Cautionary Statement Regarding Forward-Looking Statements
Certain statements included herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “scheduled,” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans, or intentions. In addition, all information included herein with respect to projected or future results of operations, cash flows, financial condition, financial performance, or other financial or statistical matters constitute forward-looking statements. Such forward-looking statements are necessarily dependent on assumptions, data, or methods that may be incorrect or imprecise and that may be incapable of being realized. The following factors, among others, could cause actual results and other matters to differ materially from those in such forward-looking statements:
— | declines in the financial condition or performance of Honda Motor Co., Ltd. or the sales of Honda or Acura products; |
— | changes in general business and economic conditions; |
— | fluctuations in interest rates and currency exchange rates; |
— | the failure of our customers, dealers or counterparties in the financial industry to meet the terms of any contracts with us, or otherwise fail to perform as agreed; |
— | our inability to recover the estimated residual value of vehicles we lease at the end of their lease terms; |
— | changes or disruption in our funding sources or access to the capital markets; |
— | changes in our, or Honda Motor Co., Ltd.’s, credit ratings; |
— | increases in competition from other financial institutions seeking to increase their share of financing of Honda and Acura products; |
— | changes in laws and regulations, including as a result of recent financial services legislation, and related costs; |
— | changes in accounting standards; |
— | a failure or interruption in our operations; and |
— | the other risks and uncertainties set forth in “Part I, Item 1A. Risk Factors”. |
We do not intend, and undertake no obligation to, update any forward-looking information to reflect actual results or future events or circumstances, except as required by applicable law.
ii
Overview
American Honda Finance Corporation (AHFC) is a California corporation that was incorporated on February 6, 1980. Unless otherwise indicated by the context, all references to the “Company”, “we”, “us”, and “our” in this report include AHFC and our consolidated subsidiaries, and references to “AHFC” refer solely to American Honda Finance Corporation (excluding our subsidiaries). AHFC is a wholly owned subsidiary of American Honda Motor Co., Inc. (AHM). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Noncontrolling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate. AHM is a wholly owned subsidiary and HCI is an indirect wholly owned subsidiary of Honda Motor Co., Ltd. (HMC). AHM and HCI are the sole authorized distributors of Honda and Acura products, including motor vehicles, parts, and accessories in the United States and Canada. AHFC’s principal executive offices are located at 20800 Madrona Avenue, Torrance, California 90503.
We provide various forms of financing in the United States and Canada to purchasers and lessees of Honda and Acura products and authorized independent dealers of Honda and Acura products. Our primary focus, in collaboration with AHM and HCI, is to provide support for the sale of Honda and Acura products in the United States and Canada and maintain customer and dealer satisfaction and loyalty. Our business is substantially dependent upon the sale of those Honda and Acura products in the United States and Canada and the percentage of those sales financed by us.
We acquire retail loans, primarily installment sale contracts, and leases made to retail customers of Honda and Acura products and we offer wholesale flooring and commercial loans to authorized dealers of Honda and Acura products. A small portion of our business also consists of acquiring financings of non-Honda and non-Acura used automobiles and providing wholesale loans to non-Honda and non-Acura dealerships.
AHM and HCI sponsor incentive financing programs in the United States and Canada, respectively, to purchasers and lessees of Honda and Acura products and authorized dealers of Honda and Acura products. Pursuant to these programs, AHM or HCI, as applicable, pays us a subsidy that enables us to realize a market yield on any financing contract we indirectly or directly finance under the programs.
We acquire and offer, as applicable, substantially similar products and services throughout many different regions, provinces, and territories, subject to local legal restrictions and market conditions. We divide our business segments between our business in the United States and our business in Canada. For additional financial information regarding our operations by business segments, see Note 15—Segment Information of Notes to Consolidated Financial Statements and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.” In the United States and Canada, we provide our financing products under the brand names Honda Financial Services and Acura Financial Services.
References to “C$” are to the Canadian dollar. This report contains translations of certain Canadian dollar amounts into U.S. dollars at the rate specified below solely for your convenience. These translations should not be construed as representations that the Canadian dollar amounts actually represent such U.S. dollar amounts or that they could be converted into U.S. dollars at the rate indicated. U.S. dollar equivalents for “C$” amounts are calculated based on an exchange rate of 1.1050 per U.S. dollar as of March 31, 2014.
Public Filings
Our filings with the Securities and Exchange Commission (SEC) may be found by accessing the SEC website at www.sec.gov under “Company Filings”. The SEC website contains reports, registration statements, and other information regarding issuers that file electronically with the SEC. The public may obtain additional information by calling the “SEC Toll-Free Investor Information Service” line at 1-800-SEC-0330 (1-800-732-0330). A direct link to the SEC website and certain of our filings is contained on our website located at: www.hondafinancialservices.com under “Investor Relations, SEC Filings”. Additionally, we have made available on our website, without charge, electronic copies of our periodic and current reports that have been filed with the SEC.
Investors and others should note that we announce material financial information using the investor relations section of our corporate website (http://www.hondafinancialservices.com). We use our website and press releases to communicate with our investors, customers and the general public about our company, our services and other matters. While not all of the information that we post on our website is of a material nature, some information could be material. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the investor relations section of our website. Currently, we do not use any social media channels for purposes of communicating with the public. Any changes to our communication channels will be posted
on the investor relations website. We are not incorporating any of the information set forth on our website into this filing on Form 10-K.
Consumer Financing
Retail Loans
We provide indirect financing to retail customers of Honda and Acura products by acquiring retail loans originated by authorized Honda and Acura dealers. Retail loans are acquired in accordance with our underwriting standards. See “—Underwriting and Pricing of Consumer Financing” below for a description of our underwriting process. The products that we finance consist primarily of new and used Honda and Acura automobiles and Honda motorcycles, power equipment, and marine engines. On a limited basis, we also finance customer purchases of non-Honda and non-Acura used automobiles. Retail loans may also include the financing of insurance products or Vehicle Service Contracts. See “—Other Consumer Products” below for more information. The terms of retail loans originated in the United States generally range from 24 to 72 months while the terms of retail loans originated in Canada generally range from 24 to 84 months.
We service all of the retail loans we acquire. We generally hold a security interest in the products purchased through our retail loans. As a result, if our collection efforts fail to bring a delinquent customer’s payments current, we generally can repossess the customer’s vehicle, after satisfying local legal requirements, and sell it at auction. We may waive late payment fees and other fees assessed in the ordinary course of servicing the retail loans and allow payment deferrals by extending the loan’s term. See “—Servicing of Consumer Financing” below for more information.
We require customers that purchase Honda and Acura products through retail loans acquired by us to obtain adequate physical damage, comprehensive and collision insurance.
Retail Leases
We acquire closed-end vehicle lease contracts between authorized Honda and Acura dealers and their customers primarily for leases of new Honda and Acura automobiles. On a limited basis, we also acquire lease contracts for leases of used Honda and Acura automobiles and Honda motorcycles. In the case of leases originating in the United States, upon our acquisition of such leases, the dealer assigns all of its rights, title, and interest in the lease and the automobile to either our wholly owned subsidiary, Honda Lease Trust (HLT) or its trustee, HVT, Inc. (HVT), depending on the applicable state. HLT is a trust established to take assignments of and serve as holder of legal title to leased automobiles. In the case of leases originating in Canada, upon our acquisition of such leases, the dealer assigns all of its rights, title, and interest in the lease and the vehicle to our majority owned subsidiary HCFI.