Company Quick10K Filing
General Motors Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 5 $-0
10-Q 2019-10-29 Quarter: 2019-09-30
10-Q 2019-08-01 Quarter: 2019-06-30
10-Q 2019-04-30 Quarter: 2019-03-31
10-K 2019-02-06 Annual: 2018-12-31
10-Q 2018-10-31 Quarter: 2018-09-30
10-Q 2018-07-25 Quarter: 2018-06-30
10-Q 2018-04-26 Quarter: 2018-03-31
10-K 2018-02-06 Annual: 2018-02-06
10-Q 2017-10-24 Quarter: 2017-09-30
10-Q 2017-07-25 Quarter: 2017-06-30
10-Q 2017-04-28 Quarter: 2017-03-31
10-K 2017-02-07 Annual: 2016-12-31
10-Q 2016-10-25 Quarter: 2016-09-30
10-Q 2016-07-21 Quarter: 2016-06-30
10-Q 2016-04-21 Quarter: 2016-03-31
10-K 2016-02-03 Annual: 2015-12-31
10-Q 2015-10-21 Quarter: 2015-09-30
10-Q 2015-07-23 Quarter: 2015-06-30
10-Q 2015-04-23 Quarter: 2015-03-31
10-K 2015-02-04 Annual: 2014-12-31
10-Q 2014-10-23 Quarter: 2014-09-30
10-Q 2014-07-24 Quarter: 2014-06-30
10-Q 2014-04-24 Quarter: 2014-03-31
10-K 2014-02-06 Annual: 2013-12-31
10-Q 2013-10-30 Quarter: 2013-09-30
10-Q 2013-07-30 Quarter: 2013-06-30
10-Q 2013-05-02 Quarter: 2013-03-31
10-K 2013-02-15 Annual: 2012-12-31
10-Q 2012-10-31 Quarter: 2012-09-30
10-Q 2012-08-03 Quarter: 2012-06-30
10-Q 2012-05-03 Quarter: 2012-03-31
10-K 2012-02-27 Annual: 2011-12-31
10-Q 2011-11-09 Quarter: 2011-09-30
10-Q 2011-08-05 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-Q 2010-11-09 Quarter: 2010-09-30
10-K 2010-08-27 Annual: 2010-06-30
10-Q 2010-05-07 Quarter: 2010-03-31
10-Q 2010-02-05 Quarter: 2009-12-31
8-K 2020-01-06 Other Events, Exhibits
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-10-29 Regulation FD, Exhibits
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-08-01 Regulation FD, Exhibits
8-K 2019-05-01 Regulation FD, Exhibits
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-04-16 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-04-03 Other Events, Exhibits
8-K 2019-02-06 Regulation FD, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-01-14 Other Events, Exhibits
8-K 2018-11-01 Other Events, Exhibits
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-10-31 Regulation FD, Exhibits
8-K 2018-09-17 Shareholder Rights, Other Events, Exhibits
8-K 2018-08-20 Exhibits
8-K 2018-07-25 Regulation FD, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-06-14 Enter Agreement, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-04-26 Regulation FD, Exhibits
8-K 2018-04-18 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-04-05 Enter Agreement, Exhibits
8-K 2018-02-12 Other Events
8-K 2018-02-07 Regulation FD, Exhibits
8-K 2018-02-06 Earnings, Exhibits
8-K 2018-01-02 Enter Agreement, Exhibits
ACF 2019-09-30
Part I
Item 1. Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Related Party Transactions
Note 3. Finance Receivables
Note 4. Leased Vehicles
Note 5. Equity in Net Assets of Non-Consolidated Affiliates
Note 6. Debt
Note 7. Variable Interest Entities
Note 8. Derivative Financial Instruments and Hedging Activities
Note 9. Commitments and Contingencies
Note 10. Shareholders' Equity
Note 11. Income Taxes
Note 12. Segment Reporting
Note 13. Regulatory Capital and Other Regulatory Matters
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 gmfexhibit311certification.htm
EX-31.2 gmfexhibit312certification.htm
EX-32 gmfexhibit32certifications.htm

General Motors Financial Earnings 2019-09-30

ACF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
RMES 1 1 0 0 -0 -0 -0 0.5 -13%
TCT 210 12 13 0 11 11 -200 0% -18.3 5%
VDI 1,766 1,288 779 0 465 632 222 0% 0.4 26%
POYE 0 0 0 0 -0 -0 -0 0.0 -1,973%
SCTF 0 0 0 0 -0 -0 -0 3.0 -33%
SEK 302,033 283,794 0 0 0 0 -0 0%
DAVEY 570 398 1,095 98 32 97 161 9% 1.7 6%
SLDV 25 6 2 0 13 19 -1 0% -0.0 53%
MBCC 216 243 112 0 -7 10 215 0% 21.5 -3%

10-Q 1 gmf930201910-q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
(Mark One)
ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-10667
______________________________________________ 
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
State of Texas
 
75-2291093
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
5.250% Senior Notes due 2026
GM/26
New York Stock Exchange
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  Q    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  Q    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
ý
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  Q 
As of October 28, 2019, there were 5,050,000 shares of the registrant’s common stock, par value $0.0001 per share, outstanding. All shares of the registrant’s common stock are owned by General Motors Holdings LLC, a wholly-owned subsidiary of General Motors Company.
The registrant is a wholly-owned subsidiary of General Motors Company and meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with a reduced disclosure format as permitted by Instruction H(2).



INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       PART II
 
 


GENERAL MOTORS FINANCIAL COMPANY, INC.

