competitive impact of cross-border price
transparency; 3)the impact on currency exchange rate risks; 4)the impact on
existing contracts; and 5)tax and accounting implications. The Company expects
that the euro conversion will not have a material adverse impact on its
financial condition or results of operations.
ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 1999. The new standard requires that all companies record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. Management is currently assessing the impact of SFAS No.
133 on the financial statements of the Company. The Company will adopt this
accounting standard on January 1, 2000, as required.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
ACCOUNTING STANDARDS (CONCLUDED)
In the first quarter of 1998, the AICPA's Accounting Standards Executive
Committee issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 provides
guidance on the capitalization of software for internal use. GMAC will adopt SOP
98-1 on January 1, 1999, as required. Management is currently assessing the
impact of this SOP on the financial statements of the Company.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. SFAS No. 132 requires an entity to
disclose certain information about pensions and other postretirement benefits.
The effect of adopting this new accounting standard will not be material to the
Company's consolidated financial statements, when adopted for this fiscal year,
as required.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company did not become a party to any material pending legal proceedings
during the third quarter ended September 30, 1998, or prior to the filing of
this report.
ITEM 5. OTHER INFORMATION
RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended
SEPTEMBER 30,
-------------------
1998 1997
---- ----
1.34 1.45
The ratio of earnings to fixed charges has been computed by dividing earnings
before income taxes and fixed charges by the fixed charges. This ratio includes
the earnings and fixed charges of the Company and its consolidated subsidiaries.
Fixed charges consist of interest, debt discount and expense and the portion of
rentals for real and personal properties in an amount deemed to be
representative of the interest factor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
20. General Motors Acceptance Corporation and Subsidiaries
Consolidated Financial Statements for the Third Quarter
and Nine Months Ended September 30, 1998.
<PAGE>
PART II. OTHER INFORMATION (CONCLUDED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONCLUDED)
(b) REPORTS ON FORM 8-K:
The Company filed a Form 8-K on October 13, 1998 reporting matters
under Item 5, Other Events.
The Company is presently not under review by any of the nationally
recognized statistical rating agencies. Additional disclosures
regarding credit ratings are provided on page 8 of this document
and pages 15 and 16 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, filed with the Securities and Exchange
Commission on March 17, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL MOTORS ACCEPTANCE CORPORATION
-------------------------------------
(Registrant)
S/ WILLIAM F. MUIR
-------------------------------------
Dated: NOVEMBER 16, 1998 William F. Muir, Executive Vice
-----------------
President and Principal Financial
Officer
S/ GERALD E. GROSS
-------------------------------------
Dated: NOVEMBER 16, 1998 Gerald E. Gross, Comptroller and
-----------------
Principal Accounting Officer
<PAGE>
<TABLE>
Exhibit 20
Page 1 of 7
<CAPTION>
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEET
Sept. 30, Dec. 31, Sept. 30,
1998 1997 1997
-------- -------- --------
(in millions of dollars)
<S> <C> <C> <C>
Cash and cash equivalents $ 614.2 $ 759.2 $ 476.0
EARNING ASSETS
Investments in securities 8,134.9 7,896.1 6,153.2
Finance receivables, net (Note 1) 63,725.3 59,630.8 59,581.8
Investment in operating leases, net 28,400.1 25,849.1 26,384.5
Notes receivable from General Motors Corporation 2,301.6 551.7 454.3
Real estate mortgages - held for sale 5,424.6 5,119.5 4,790.4
- held for investment 789.5 713.0 774.0
- lending receivables 1,783.3 2,222.9 1,999.6
Due and deferred from receivable sales, net 186.1 690.5 660.9
Other 2,558.1 1,807.6 1,499.4
---------- ---------- ----------
Total earning assets 113,303.5 104,481.2 102,298.1
Nonearning assets 4,705.1 4,078.9 2,444.4
---------- ---------- ----------
TOTAL ASSETS $118,622.8 $109,319.3 $105,218.5
========== ========== ==========
Notes, loans and debentures payable within
one year (Note 2) $ 50,959.6 $ 50,399.5 $ 48,112.1
---------- ---------- ----------
ACCOUNTS PAYABLE AND OTHER LIABILITIES
General Motors Corporation and affiliated companies 1,898.8 698.9 1,477.5
Interest 1,394.3 1,101.8 1,366.2
Insurance losses and loss expenses 2,043.7 2,125.3 1,566.1
Unearned insurance premiums 1,865.0 1,804.1 1,494.6
Deferred income taxes 2,796.6 2,577.1 2,323.5
United States and foreign income and other taxes
payable 276.4 321.2 442.4
Other postretirement benefits 690.9 652.6 652.5
Other 6,261.0 4,607.5 4,290.7
---------- ---------- ----------
Total accounts payable and other liabilities 17,226.7 13,888.5 13,613.5
---------- ---------- ----------
Notes, loans and debentures payable after one year
(Note 3) 40,937.7 36,275.2 34,828.9
---------- ---------- ----------
Common stock, $.10 par value (authorized 10,000
shares, outstanding 10 shares) and paid-in capital 2,200.0 2,200.0 2,200.0
Net income retained for use in the business 7,128.4 6,326.3 6,147.5
Net unrealized gains on securities 306.6 368.5 388.8
Unrealized accumulated foreign currency translation
adjustment (136.2) (138.7) (72.3)
---------- ---------- ----------
Accumulated other comprehensive income 170.4 229.8 316.5
---------- ---------- ----------
Total stockholder's equity 9,498.8 8,756.1 8,664.0
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $118,622.8 $109,319.3 $105,218.5
========== ========== ==========
</TABLE>
Certain amounts for 1997 have been reclassified to conform with 1998
classifications.
