AHFC Investor Presentation July 21, 2015

American Honda Finance Corporation
ACURA NSX
Investor Presentation
July 2015
Caution with Respect to Forward-Looking Statements:
These slides may contain “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. 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. Factors such as declines in the financial condition or performance of Honda or AHFC or the sales of Honda or Acura products, changes in general business and
economic conditions, and fluctuations in interest rates and currency exchange rates, among others, could cause actual results and other matters to differ materially from those in
such forward-looking statements.
Use and Definition of Non-GAAP Financial Measure:
This presentation includes the following financial measure defined as a non ‐GAAP financial measure by the SEC: Income before income taxes excluding valuation adjustments
and reclassifications. This measure has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in
accordance with GAAP or as an indicator of our liquidity. Our presentation of this non ‐GAAP financial measure should also not be construed as an inference that our results will
be unaffected by unusual or non‐recurring items. Our computations of this non ‐GAAP financial measure may not be comparable to other similarly titled measures of other
companies.
We define income before income taxes excluding valuation adjustments and reclassifications as income before income taxes excluding realized (gains)/losses on derivatives
and foreign currency denominated debt, (gain)/loss on derivative instruments, and (gain)/loss on foreign currency revaluation of debt. Management believes income before
income taxes excluding valuation adjustments and reclassifications is useful because it allows management to evaluate our operating performance and compare the results of
our operations from period to period and against our peers without regard to fluctuations in performance resulting from currency related charges and interest rate swaps.
A reconciliation of our net income as determined in accordance with GAAP to income before taxes excluding valuation adjustments and reclassifications is provided in Appendix
A to these slides.
Accounting Standards:
Our consolidated financial information is prepared in conformity with U.S. generally accepted accounting principles and the financial forecast for FY16 was prepared in
conformity with international financial reporting standards.
This information is presented as of July 21, 2015 and does not purport to be accurate as of any other date. We undertake no obligation to update this information.
This presentation does not constitute an offer to sell or a solicitation of an offer to purchase any securities. Any offer or sale of securities will be made only by means of an
offering memorandum and related documents.
Foreign Currency Translation:
The financial data in these slides is presented on a consolidated basis unless otherwise noted. Upon consolidation, the assets and liabilities of Honda Canada Finance Inc.
(HCFI), a majority-owned subsidiary of AHFC, are translated at year-end exchange rates, and the revenues and expenses are translated at the average rates of exchange
during the respective years. Foreign currency denominated debt is translated at year-end exchange rates, and the foreign currency transaction gains and losses are
recognized through earnings.
2
Honda Corporate Structure
Rating Information: Moody’s
S&P
A1 Stable
A+ Stable
Fiscal year of Honda Motor Co., Ltd.
ends on March 31
Keep Well Highlights
Honda Motor Co., Ltd.
“Honda”
Maintain 80% ownership
American Honda
Motor Co., Inc.
“AHM”
100%
American Honda
Finance Corporation
“AHFC”
Support Agreement
100%
Ensure AHFC maintains a positive net worth
If necessary, provide liquidity for AHFC to meet certain
obligations, including our SEC medium term debt
3
American Honda Finance Corporation
4
AHFC Operations in US
8 Regional Auto offices
1 National Motorcycle
office
Approximately
3.3 million
customers
(@ 3/31/15)
HQ located in
Torrance, CA
1,625
Employees
(@ 3/31/15)
Service Center in Irving TX
American Honda Finance Corporation
5
Business Highlights
Incentive programs have increased our lease portfolio
Underwriting standards remains consistent
Low charge-offs continue
Strong ratings
Established a SEC registered MTN program (2013)
Regulatory reform continues to be a focus
American Honda Finance Corporation
6
AHFC Net Income
Income Before Income Taxes (IBIT)
IBIT excluding valuation adjustments and reclassifications
US$ (millions)
(1)
US$ (millions)
Total Finance Revenues
2,500
6,361
5,986
5,760
5,637
7,000
6,000
2,000
5,000
1,500
1,000
4,000
1,990
3,000
1,811
1,652
1,706
1,445
1,551
1,552
1,508
2,000
500
1,000
0
0
FY 12
FY 13
FY 14
FY 15
(1) For a reconciliation of IBIT excluding valuation adjustments and reclassifications see Appendix A
American Honda Finance Corporation
7
AHFC Portfolio Mix
US$ (millions)
70,000
60,000
$62,931
$55,562
$62,903
As of March 31, 2015:
Retail Loans are approx. 52% of
outstanding receivables (including
ABS assets)
$58,852
50,000
40,000
Leases are 42% of outstanding
receivables
30,000
Securitized Assets are Retail
Loans. We do not currently
securitize other asset classes
20,000
10,000
0
FY 12
FY 13
FY 14
FY 15
Retail
$24,359
$24,356
$26,430
$25,054
Lease
$21,134
$22,706
$23,952
$26,239
Dealer
$3,250
$4,208
$4,372
$4,256
Securitized Assets
$6,819
$7,582
$8,177
$7,354
Debt
$40,567
$42,149
$45,634
$44,689
Dealer Loans
Flooring 30% of the Honda/Acura
Auto dealers
Flooring 97% of the Honda/Acura
Motorcycle dealers
Lease includes both direct finance leases and operating leases.