PART I
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts) (unaudited)
 
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Cash and cash equivalents
$
3,218

 
$
4,883

Finance receivables, net (Note 3; Note 7 VIEs)
54,332

 
52,512

Leased vehicles, net (Note 4; Note 7 VIEs)
42,527

 
43,559

Goodwill
1,182

 
1,186

Equity in net assets of non-consolidated affiliates (Note 5)
1,381

 
1,355

Related party receivables (Note 2)
696

 
729

Other assets (Note 7 VIEs)
6,025

 
5,696

Total assets
$
109,361

 
$
109,920

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
Secured debt (Note 6; Note 7 VIEs)
$
39,029

 
$
42,835

Unsecured debt (Note 6)
50,099

 
48,153

Deferred income
3,708

 
3,605

Related party payables (Note 2)
67

 
63

Other liabilities
3,770

 
3,605

Total liabilities
96,673

 
98,261

Commitments and contingencies (Note 9)

 

Shareholders' equity (Note 10)
 
 
 
Common stock, $0.0001 par value per share

 

Preferred stock, $0.01 par value per share

 

Additional paid-in capital
8,085

 
8,058

Accumulated other comprehensive loss
(1,210
)
 
(1,066
)
Retained earnings
5,813

 
4,667

Total shareholders' equity
12,688

 
11,659

Total liabilities and shareholders' equity
$
109,361

 
$
109,920

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions) (unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
Finance charge income
$
1,043

 
$
917

 
$
3,038

 
$
2,667

Leased vehicle income
2,515

 
2,501

 
7,536

 
7,445

Other income
101

 
100

 
344

 
305

Total revenue
3,659

 
3,518

 
10,918

 
10,417

Costs and expenses
 
 
 
 
 
 
 
Operating expenses
384

 
369

 
1,131

 
1,116

Leased vehicle expenses
1,574

 
1,677

 
5,025

 
5,148

Provision for loan losses (Note 3)
150

 
180

 
504

 
444

Interest expense
879

 
838

 
2,778

 
2,373

Total costs and expenses
2,987

 
3,064

 
9,438

 
9,081

Equity income (Note 5)
39

 
44

 
126

 
141

Income before income taxes
711

 
498

 
1,606

 
1,477

Income tax provision (Note 11)
195

 
57

 
416

 
225

Net income
516

 
441

 
1,190

 
1,252

Less: cumulative dividends on preferred stock
23

 
15

 
68

 
44

Net income attributable to common shareholder
$
493

 
$
426

 
$
1,122

 
$
1,208


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions) (unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
516

 
$
441

 
$
1,190

 
$
1,252

Other comprehensive loss, net of tax (Note 10)
 
 
 
 
 
 
 
Unrealized (loss) gain on hedges, net of income tax (benefit) expense of $(4), $2, $(15) and $1
(12
)
 
1

 
(45
)
 
19

Foreign currency translation adjustment, net of income tax benefit of $0, $0, $0 and $1
(164
)
 
(35
)
 
(99
)
 
(221
)
Other comprehensive loss, net of tax
(176
)
 
(34
)
 
(144
)
 
(202
)
Comprehensive income
$
340

 
$
407

 
$
1,046

 
$
1,050

The accompanying notes are an integral part of these condensed consolidated financial statements.


2

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions) (unaudited)
 
Common Stock
 
Preferred Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Loss
 
Retained Earnings
 
Total
Equity
Balance at January 1, 2018
$

 
$

 
$
7,525

 
$
(768
)
 
$
3,537

 
$
10,294

Adoption of accounting standards

 

 

 

 
40

 
40

Net income

 

 

 

 
369

 
369

Other comprehensive income

 

 

 
60

 

 
60

Stock based compensation

 

 
16

 

 

 
16

Dividends paid

 

 

 

 
(30
)
 
(30
)
Other

 

 

 

 
(1
)
 
(1
)
Balance at March 31, 2018

 

 
7,541

 
(708
)
 
3,915

 
10,748

Net income

 

 

 

 
442

 
442

Other comprehensive loss

 

 

 
(228
)
 

 
(228
)
Stock based compensation

 

 
13

 

 

 
13

Other

 

 

 

 
1

 
1

Balance at June 30, 2018

 

 
7,554

 
(936
)
 
4,358

 
10,976

Net income

 

 

 

 
441

 
441

Other comprehensive loss

 

 

 
(34
)
 

 
(34
)
Stock based compensation

 

 
6

 

 

 
6

Issuance of preferred stock

 

 
492

 

 

 
492

Dividends paid

 

 

 

 
(29
)
 
(29
)
Balance at September 30, 2018
$

 
$

 
$
8,052

 
$
(970
)
 
$
4,770

 
$
11,852

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
$

 
$

 
$
8,058

 
$
(1,066
)
 
$
4,667

 
$
11,659

Net income

 

 

 

 
271

 
271

Other comprehensive income

 

 

 
42

 

 
42

Stock based compensation

 

 
11

 

 

 
11

Other

 

 

 

 
1

 
1

Balance at March 31, 2019

 

 
8,069

 
(1,024
)
 
4,939

 
11,984

Net income

 

 

 

 
403

 
403

Other comprehensive loss

 

 

 
(10
)
 

 
(10
)
Stock based compensation

 

 
8

 

 

 
8

Balance at June 30, 2019

 

 
8,077

 
(1,034
)
 
5,342

 
12,385

Net income

 

 

 

 
516

 
516

Other comprehensive loss

 

 