Reference should be made to the Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Exhibit 20
Page 2 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF INCOME,
NET INCOME RETAINED FOR USE IN THE BUSINESS AND
COMPREHENSIVE INCOME
<CAPTION>
Period Ended September 30,
Third Quarter Nine Months
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- ---------- ---------
(in millions of dollars)
FINANCING REVENUE
<S> <C> <C> <C> <C>
Retail and lease financing $ 982.1 $ 861.7 $ 2,834.4 $ 2,691.9
Operating leases 1,822.2 1,827.2 5,415.8 5,445.7
Wholesale and term loans 345.9 416.9 1,211.5 1,320.3
--------- --------- ---------- ---------
Total automotive financing revenue 3,150.2 3,105.8 9,461.7 9,457.9
Interest and discount 1,477.5 1,307.9 4,316.7 3,885.6
Depreciation on operating leases 1,149.1 1,163.0 3,488.2 3,475.4
--------- --------- ---------- ---------
Net automotive financing revenue 523.6 634.9 1,656.8 2,096.9
Insurance premiums earned 466.1 302.5 1,416.9 914.3
Mortgage revenue 537.7 417.7 1,455.6 1,090.7
Other income 292.5 281.1 960.2 843.2
--------- --------- ---------- ---------
Net financing revenue and other 1,819.9 1,636.2 5,489.5 4,945.1
--------- --------- ---------- ---------
EXPENSES
Salaries and benefits 283.0 282.8 861.4 806.9
Other operating expenses 639.1 411.6 1,703.9 1,256.5
Insurance losses and loss
adjustment expenses 360.8 248.0 1,115.9 717.6
Provision for credit losses 93.9 138.7 322.6 395.9
--------- --------- ---------- ---------
Total expenses 1,376.8 1,081.1 4,003.8 3,176.9
--------- --------- ---------- ---------
Income before income taxes 443.1 555.1 1,485.7 1,768.2
United States, foreign and other
income taxes 130.0 242.5 458.6 745.9
--------- --------- ---------- ---------
NET INCOME 313.1 312.6 1,027.1 1,022.3
Net income retained for use in the
business at beginning of the period 6,890.3 6,034.9 6,326.3 5,775.2
--------- --------- ---------- ---------
Total 7,203.4 6,347.5 7,353.4 6,797.5
Cash dividends 75.0 200.0 225.0 650.0
--------- --------- ---------- ---------
NET INCOME RETAINED FOR USE IN THE
BUSINESS AT END OF THE PERIOD $ 7,128.4 $ 6,147.5 $ 7,128.4 $ 6,147.5
========= ========= ========== =========
TOTAL COMPREHENSIVE INCOME $ 244.0 $ 373.2 $ 967.7 $ 1,046.4
========= ========= ========== =========
</TABLE>
Certain amounts for 1997 have been reclassified to conform with 1998
classifications.
