AutoNation 2000 Annual Report Download - page 69

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------------ ----------------- --------------- ----------------
Voluntary prepayment speed (ABS) ................. 1.16% $ 2.4 $ 4.8
Expected credit losses (annual rate) ............. 1.06% $ 2.2 $ 4.3
Discount rate on residual cash flows
(annual rate) .................................. 9.50% $ 1.0 $ 1.9
Variable rate to investors (annual rate) ......... 7.30% $ 16.6 $ 32.9
As of December 31, 2000, the Company had expected static pool credit
losses of 2.28%, which would have averaged to an annual rate of 1.13%.
The following summarizes information about managed or securitized
installment loans and delinquencies and net credit losses at December 31, 2000:
Total Principal Principal Amount of Loans
Amount of Loans 60 Days or More Past Due
----------------- --------------------------
Loans securitized .......................... $ 1,619.2 $ 7.8
Loans retained on balance sheet ............ 50.3 .4
---------- ------
Total loans managed or securitized ......... $ 1,669.5 $ 8.2
========== ======
Net credit losses are charge-offs less recoveries and are based on total
installment loans managed or securitized. Net credit losses during the year
ended December 31, 2000 totaled $31.5 million.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation. Fair value estimates are
made at a specific point in time, based on relevant market information about
the financial instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment, and therefore cannot be
determined with precision. The assumptions used have a significant effect on
the estimated amounts reported.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
o Cash and cash equivalents, trade and manufacturer receivables, other
current assets, accounts payable, accrued liabilities, other current
liabilities and variable rate debt: the amounts reported in the
accompanying Consolidated Balance Sheets approximate fair value.
o Installment loans receivable and retained interests in securitized
receivables: The fair value of installment loans receivable and retained
interests in securitized receivables are estimated based upon the
discounted value of the future cash flows expected to be received.
Significant assumptions
67
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)