 
(176
)
 

 
(176
)
Stock based compensation

 

 
8

 

 

 
8

Dividends paid

 

 

 

 
(45
)
 
(45
)
Balance at September 30, 2019
$

 
$

 
$
8,085

 
$
(1,210
)
 
$
5,813

 
$
12,688

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) (unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities
 
 
 
Net cash provided by operating activities
$
6,304

 
$
5,308

Cash flows from investing activities
 
 
 
Purchases of retail finance receivables, net
(19,866
)
 
(17,794
)
Principal collections and recoveries on retail finance receivables
17,733

 
12,010

Net funding of commercial finance receivables
(599
)
 
(886
)
Purchases of leased vehicles, net
(12,488
)
 
(13,051
)
Proceeds from termination of leased vehicles
9,983

 
8,094

Other investing activities
(37
)
 
(100
)
Net cash used in investing activities
(5,274
)
 
(11,727
)
Cash flows from financing activities
 
 
 
Net change in debt (original maturities less than three months)
27

 
1,563

Borrowings and issuances of secured debt
17,880

 
18,541

Payments on secured debt
(21,707
)
 
(18,710
)
Borrowings and issuances of unsecured debt
8,796

 
9,552

Payments on unsecured debt
(7,278
)
 
(4,423
)
Debt issuance costs
(102
)
 
(118
)
Proceeds from issuance of preferred stock

 
492

Dividends paid
(91
)
 
(59
)
Net cash (used in) provided by financing activities
(2,475
)
 
6,838

Net (decrease) increase in cash, cash equivalents and restricted cash
(1,445
)
 
419

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(20
)
 
(56
)
Cash, cash equivalents and restricted cash at beginning of period
7,443

 
6,567

Cash, cash equivalents and restricted cash at end of period
$
5,978

 
$
6,930

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet:
 
September 30, 2019
Cash and cash equivalents
$
3,218

Restricted cash included in other assets
2,760

Total
$
5,978

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation The condensed consolidated financial statements include our accounts and the accounts of our consolidated subsidiaries, including certain special purpose entities (SPEs) utilized in secured financing transactions, which are considered variable interest entities (VIEs). All intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles (GAAP) in the U.S. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements that are included in our Annual Report on Form 10–K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission (SEC) on February 6, 2019 (2018 Form 10–K). Except as otherwise specified, dollar amounts presented within tables are stated in millions.
The condensed consolidated financial statements at September 30, 2019, and for the three and nine months ended September 30, 2019 and 2018, are unaudited and, in management’s opinion, include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations. The results for interim periods are not necessarily indicative of results for a full year. The condensed consolidated balance sheet at December 31, 2018 was derived from audited annual financial statements.
Segment Information We are the wholly-owned captive finance subsidiary of General Motors Company (GM). We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: North America (the North America Segment) and International (the International Segment). Our North America Segment includes operations in the U.S. and Canada. Our International Segment includes operations in Brazil, Chile, Colombia, Mexico and Peru, as well as our equity investments in joint ventures in China.
Recently Adopted Accounting Standards Effective January 1, 2019, we adopted ASU 2016-02, "Leases" (ASU 2016-02) using the optional transition method, resulting in the recognition of right of use assets of $129 million, included in other assets, and lease obligations of $144 million, included in other liabilities on our condensed consolidated balance sheet related to our existing operating leases at January 1, 2019. We elected to apply the package of practical expedients permitted under the transition guidance in the new standard, which allowed us to carry forward our historical lease classification. The accounting for finance leases and leases where we are lessor remained substantially unchanged. The application of ASU 2016-02 had no impact on our condensed consolidated statement of income or condensed consolidated statement of cash flows.
The following table summarizes our minimum commitments under noncancelable operating leases having initial terms in excess of one year at December 31, 2018:
 
Years Ending December 31,
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Minimum commitments
$
27

 
$
26

 
$
25

 
$
23

 
$
19

 
$
47

 
$
167

Refer to Note 9 for information on our operating leases at September 30, 2019.
As lessor, we have investments in leased vehicles recorded as operating leases. Leased vehicles consist of automobiles leased to customers and are carried at amortized cost less unearned manufacturer subvention payments, which are received up front. Depreciation expense is recorded on a straight-line basis over the term of the lease agreement to the estimated residual value. Manufacturer subvention is earned on a straight-line basis as a reduction to depreciation expense.
Generally, the lessee may purchase the leased vehicle at the maturity of the lease by paying the purchase price stated in the lease agreement, which equals the contract residual value determined at origination of the lease, plus any fees and all other amounts owed under the lease. If the lessee decides not to purchase the leased vehicle, the lessee must return it to a dealer by the lease's scheduled lease maturity date. Extensions may be granted to the lessee for up to six months. If the lessee extends the maturity date on their lease agreement, the lessee is responsible for additional monthly payments until the leased vehicle is returned or purchased. Since the lessee is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent the customer returns the vehicle prior to or at the end of the lease term and the value of the vehicle is lower than the residual value estimated at inception of the lease.
We estimate the expected residual value based on third-party data which considers various data points and assumptions including recent auction values, the expected future volume of returning leased vehicles, used vehicle prices, manufacturer incentive programs and fuel prices. Changes in the expected residual value result in increased or decreased depreciation of the leased asset