Reference should be made to the Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Exhibit 20
Page 3 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1998 1997
----------- ----------
(in millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,027.1 $ 1,022.3
Depreciation 3,542.9 3,515.2
Provision for credit losses 322.6 395.7
Gains on sales of finance receivables (31.0) (55.9)
Mortgage loans - originations/purchases (39,491.7) (19,741.8)
- proceeds on sale 39,186.6 17,736.4
Mortgage related securities held for trading - acquisitions (1,678.6) (1,784.8)
- liquidations 897.5 1,034.8
Changes in the following items:
Due to General Motors Corporation and affiliated companies 631.4 827.6
Taxes payable and deferred 206.9 284.5
Interest payable 292.4 308.5
Other assets (643.9) (335.6)
Other liabilities 1,837.2 367.5
Other 175.2 246.5
---------- ----------
Net cash provided by operating activities 6,274.6 3,820.9
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables - acquisitions (112,821.4) (128,299.6)
- liquidations 86,528.3 105,401.2
Notes receivable from General Motors Corporation (1,774.4) (263.8)
Operating leases - acquisitions (13,899.6) (12,400.8)
- liquidations 7,869.4 7,128.4
Investments in securities - acquisitions (14,286.2) (14,217.2)
- liquidations 14,730.0 13,752.8
Proceeds from sales of receivables - wholesale 20,406.7 17,102.4
- retail 1,515.6 3,409.9
Due and deferred from receivable sales 513.2 642.9
Other (642.6) (856.6)
---------- ----------
Net cash used in investing activities (11,861.0) (8,600.4)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 13,930.2 11,308.5
Principal payments on long-term debt (9,616.6) (8,773.1)
Change in short-term debt, net 803.8 2,622.9
Notes payable to General Motors Corporation 550.0 --
Dividends paid (225.0) (650.0)
---------- ----------
Net cash provided by financing activities 5,442.4 4,508.3
---------- ----------
Effect of exchange rate changes on cash and cash equivalents (1.0) 4.9
Net decrease in cash and cash equivalents (145.0) (266.3)
Cash and cash equivalents at the beginning of the period 759.2 742.3
---------- ----------
Cash and cash equivalents at the end of the period $ 614.2 $ 476.0
========== ==========
SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid $ 3,954.5 $ 3,523.9
Income taxes paid 206.2 217.3
</TABLE>
Certain amounts for 1997 have been reclassified to conform with 1998
classifications.
Reference should be made to the Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Exhibit 20
Page 4 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. FINANCE RECEIVABLES
The composition of finance receivables outstanding at September 30, 1998,
December 31, 1997 and September 30, 1997 is summarized as follows:
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
1998 1997 1997
---------- ---------- ----------
(in millions of dollars)
United States
<S> <C> <C> <C>
Retail $ 31,748.1 $ 26,570.2 $ 26,606.9
Wholesale 13,719.4 15,212.7 15,808.6
Leasing and lease financing 602.4 716.2 723.3
Term loans to dealers and others 4,553.0 3,506.6 3,362.3
---------- ---------- ----------
Total United States 50,622.9 46,005.7 46,501.1
---------- ---------- ----------
Europe
Retail 5,321.3 4,944.2 5,065.6
Wholesale 3,324.0 3,828.5 3,265.2
Leasing and lease financing 516.1 578.1 543.2
Term loans to dealers and others 381.0 279.7 270.9
---------- ---------- ----------
Total Europe 9,542.4 9,630.5 9,144.9
---------- ---------- ----------
Canada
Retail 1,686.6 1,088.5 1,041.8
Wholesale 1,739.4 2,245.9 2,235.1
Leasing and lease financing 893.8 962.3 996.0
Term loans to dealers and others 188.0 215.6 178.0
---------- ---------- ----------
Total Canada 4,507.8 4,512.3 4,450.9
---------- ---------- ----------
Other Countries
Retail 2,278.6 2,026.0 2,104.8
Wholesale 862.7 1,048.0 968.1
Leasing and lease financing 534.5 523.7 579.2
Term loans to dealers and others 205.3 124.2 183.7
---------- ---------- ----------
Total Other Countries 3,881.1 3,721.9 3,835.8
---------- ---------- ----------
Total finance receivables 68,554.2 63,870.4 63,932.7
---------- ---------- ----------
Deductions
Unearned income 3,846.2 3,336.6 3,443.1
Allowance for credit losses 982.7 903.0 907.8
---------- ---------- ----------
Total deductions 4,828.9 4,239.6 4,350.9
---------- ---------- ----------
Finance receivables, net $ 63,725.3 $ 59,630.8 $ 59,581.8
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Exhibit 20
Page 5 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. NOTES, LOANS AND DEBENTURES PAYABLE WITHIN ONE YEAR
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
1998 1997 1997
---------- --------- ----------
(in millions of dollars)
