Item 1A. Risk Factors
Item 1A. Risk Factors
We remind the reader that risk factors are set
forth in Item 1A of our report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 15, 2022. Where we are aware
of material changes to such risk factors as previously disclosed, we set forth below an updated discussion of such risks. The reader should
note that the other risks identified in our report on Form 10-K remain applicable.
We have substantial indebtedness.
We have and will continue to
have a substantial amount of indebtedness. At June 30, 2022, we had approximately $2,239.8 million of debt outstanding. Such debt consisted
primarily of $1,934.2 million of securitization trust debt and $228.9 million of debt from warehouse lines of credit. Our securitization
trust debt has increased by $174.2 million while our warehouse lines of credit debt has increased by $123.3 million since December 31,
2021 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis,
and such notes have maturities that range from six months to 10 years. We had $27.2 million and $26.5 million in subordinated renewable
notes outstanding at June 30, 2022 and December 31, 2021, respectively. On June 30, 2021, we completed a $50.0 million securitization
of residual interests from other previously issued securitizations. As of June 31, 2022, all $50.0 million of this debt remains outstanding.
Our substantial indebtedness could adversely affect
our financial condition by, among other things:
· increasing our vulnerability to general adverse economic and industry conditions;
· requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing amounts available for working capital, capital expenditures and other general corporate purposes;
· limiting our flexibility in planning for, or reacting to, changes in our business and the industry in
which we operate;
· placing us at a competitive disadvantage compared to our competitors that have less debt; and
· limiting our ability to borrow additional funds.
Although we believe we are able to service and
repay such debt, there is no assurance that we will be able to do so. If we do not generate sufficient operating profits, our ability
to make required payments on our debt would be impaired. Failure to pay our indebtedness when due could have a material adverse effect.
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Forward-Looking Statements
Discussions of certain matters
contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. These
forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of
future performance, perceived opportunities in the market and statements regarding our mission and vision. You can generally identify
forward-looking statements as statements containing the words "will," "would," "believe," "may,"
"could," "expect," "anticipate," "intend," "estimate," "assume" or other similar
expressions. Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed
or implied in such forward-looking statements. The discussion under "Risk Factors" identifies some of the factors that might
cause such a difference, including the following:
· changes in general economic conditions;
· our ability or inability to obtain necessary financing, and the terms of any such financing;
· changes in interest rates, especially as applicable to securitization trust debt;
· our ability to generate sufficient operating and financing cash flows;
· competition;
· level of future provisioning for receivables losses;
· the levels of actual losses on receivables; and
· regulatory requirements.
Forward-looking statements
in this report also include our recorded figures representing allowances for remaining expected lifetime credit losses, our markdown of
the recorded value for the portion of our portfolio accounted for at fair value, our charge to the provision for credit losses for the
our legacy portfolio, our estimates of fair value (most significantly for our receivables accounted for at fair value), our entries offsetting
the preceding, and figures derived from any of the preceding. In each case, such figures are forward-looking statements because
they are dependent on our estimates of cash to be received and losses to be incurred in the future. The accuracy of such estimates may
be adversely affected by various factors, which include (in addition to risks relating to the COVD-19 pandemic and to the economy generally)
the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed
and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect our ability to service
our portfolio; possible increases in the rate of consumer bankruptcy filings, which could adversely affect our rights to collect payments
from our portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used
vehicles, which could adversely affect our realization upon repossessed vehicles; and economic conditions in geographic areas in which
the Company's business is concentrated. The accuracy of such estimates may also be affected by the effects of the COVID-19 pandemic and
of governmental responses to said pandemic, which have included prohibitions on certain means of enforcement of receivables, and may include
additional restrictions, as yet unknown, in the future. Any or all of such factors also may affect our future financial results, as to
which there can be no assurance. Any implication that past results or past consecutive earnings are indicative of future results or future
earnings is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to losses to
be incurred in the future may affect future performance.
Forward-looking statements are not guarantees
of performance. They involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond
our ability to control or predict, including those described herein, and in documents incorporated by reference in this report. For these
statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
We undertake no obligation
to publicly update any forward-looking information. You are advised to consult any additional disclosure we make in our periodic reports
filed with the SEC.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.