5

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

over the remaining term of the lease. Upon disposition, a gain or loss is recorded for any difference between the carrying amount of the lease and the proceeds from the disposition of the asset, including any insurance proceeds. Under the accounting for impairment or disposal of long-lived assets, vehicles on operating leases are evaluated by asset group for impairment. We aggregate leased vehicles into asset groups based on make, year and model. When asset group indicators of impairment exist and aggregate future cash flows from the operating lease, including the expected realizable fair value of the leased assets at the end of the lease, are less than the carrying amount of the lease asset group, an immediate impairment write-down is recognized if the difference is deemed not recoverable.
Accounting Standards Not Yet Adopted In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), which requires entities to use a new impairment model based on current expected credit losses (CECL) rather than incurred losses. We plan to adopt ASU 2016-13 on January 1, 2020 on a modified retrospective basis.
Estimated credit losses under CECL will consider relevant information about past events, current conditions and reasonable and supportable forecasts that affect the collectibility of the reported amount, resulting in recognition of lifetime expected credit losses upon loan origination. We are currently validating and refining our risk forecasting models, assumption review processes, corporate governance controls and accounting and financial reporting for our implementation of ASU 2016-13. Upon adoption, we expect to record an adjustment that will increase our allowance for credit losses between $700 million and $900 million, with an after-tax reduction to retained earnings between $500 million and $700 million. The amount of the adjustment is heavily dependent on the volume, credit mix and seasoning of our loan portfolio.
Note 2. Related Party Transactions
We offer loan and lease finance products through GM-franchised dealers to customers purchasing new vehicles manufactured by GM and certain used vehicles and make commercial loans directly to GM-franchised dealers and their affiliates. We also offer commercial loans to dealers that are consolidated by GM and those balances are included in our finance receivables, net.
Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on retail loan and lease finance products. In addition, GM makes cash payments to us to cover interest payments on certain commercial loans.
We purchase certain program vehicles from GM subsidiaries. We simultaneously lease these vehicles to those subsidiaries for use primarily in their vehicle-sharing arrangements. We account for these leases as direct-finance leases, sales-type leases or loans depending on the origin of the asset, all of which are included in our finance receivables, net.
We periodically purchase finance receivables from other GM subsidiaries for vehicles sold to rental car companies and for vehicles sold to certain dealerships. During the nine months ended September 30, 2019 and 2018, we purchased $689 million and $371 million of these receivables from GM, which are included in our finance receivables, net.
We have related party payables due to GM, primarily for commercial finance receivables originated but not yet funded.

6

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following tables present related party transactions:
Balance Sheet Data
September 30, 2019
 
December 31, 2018
Commercial finance receivables, net due from dealers consolidated by GM(a)
$
502

 
$
445

Finance receivables from GM subsidiaries(a)
$
70

 
$
134

Subvention receivable(b)
$
692

 
$
727

Commercial loan funding payable(c)
$
61

 
$
61

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Income Statement Data
2019
 
2018
 
2019
 
2018
Interest subvention earned on retail finance receivables(d)
$
137

 
$
125

 
$
401

 
$
359

Interest subvention earned on commercial finance receivables(d)
$
16

 
$
17

 
$
47

 
$
50

Leased vehicle subvention earned(e)
$
814

 
$
827

 
$
2,467

 
$
2,438

_________________
(a)
Included in finance receivables, net.
(b)
Included in related party receivables. We received subvention payments from GM of $1.0 billion and $1.1 billion for the three months ended September 30, 2019 and 2018 and $3.1 billion and $2.8 billion for the nine months ended September 30, 2019 and 2018.
(c)
Included in related party payables.
(d)
Included in finance charge income.
(e)
Included as a reduction to leased vehicle expenses.
Under the support agreement with GM (the Support Agreement), if our earning assets leverage ratio at the end of any calendar quarter exceeds the applicable threshold set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio to within the applicable threshold. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time.
Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding. GM also agrees to certain provisions in the Support Agreement intended to ensure that we maintain adequate access to liquidity. Pursuant to these provisions, GM provides us with a $1.0 billion junior subordinated unsecured intercompany revolving credit facility (the Junior Subordinated Revolving Credit Facility), and GM agrees to use commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower under GM's corporate revolving credit facilities.
In April 2019, GM renewed the 364-day, $2.0 billion facility (the GM Revolving 364-Day Credit Facility) for an additional 364-day term. This facility has been allocated for exclusive access by us since April 2018. At September 30, 2019, we had no amounts borrowed under any of the GM facilities.
We are included in GM's consolidated U.S. federal income tax returns and certain U.S. state returns, and we are obligated to pay GM for our share of these tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable. At September 30, 2019, we had a related party taxes payable of $4 million. At December 31, 2018, we had no related party taxes payable.

7

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3. Finance Receivables
 
September 30, 2019
 
December 31, 2018

Retail finance receivables
 
 
 
Retail finance receivables, collectively evaluated for impairment, net of fees
$
39,577

 
$
38,354

Retail finance receivables, individually evaluated for impairment, net of fees
2,390

 
2,348

Total retail finance receivables, net of fees(a)
41,967

 
40,702

Less: allowance for loan losses - collective
(519
)
 
(523
)
Less: allowance for loan losses - specific
(337
)
 
(321
)
Total retail finance receivables, net
41,111

 
39,858

Commercial finance receivables
 
 
 
Commercial finance receivables, collectively evaluated for impairment, net of fees
13,258

 
12,680

Commercial finance receivables, individually evaluated for impairment, net of fees
40

 
41

Total commercial finance receivables, net of fees(b)
13,298

 
12,721

Less: allowance for loan losses - collective
(66
)
 
(63
)
Less: allowance for loan losses - specific
(11
)
 