Short-term notes
<S> <C> <C> <C>
Commercial paper $ 26,406.5 $ 27,460.9 $ 25,431.3
Master notes 472.1 248.2 300.7
Demand notes 4,093.3 3,709.2 3,721.6
Other 1,230.3 869.3 963.2
---------- ---------- ----------
Total principal amount 32,202.2 32,287.6 30,416.8
Unamortized discount (137.2) (192.0) (188.5)
---------- ---------- ----------
Total 32,065.0 32,095.6 30,228.3
---------- ---------- ----------
Bank loans and overdrafts
United States 2,291.0 1,660.8 1,317.8
Other countries 5,419.7 6,850.1 5,852.3
---------- ---------- ----------
Total 7,710.7 8,510.9 7,170.1
---------- ---------- ----------
Other notes, loans and debentures
payable within one year
United States 9,797.0 8,869.2 9,735.1
Other countries 1,386.9 923.8 978.6
---------- ---------- ----------
Total 11,183.9 9,793.0 10,713.7
---------- ---------- ----------
Total payable within one year $ 50,959.6 $ 50,399.5 $ 48,112.1
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Exhibit 20
Page 6 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. NOTES, LOANS AND DEBENTURES PAYABLE AFTER ONE YEAR
<CAPTION>
Weighted Average
Interest Rates at Sept. 30, Dec. 31, Sept. 30,
Maturity Sept. 30, 1998 1998 1997 1997
- - ---------------------- ----------------- ---------- ---------- -----------
(in millions of dollars)
United States
<C> <C> <C> <C> <C>
1998 $ - $ - $ 992.8
1999 6.5% 1,917.9 8,479.7 7,183.9
2000 6.5% 7,992.5 4,567.7 4,389.1
2001 6.5% 6,211.5 4,534.8 3,783.8
2002 6.3% 6,787.9 6,329.1 6,220.0
2003 6.1% 5,310.6 2,602.8 2,269.9
2004 - 2008 6.4% 3,592.2 2,075.5 2,046.8
2009 - 2013 9.6% 1,411.8 1,215.4 1,215.4
2014 - 2018 10.3% 373.8 373.8 373.8
2019 - 2049 5.1% 75.0 75.0 75.0
---------- ---------- ----------
Total United States 33,673.2 30,253.8 28,550.5
Other countries
1999 - 2008 5.9% 7,937.8 6,715.2 6,984.8
---------- ---------- ----------
Total notes, loans and debentures 41,611.0 36,969.0 35,535.3
Unamortized discount (673.3) (693.8) (706.4)
---------- ---------- ----------
Total notes, loans and debentures payable
after one year $ 40,937.7 $ 36,275.2 $ 34,828.9
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Exhibit 20
Page 7 of 7
GENERAL MOTORS ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. SEGMENT INFORMATION
GMAC's reportable operating segments include GMAC North American Financing
Operations (GMAC-NAO), GMAC International Financing Operations (GMAC-IO),
Insurance Operations (GMACI) and Mortgage Operations (GMACMG). GMAC-NAO consists
of the United States and Canada, and GMAC-IO consists of all other countries and
Puerto Rico.
Financial results of GMAC's operating segments for the quarters and nine months
ended September 30, 1998 and 1997 are summarized below:
OPERATING SEGMENTS:
(in millions of dollars)
<CAPTION>
Eliminations/
GMAC-NAO GMAC-IO GMACI GMACMG Reclassifications Total
-------- ------- --------- ------- ----------------- ---------
For the Quarters Ended:
September 30, 1998
- - ------------------
Net automotive
<S> <C> <C> <C> <C> <C> <C>
financing revenue $ 339.8 $ 205.2 $ 0.0 $ 0.0 $ (21.4) $ 523.6
Other revenue 339.2 7.6 579.1 351.0 19.4 1,296.3
Net income 195.4 54.1 54.2 9.4 0.0 313.1
September 30, 1997
- - ------------------
Net automotive
financing revenue $ 443.5 $ 203.4 $ 0.0 $ 0.0 $ (12.0) $ 634.9
Other revenue 310.7 5.6 396.7 279.6 8.7 1,001.3
Net income 160.8 62.0 50.1 39.7 0.0 312.6
For the Nine Months Ended:
September 30, 1998
- - ------------------
Net automotive
financing revenue $ 1,081.4 $ 613.8 $ 0.0 $ 0.0 $ (38.4) $ 1,656.8
Other revenue 1,046.8 20.7 1,790.8 943.7 30.7 3,832.7
Net income 618.0 166.1 187.8 55.2 0.0 1,027.1
September 30, 1997
- - ------------------
Net automotive
financing revenue $ 1,488.1 $ 627.7 $ 0.0 $ 0.0 $ (18.9) $ 2,096.9
Other revenue 829.6 14.8 1,222.8 772.6 8.4 2,848.2
Net income 548.0 176.5 170.7 127.1 0.0 1,022.3
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the General
Motors Acceptance Corporation Form 10-Q for the period ending September 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000040729
<NAME> GMAC
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 614
<SECURITIES> 8135
<RECEIVABLES> 68554
<ALLOWANCES> 983
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28400
<DEPRECIATION> 0
<TOTAL-ASSETS> 118623
<CURRENT-LIABILITIES> 58438
<BONDS> 40938
0
0
<COMMON> 2200
<OTHER-SE> 7299
<TOTAL-LIABILITY-AND-EQUITY> 118623
<SALES> 0
<TOTAL-REVENUES> 13294
<CGS> 0
<TOTAL-COSTS> 4604
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 323
<INTEREST-EXPENSE> 4317
<INCOME-PRETAX> 1486
<INCOME-TAX> 459
<INCOME-CONTINUING> 1027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1027
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