Retail excludes securitized assets
American Honda Finance Corporation
8
AHFC CFS Originations, Penetration & Outstanding
Unit (thousands)
3,000
New Auto
71%
Penetration
71%
63%
2,500
62%
80%
70%
60%
2,000
43%
43%
Motorcycle
39%
1,500
1,118
1,176
1,361
50%
37%
40%
1,217
30%
1,000
20%
500
10%
0
0%
FY 12
FY 13
FY 14
Originations
Retail Auto
Outstanding
Penetration
FY 12 and FY 14
show higher new
auto penetration as
a result of higher
incentive programs
sponsored by our
parent, American
Honda Motor Co.,
Inc.
3,440
Lease Auto
3,491
3,660
FY 15
Other
3,749
American Honda Finance Corporation
9
AHFC Performance Data
AHFC’s underwriting
standards are reflected in
our low charge-off and
delinquency numbers.
Fiscal Year Ending
FY 12
FY 13
FY 14
FY 15
Delinquency (60 or more days)(1),(3)
0.10%
0.10%
0.10%
0.10%
Allowance for Credit Losses (1),(3)
0.42%
0.23%
0.24%
0.22%
Charge-Offs (Net of Recoveries)(2),(3)
0.30%
0.28%
0.27%
0.26%
(1)
Percentages based on ending receivable balances for respective periods.
(2) Percentages based on average receivable balances for respective periods.
(3) Ending and average receivable balances exclude the allowance for credit losses, write-down of lease residual values, unearned
subvention income related to our incentive financing programs and deferred origination costs. Average receivable balances
are calculated based on the average of each month’s ending receivables balance for that fiscal period.
American Honda Finance Corporation
10
AHFC Funding Highlights
 Strong liquidity including committed credit facilities and investment
reserves
 Access to various unsecured domestic and international markets
 Benchmark program in the ABS markets
 Deep and solid relationships with our investor community
 Continuously developing new investor relationships
American Honda Finance Corporation
11
AHFC Funding Flexibility
Diversified AHFC Funding Programs
US$ (millions)
50,000
- Commercial Paper Program
$45,634
45,000
$40,567
35,000
4%
30,000
18%
16%
3%
8%
4%
4%
18%
4%
8%
- Bank Loans
41%
36%
32%
5,000
- US $16 billion Shelf USMTN Public
Program
28%
- US $25 billion USMTN Private 144a
15,000
10,000
- Related Party Debt
14%
25,000
20,000
(supported by US $7 billion and CAD $1.6
billion (HCFI) Bank Credit Facilities)
$42,149
40,000
17%
US $7 billion, CAD $2 billion (HCFI)
$44,689
16%
14%
16%
11%
10%
8%
9%
11%
9%
10%
FY 12
FY 13
FY 14
FY 15
17%
12%
Related Party Debt
Bank Loan
US MTN
- US $11 billion EMTN Program (Inactive)
- Private Placement Issuance (HCFI)
0
Commercial Paper
Program (Inactive)
Euro MTN
Other
ABS
- Public & Private Securitization (AHFC &
HCFI)
American Honda Finance Corporation
12
FY Debt Issuance
(US Operations Only)
9,000
$8,215
8,000
7,000
$6,750
$5,750
6,000
5,000
$4,250
4,000
3,000
2,000
$1,161
1,000
$800
$1,300
0
USMTN
EMTN
FY 14
Bank Loan
Securitization
FY 15
FY 2014 USMTN included issuance off 144A program
FY 2015 USMTN was all SEC registered
Excludes Commercial Paper and Related Party Debt
American Honda Finance Corporation
13
Unsecured Term Debt Maturity Profile
As of March 2015
US$ (millions)
9,000
29%
8,000
7,000
24%
20%
6,000
17%
5,000
4,000
10%
3,000
2,000
1,000
0
<1yr
1yr - 2yr
2yr - 3yr
3yr - 4yr
>4yr