(4
)
Total commercial finance receivables, net
13,221

 
12,654

Total finance receivables, net
$
54,332

 
$
52,512

Fair value utilizing Level 2 inputs
$
13,221

 
$
12,654

Fair value utilizing Level 3 inputs
$
41,627

 
$
39,564

________________
(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $72 million and $53 million at September 30, 2019 and December 31, 2018.
(b) Net of dealer cash management balances of $1.2 billion and $922 million at September 30, 2019 and December 31, 2018.
Rollforward of Allowance for Retail Loan Losses A summary of the activity in the allowance for retail loan losses is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Allowance for retail loan losses beginning balance
$
881

 
$
815

 
$
844

 
$
889

Provision for loan losses
149

 
176

 
492

 
434

Charge-offs
(300
)
 
(285
)
 
(886
)
 
(878
)
Recoveries
133

 
130

 
410

 
398

Foreign currency translation
(7
)
 
3

 
(4
)
 
(4
)
Allowance for retail loan losses ending balance
$
856

 
$
839

 
$
856

 
$
839



8

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. We review the credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following is a consolidated summary of the contractual amounts of delinquent retail finance receivables, which is not significantly different than the recorded investment for such receivables: 
 
September 30, 2019
 
September 30, 2018
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
31 - 60 days
$
1,252

 
3.0
%
 
$
1,302

 
3.4
%
Greater than 60 days
514

 
1.2

 
498

 
1.3

Total finance receivables more than 30 days delinquent
1,766

 
4.2

 
1,800

 
4.7

In repossession
48

 
0.1

 
53

 
0.2

Total finance receivables more than 30 days delinquent or in repossession
$
1,814

 
4.3
%
 
$
1,853

 
4.9
%
At September 30, 2019 and December 31, 2018, the accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $853 million and $888 million.
Impaired Retail Finance Receivables - TDRs Retail finance receivables that become classified as troubled debt restructurings (TDRs) are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. Accounts that become classified as TDRs because of a payment deferral accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer; therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in the U.S. in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs.
The outstanding recorded investment for retail finance receivables that are considered to be TDRs and the related allowance is presented below:
 
September 30, 2019
 
December 31, 2018
Outstanding recorded investment
$
2,390

 
$
2,348

Less: allowance for loan losses
(337
)
 
(321
)
Outstanding recorded investment, net of allowance
$
2,053

 
$
2,027

Unpaid principal balance
$
2,416

 
$
2,379

Additional information about loans classified as TDRs is presented below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Average outstanding recorded investment
$
2,372

 
$
2,293

 
$
2,369

 
$
2,268

Finance charge income recognized
$
60

 
$
59

 
$
191

 
$
185

Number of loans classified as TDRs during the period
19,074

 
17,924

 
53,013

 
51,020

Recorded investment of loans classified as TDRs during the period
$
343

 
$
319

 
$
969

 
$
932

The unpaid principal balance, net of recoveries, of loans charged off during the reporting period within 12 months of being modified as a TDR was insignificant for the three and nine months ended September 30, 2019 and 2018.

9

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables: 
 
 
 
September 30, 2019
 
December 31, 2018
 
 
 
Amount
 
Percent
 
Amount
 
Percent
Group I
-
Dealers with superior financial metrics
$
1,924

 
14.5
%
 
$
2,192

 
17.2
%
Group II
-
Dealers with strong financial metrics
5,398

 
40.6

 
4,500

 
35.4

Group III
-
Dealers with fair financial metrics
4,243

 
31.9

 
4,292

 
33.7

Group IV
-
Dealers with weak financial metrics
1,327

 
10.0

 
1,205

 
9.5

Group V
-
Dealers warranting special mention due to elevated risks
332

 
2.5

 
449

 
3.5

Group VI
-
Dealers with loans classified as substandard, doubtful or impaired
74

 
0.5

 
83

 
0.7

Balance at end of period
$
13,298

 
100.0
%
 
$
12,721

 
100.0
%
At September 30, 2019 and December 31, 2018, substantially all of our commercial finance receivables were current with respect to payment status. Commercial finance receivables on non-accrual status were insignificant, and none were classified as TDRs. Activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30, 2019 and 2018.
Note 4. Leased Vehicles
 
September 30, 2019
 
December 31, 2018
Leased vehicles
$
63,589

 
$
64,928

Manufacturer subvention
(9,810
)
 
(9,934
)
Net capitalized cost
53,779

 
54,994

Less: accumulated depreciation
(11,252
)
 
(11,435
)
Leased vehicles, net
$
42,527

 
$
43,559

The following table summarizes lease payments due to us as lessor under operating leases at September 30, 2019:
 
Years Ending December 31,
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Lease payments under operating leases
$
1,852

 
$
5,996

 
$
3,471

 
$
1,084

 
$
79

 
$
3

 
$
12,485

Note 5. Equity in Net Assets of Non-consolidated Affiliates
We use the equity method to account for our equity interest in joint ventures. The income of these joint ventures is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income.
There have been no significant ownership changes in our joint ventures since December 31, 2018. The following table presents certain aggregated operating data of our joint ventures:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Summarized Operating Data
2019
 
2018
 
2019
 
2018
Finance charge income
$
330

 
$
305

 
$
1,024

 
$
927

Income before income taxes
$
150

 
$
168

 
$
481

 
$
537

Net income
$
113

 
$
126

 
$
361

 
$
403

At September 30, 2019 and December 31, 2018, we had undistributed earnings of $575 million and $498 million related to our non-consolidated affiliates. During the three months ended September 30, 2019, SAIC-GMAC Automotive Finance Company Limited (SAIC-GMAC) declared a $140 million cash dividend of which our share was $49 million. We expect to receive the dividend payment in the fourth quarter of 2019.

10

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 6. Debt
 
September 30, 2019
 
December 31, 2018
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Secured debt
 
 
 
 
 
 
 
Revolving credit facilities
$
2,109

 
$
2,115

 
$
3,410

 
$
3,413

Securitization notes payable
36,920

 
37,150

 
39,425

 
39,422

Total secured debt
39,029

 
39,265

 
42,835

 
42,835

Unsecured debt
 
 
 
 
 
 
 
Senior notes
45,117

 
45,965

 
42,611

 
42,015

Credit facilities
1,665

 
1,665

 
2,157

 
2,151

Other unsecured debt
3,317

 
3,324

 
3,385

 
3,390

Total unsecured debt
50,099

 
50,954

 
48,153

 
47,556

Total secured and unsecured debt
$
89,128

 
$
90,219

 
$
90,988

 
$
90,391

Fair value utilizing Level 2 inputs
 
 
$
88,388

 
 
 
$
88,305

Fair value utilizing Level 3 inputs
 
 
$
1,831

 
 
 
$
2,086

Secured Debt Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 7 for further discussion.
During the nine months ended September 30, 2019, we entered into new or renewed credit facilities with a total net additional borrowing capacity of $225 million, and we issued $14.2 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.83% and legal final maturity dates ranging from 2022 to 2026.
Unsecured Debt During the nine months ended September 30, 2019, we issued $6.5 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.65% and maturity dates ranging from 2021 to 2029.
The principal amount outstanding of our commercial paper in the U.S. was $1.0 billion and $1.2 billion at September 30, 2019 and December 31, 2018.
General Motors Financial Company, Inc. is the sole guarantor of its subsidiaries' unsecured debt obligations for which a guarantee is provided.
Compliance with Debt Covenants Several of our revolving credit facilities require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Certain of our secured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. Our unsecured debt obligations contain covenants including limitations on our ability to incur certain liens. At September 30, 2019, we were in compliance with these debt covenants.
Note 7. Variable Interest Entities
Securitizations and Credit Facilities The following table summarizes the assets and liabilities related to our consolidated VIEs:
 
September 30, 2019
 
December 31, 2018
Restricted cash(a)
$
2,584

 
$
2,380

Finance receivables, net of fees
$
32,824

 
$
32,626

Lease related assets
$
17,603

 
$
21,781

Secured debt
$
38,902

 
$
42,504

_______________
(a) Included in other assets.

11

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

These amounts are related to securitization and credit facilities held by consolidated VIEs. Our continuing involvement with these VIEs consists of servicing assets held by the entities and holding residual interests in the entities. We have determined that we are the primary beneficiary of each VIE because we hold both (i) the power to direct the activities of the VIEs that most significantly impact the VIEs' economic performance and (ii) the obligation to absorb losses from and the right to receive benefits of the VIEs that could potentially be significant to the VIEs. We are not required, and do not currently intend, to provide any additional financial support to these VIEs. Liabilities recognized as a result of consolidating these entities generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of these entities' operations and cannot be used to satisfy our or our other subsidiaries' obligations.

12

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 8. Derivative Financial Instruments and Hedging Activities
We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate risk, primarily by managing the amount, sources, and duration of our assets and liabilities and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our borrowings.
Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates. We primarily finance our earning assets with debt in the same currency to minimize the impact to earnings from our exposure to fluctuations in exchange rates. When we use a different currency, these fluctuations may impact the value of our cash receipts and payments in terms of our functional currency. We enter into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of the relevant functional currency. The table below presents the gross amounts of fair value of our derivative instruments and the associated notional amounts:
 
 
September 30, 2019
 
December 31, 2018
 
 
Notional
 
Fair Value of Assets(a)
 
Fair Value of Liabilities(a)
 
Notional
 
Fair Value of Assets(a)
 
Fair Value of Liabilities(a)
Derivatives designated as hedges
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
10,702

 
$
384

 
$
4

 
$
9,533

 
$
42

 
$
231

Foreign currency swaps
 
1,744

 

 
101

 
1,829

 
37

 
60

Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
553

 
1

 
5

 
768

 
8

 

Foreign currency swaps
 
4,269

 
16

 
241

 
2,075

 
43

 
58

Derivatives not designated as hedges
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
86,848

 
302

 
384

 
99,666

 
372

 
520

Total(b)
 
$
104,116

 
$
703

 
$
735

 
$
113,871

 
$
502

 
$
869

 _________________
(a)
The gross amounts of the fair value of our assets and liabilities are included in other assets and other liabilities, respectively. Amounts accrued for interest payments in a net receivable position are included in other assets. Amounts accrued for interest payments in a net payable position are included in other liabilities. All our derivatives are categorized within Level 2 of the fair value hierarchy. The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.
(b)
We primarily enter into derivative instruments through AmeriCredit Financial Services, Inc. (AFSI); however, our SPEs may also be parties to derivative instruments. Agreements between AFSI and its derivative counterparties include rights of setoff for positions with offsetting values or for collateral held or posted. At September 30, 2019 and December 31, 2018, the fair value of assets and liabilities available for offset was $383 million and $320 million. At September 30, 2019 and December 31, 2018, we held $258 million and $30 million of collateral from counterparties which is available for netting against our asset positions. At September 30, 2019 and December 31, 2018, we posted $129 million and $451 million of collateral to counterparties which is available for netting against our liability positions.
The following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:
 
Carrying Amount of
Hedged Items
 
Cumulative Amount of Fair Value
Hedging Adjustments
(a)
 
September 30, 2019
 
December 31, 2018
 
September 30, 2019
 
December 31, 2018
Unsecured debt
$
20,453

 
$
17,923

 
$
(135
)
 
$
459

 _________________
(a)
Includes $131 million and $247 million at September 30, 2019 and December 31, 2018 of amortization remaining on hedged items for which hedge accounting has been discontinued.