Excludes Commercial Paper and Related Party Debt
Does not include unamortized discounts and fees
Foreign debt based on exchange rates as of March 31, 2015
American Honda Finance Corporation
14
ABS Portfolio Comparison
Honda Auto Receivables Owner Trust
(HAROT)
2015-2
2015-1
2014-4
2014-3
2014-2
2014-1
2013-4
2013-3
2013-2
2013-1
Amount (Mill's)
WAC
WAOM
WA Seasoning
Fico Score
$1,391
2.12%
59.67
13.39
759
$1,282
2.13%
59.52
13.72
758
$1,026
2.18%
58.89
13.01
757
$1,026
2.20%
59.87
13.14
757
$1,026
2.20%
59.89
13.36
756
$1,538
2.23%
59.91
12.92
754
$1,538
2.38%
59.67
13.10
756
$1,538
2.42%
59.85
13.00
753
$1,282
2.58%
59.64
12.60
752
$1,282
2.66%
59.00
13.31
754
Credit
Grade
A
B
C
D
80.65%
12.01%
5.83%
1.50%
80.89%
11.92%
5.78%
1.41%
81.06%
12.98%
4.22%
1.75%
80.83%
13.01%
4.38%
1.78%
79.80%
13.33%
5.27%
1.60%
79.57%
13.55%
5.32%
1.57%
79.21%
13.67%
5.71%
1.42%
78.76%
13.95%
5.83%
1.46%
78.39%
14.03%
5.68%
1.90%
79.11%
13.65%
5.48%
1.75%
Make
Honda
Acura
86.18%
13.82%
87.20%
12.80%
86.21%
13.79%
85.96%
14.04%
85.56%
14.44%
87.38%
12.62%
85.18%
14.82%
85.25%
14.75%
85.98%
14.02%
84.85%
15.15%
Top 5
Models
Accord
Civic
CRV
Odyssey
Pilot
25.26%
15.53%
18.80%
11.66%
10.15%
21.44%
16.80%
20.51%
11.41%
11.32%
21.65%
17.19%
20.15%
10.99%
10.71%
20.72%
16.38%
19.22%
12.00%
12.18%
20.09%
16.36%
19.63%
11.03%
12.68%
21.40%
16.71%
15.26%
14.94%
13.55%
21.59%
17.07%
13.84%
13.92%
12.56%
20.95%
20.04%
10.09%
14.96%
14.38%
21.95%
19.53%
10.14%
15.10%
13.21%
21.24%
19.11%
10.45%
14.78%
12.97%
Original
Term
13-24
25-36
37-48
49-60
61-72
0.13%
7.65%
2.38%
73.21%
16.62%
0.19%
7.38%
1.94%
76.27%
14.22%
0.17%
9.77%
2.33%
73.57%
14.16%
0.30%
5.51%
2.20%
77.78%
14.21%
0.15%
5.77%
2.24%
77.35%
14.49%
0.16%
5.82%
2.30%
76.93%
14.79%
0.17%
6.58%
2.51%
76.21%
14.54%
0.16%
5.94%
2.33%
77.03%
14.54%
0.16%
6.56%
2.48%
76.58%
14.23%
0.19%
8.30%
2.51%
76.85%
12.16%
New/Used
New
Used
91.97%
8.03%
91.17%
8.83%
90.63%
9.37%
90.28%
9.72%
89.52%
10.48%
88.83%
11.17%
87.47%
12.53%
87.48%
12.52%
86.41%
13.59%
86.82%
13.18%
General
Honda Auto Receivables Owner Trust
15
ABS Cumulative Net Losses
0.50%
0.45%
0.40%
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0.00%
3
6
9
12
15
18
21
24
27
30
33
36
39
2010-1
2010-2
2010-3
2011-1
2011-2
2011-3
2012-1
2012-2
2012-3
2012-4
2013-1
2013-2
2013-3
2013-4
2014-1
2014-2
2014-3
2014-4
As of February 2015
Honda Auto Receivables Owner Trust
16
17
Appendix A
The table set forth below reconciles net income, calculated and presented in accordance with
U.S. generally accepted accounting principles, to income before income taxes excluding
valuation adjustments and reclassifications:
Net income………………………………………..
Add:
Income tax expense………………………..
Realized (gains)/losses on
derivatives and foreign currency
denominated debt………………………
(Gain)/Loss on derivative instruments ….
(Gain)/Loss on foreign currency
revaluation of debt……………………..
Income before income taxes excluding
valuation adjustments and
reclassification……………………………
US$ (Millions)
Fiscal Years ended March 31,
2012
2013
2014
2015
$ 1,268
$ 1,002
$ 956
$ 992
722
650
489
560
(53)
(30)
99
143
20
(25)
(17)
326
(96)
(188)
111
(353)
$ 1,811
$ 1,706
American Honda Finance Corporation
$ 1,551
$ 1,508
18