13

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The table below presents the effect of our derivative financial instruments in the condensed consolidated statements of income:
 
Income (Losses) Recognized In Income
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
Interest Expense(a)
 
Operating Expenses(b)
 
Interest Expense(a)
 
Operating Expenses(b)
 
Interest Expense(a)
 
Operating Expenses(b)
 
Interest Expense(a)
 
Operating Expenses(b)
Fair value hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hedged items - interest rate swaps
$
(159
)
 
$

 
$
68

 
$

 
$
(682
)
 
$

 
$
345

 
$

Interest rate swaps
80

 

 
(73
)
 

 
546

 

 
(359
)
 

Hedged items - foreign currency swaps

 
78

 

 

 

 
85

 

 

Foreign currency swaps
(15
)
 
(77
)
 

 

 
(46
)
 
(81
)
 

 

Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
1

 

 
4

 

 
5

 

 
11

 

Foreign currency swaps
(23
)
 
(134
)
 
(14
)
 
(23
)
 
(62
)
 
(149
)
 
(36
)
 
(91
)
Derivatives not designated as hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
89

 

 
(7
)
 

 
79

 

 
(2
)
 

Foreign currency swaps

 

 
(15
)
 
(5
)
 

 

 
(35
)
 
(92
)
Total
$
(27
)
 
$
(133
)
 
$
(37
)
 
$
(28
)
 
$
(160
)
 
$
(145
)
 
$
(76
)
 
$
(183
)
_________________
(a)
Total interest expense was $879 million and $838 million for the three months ended September 30, 2019 and 2018 and $2.8 billion and $2.4 billion for the nine months ended September 30, 2019 and 2018.
(b)
Activity is offset by translation activity also recorded in operating expenses related to foreign currency-denominated loans. Total operating expenses were $384 million and $369 million for the three months ended September 30, 2019 and 2018 and $1.1 billion for both the nine months ended September 30, 2019 and 2018.

14

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income:
 
Gains (Losses) Recognized In
Accumulated Other Comprehensive Loss
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Fair value hedges
 
 
 
 
 
 
 
Foreign currency swaps
$
(10
)
 
$

 
$
(30
)
 
$

Cash flow hedges
 
 
 
 
 
 
 
Interest rate swaps
(3
)
 

 
(5
)
 
5

Foreign currency swaps
(127
)
 
(10
)
 
(198
)
 
(50
)
Total
$
(140
)
 
$
(10
)
 
$
(233
)
 
$
(45
)
 
(Gains) Losses Reclassified From
Accumulated Other Comprehensive Loss Into Income
(a)(b)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Fair value hedges
 
 
 
 
 
 
 
Foreign currency swaps
$
10

 
$

 
$
32

 
$

Cash flow hedges
 
 
 
 
 
 
 
Interest rate swaps
(1
)
 
(2
)
 
(4
)
 
(5
)
Foreign currency swaps
119

 
13

 
160

 
69

Total
$
128

 
$
11

 
$
188

 
$
64

_________________
(a)
All amounts reclassified from accumulated other comprehensive loss were recorded to interest expense.
(b)
During the next twelve months, we estimate $(17) million will be reclassified into pretax earnings from derivatives designated for hedge accounting.
Note 9. Commitments and Contingencies
Operating Leases Our lease obligations consist primarily of real estate office space. Certain leases contain escalation clauses and renewal options, and generally our leases have no residual value guarantees or material covenants. We exclude from our balance sheet leases with a term equal to one year or less and do not separate non-lease components from our real estate leases. Rent expense under operating leases was $10 million and $28 million for the three and nine months ended September 30, 2019. Variable lease costs were insignificant for the three and nine months ended September 30, 2019. At September 30, 2019, operating lease right of use assets, included in other assets, were $135 million and operating lease liabilities, included in other liabilities, were $157 million. Operating lease right of use assets obtained in exchange for lease obligations were $30 million in the nine months ended September 30, 2019. At September 30, 2019, our undiscounted future lease obligations related to operating leases having initial terms in excess of one year were $7 million for the three months ending December 31, 2019 and $27 million, $26 million, $24 million, $20 million and $83 million for the years 2020, 2021, 2022, 2023 and thereafter, with imputed interest of $30 million at September 30, 2019. The weighted average discount rate was 4.5% and the weighted average remaining lease term was 8.0 years at September 30, 2019. Lease agreements that have not yet commenced were insignificant at September 30, 2019.
Guarantees of Indebtedness At September 30, 2019 and December 31, 2018, we guaranteed $1.1 billion in aggregate principal amount of Euro Medium Term Notes issued by General Motors Financial International B.V., our former subsidiary, pursuant to our Euro Medium Term Note Programme. Subject to the terms and conditions of a letter agreement with BNP Paribas in connection with the sale of certain of our European operations, BNP Paribas will reimburse us for any amount that we may pay under any such guarantees.
Legal Proceedings We are subject to various pending and potential legal and regulatory proceedings in the ordinary course of business, including litigation, arbitration, claims, investigations, examinations, subpoenas and enforcement proceedings. Some litigation against us could take the form of class actions. The outcome of these proceedings is inherently uncertain, and thus we cannot confidently predict how or when proceedings will be resolved. An adverse outcome in one or more of these proceedings

15

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

could result in substantial damages, settlements, fines, penalties, diminished income or reputational harm. We identify below the material proceedings in connection with which we believe a material loss is reasonably possible or probable.
In accordance with the current accounting standards for loss contingencies, we establish reserves for legal matters when it is probable that a loss associated with the matter has been incurred and the amount of the loss can be reasonably estimated. The actual costs of resolving legal matters may be higher or lower than any amounts reserved for these matters. At September 30, 2019, we estimated our reasonably possible legal exposure for unfavorable outcomes is up to $55 million, and we have accrued $19 million.
In 2014 and 2015, we were served with investigative subpoenas from various state attorneys general and other governmental offices to produce documents and data relating to our automobile loan and lease business and securitization of loans and leases. We believe that we have cooperated fully with all reasonable requests for information. We are currently unable to estimate any reasonably possible loss or range of loss that may result from these investigations.
Other Administrative Tax Matters We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.
In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time. Where there is a reasonable possibility that losses exceeding amounts already recognized may be incurred, our estimate of the additional range of loss is up to $11 million at September 30, 2019.
Note 10. Shareholders' Equity
 
September 30, 2019
 
December 31, 2018
Common Stock
 
 
 
Number of shares authorized
10,000,000

 
10,000,000

Number of shares issued and outstanding
5,050,000

 
5,050,000

On October 24, 2019, our Board of Directors declared a $400 million dividend on our common stock, which was paid to General Motors Holdings LLC on October 25, 2019.
 
September 30, 2019
 
December 31, 2018
Preferred Stock
 
 
 
Number of shares authorized
250,000,000

 
250,000,000

Number of shares issued and outstanding
 
 
 
Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock,
Series A (Series A Preferred Stock)
1,000,000

 
1,000,000

Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock,
Series B (Series B Preferred Stock)
500,000

 
500,000

During the nine months ended September 30, 2019, we paid dividends of $58 million to holders of record of our Series A Preferred Stock, and $33 million to holders of record of our Series B Preferred Stock. During the nine months ended September 30, 2018, we paid dividends of $59 million to holders of record of our Series A Preferred Stock.
On October 24, 2019, prior to the declaration of our common stock dividend, our Board of Directors declared a dividend of $28.75 per share, $29 million in the aggregate, on our Series A Preferred Stock, payable on March 30, 2020 to holders of record at March 15, 2020 and declared a dividend of $32.50 per share, $16 million in the aggregate, on our Series B Preferred Stock, payable on March 30, 2020 to holders of record at March 15, 2020. Accordingly, $45 million has been set aside for the payment of these dividends.

16

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the significant components of accumulated other comprehensive loss:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Unrealized (loss) gain on hedges
 
 
 
 
 
 
 
Beginning balance
$
(24
)
 
$
34

 
$
9

 
$
16

Change in value of hedges, net of tax
(12
)
 
1

 
(45
)
 
19

Ending balance
(36
)
 
35

 
(36
)
 
35

Defined benefit plans
 
 
 
 
 
 
 
Beginning balance
1

 
1

 
1

 
1

Unrealized gain on subsidiary pension, net of tax

 

 

 

Ending balance
1

 
1

 
1

 
1

Foreign currency translation adjustment
 
 
 
 
 
 
 
Beginning balance
(1,011
)
 
(971
)
 
(1,076
)
 
(785
)
Translation loss, net of tax
(164
)
 
(35
)
 
(99
)
 
(221
)
Ending balance
(1,175
)
 
(1,006
)
 
(1,175
)
 
(1,006
)
Total accumulated other comprehensive loss
$
(1,210
)
 
$
(970
)
 
$
(1,210
)
 
$
(970
)
Note 11. Income Taxes
For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
During the three months ended September 30, 2019 and 2018, income tax expense of $195 million and $57 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. During the nine months ended September 30, 2019 and 2018, income tax expense of $416 million and $225 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. The increase in income tax expense for the three and nine months ended September 30, 2019 is primarily due to a reduction in our electric vehicle tax credit in 2019 and a favorable impact from the U.S. tax reform in 2018.
We are included in GM’s consolidated U.S. federal income tax return and for certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction.
Note 12. Segment Reporting
Our chief operating decision maker evaluates the operating results and performance of our business based on our North America and International Segments. The management of each segment is responsible for executing our strategies. Key operating data for our operating segments were as follows:
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Total revenue
$
3,355

 
$
304

 
$
3,659

 
$
3,217

 
$
301

 
$
3,518

Operating expenses
291

 
93

 
384

 
273

 
96

 
369

Leased vehicle expenses
1,557

 
17

 
1,574

 
1,668

 
9

 
1,677

Provision for loan losses
113

 
37

 
150

 
146

 
34

 
180

Interest expense
759

 
120

 
879

 
715

 
123

 
838

Equity income

 
39

 
39

 

 
44

 
44

Income before income taxes
$
635

 
$
76

 
$
711

 
$
415

 
$
83

 
$
498


17

GENERAL MOTORS FINANCIAL COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
 
North
America
 
International
 
Total
 
North
America
 
International
 
Total
Total revenue
$
9,993

 
$
925

 
$
10,918

 
$
9,482

 
$