UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 10-Q

__________________________________________________________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Numbers: 333-169730

____________________________________________________________

DriveTime Automotive Group, Inc.

(Exact name of registrant as specified in its charter)



DELAWARE		86-0721358
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

DT Acceptance Corporation

(Exact name of registrant as specified in its charter)



ARIZONA		82-0587346
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

4020 East Indian School Road

Phoenix, Arizona 85018

(Address, including zip code, of principal executive offices)

(602) 852-6600

(Registrants’ telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨		Accelerated filer	¨

Non-accelerated filer	x	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The total number of shares of common stock outstanding as of June 30, 2013, was 101.7696 for each of DriveTime Automotive Group, Inc. and DT Acceptance Corp.

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TABLE OF CONTENTS



	Page

PART I. FINANCIAL INFORMATION	1

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 (unaudited)	1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012 (unaudited)	2

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (unaudited)	3

Notes to Condensed Consolidated Financial Statements, June 30, 2013 (unaudited)	4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3. Quantitative and Qualitative Disclosures About Market Risk	45

Item 4. Controls and Procedures	45

PART II. OTHER INFORMATION	46

Item 1. Legal Proceedings	46

Item 1A. Risk Factors	46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3. Defaults Upon Senior Securities	46

Item 4. Mine Safety Disclosures	46

Item 5. Other Information	46

Item 6. Exhibits	47

SIGNATURES	50

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PART I.	FINANCIAL INFORMATION


Item 1.	Financial Statements

DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)



	June 30, 2013			December 31, 2012
	(In thousands)
ASSETS
Cash and Cash Equivalents	$	27,108		$	26,480
Restricted Cash and Investments Held in Trust	146,840			107,072
Finance Receivables	1,826,899			1,634,622
Allowance for Credit Losses	(284,719		)	(252,590		)
Finance Receivables, net	1,542,180			1,382,032
Dealer Finance Receivables, net	92,278			40,956
Vehicle Inventory	226,505			270,733
Property and Equipment, net	99,176			94,397
Other Assets	58,608			67,447
Total Assets	$	2,192,695		$	1,989,117
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	20,882		$	17,346
Accrued Expenses and Other Liabilities	95,250			81,121
Accrued Expenses—Related Party	749			818
Portfolio Term Financings	1,108,796			1,049,478
Portfolio Warehouse Facilities	78,000			57,200
Senior Secured Notes Payable	248,766			193,320
Senior Secured Notes Payable-Related Party	5,000			5,000
Other Secured Notes Payable	136,016			117,281
Total Liabilities	1,693,459			1,521,564
Shareholders’ Equity—DTAG:
Common Stock	—			—
Paid-in Capital	117,428			147,117
Retained Earnings	6,115			8,931
Total Shareholders’ Equity—DTAG	123,543			156,048
Noncontrolling Interest-Inilex ⁽¹⁾	2,424			—
Noncontrolling Interest-DTAC ⁽²⁾	373,269			311,505
Total Equity	499,236			467,553
Total Liabilities & Shareholders’ Equity	$	2,192,695		$	1,989,117

^{(1) Refer to Note 1 for a discussion regarding the noncontrolling interest-Inilex}

^{(2) Refer to Note 1 for a discussion regarding the noncontrolling interest-DTAC.}

See accompanying notes to Condensed Consolidated Financial Statements.

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DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(In thousands)
Revenue:
Sales of Used Vehicles	$	277,539		$	226,124		$	587,007		$	523,259
Interest Income	82,360			75,630			157,334			146,158
Dealer Finance and Other Income	4,902			448			7,702			623
Total Revenue	364,801			302,202			752,043			670,040
Costs and Expenses:
Cost of Used Vehicles Sold	187,770			148,254			399,408			345,416
Provision for Credit Losses	70,313			51,387			148,155			111,729
Portfolio Debt Interest Expense	10,538			10,564			20,724			20,918
Non- Portfolio Debt Interest Expense	1,453			1,088			2,772			2,131
Senior Secured Debt Interest Expense	7,356			6,610			13,839			13,216
Senior Secured Debt Interest Expense—Related Party	158			—			316			—
Selling and Marketing	8,210			6,311			17,127			15,780
General and Administrative	49,978			40,622			93,687			82,488
General and Administrative—Related Party	2,554			2,754			5,205			5,612
Depreciation Expense	5,896			5,019			11,304			9,970
Total Costs and Expenses	344,226			272,609			712,537			607,260
Income Before Income Taxes	20,575			29,593			39,506			62,780
Income Tax Expense	270			267			612			659
Net Income	$	20,305		$	29,326		$	38,894		$	62,121
Net Income Attributable to Noncontrolling Interest—Inilex ⁽¹⁾	740			—			740			—
Net Income Attributable to DriveTime Consolidated	$	19,565		$	29,326		$	38,154		$	62,121

Net Loss Attributable to Noncontrolling Interest—DTAC ⁽²⁾	$	(46,107	)	$	(30,561	)	$	(105,854	)	$	(75,462	)
Net Income Attributable to DTAG	65,672			59,887			144,008			137,583
Net Income Attributable to DriveTime Consolidated	$	19,565		$	29,326		$	38,154		$	62,121

^{(1) Refer to Note 1 for a discussion regarding the noncontrolling interest-Inilex}

^{(2) Refer to Note 1 for a discussion regarding the noncontrolling interest-DTAC.}

See accompanying notes to Condensed Consolidated Financial Statements.

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DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Six months ended June 30,
	2013			2012
	(In thousands)
Cash Flows from Operating Activities:
Net Income	$	38,894		$	62,121
Adjustments to Reconcile Net Income to Net Cash (Used In) / Provided by Operating Activities:
Provision for Credit Losses - Finance Receivables	148,155			111,729
Provision for Credit Losses - Dealer Finance Receivables	888			—
Depreciation Expense	11,304			9,970
Amortization of Debt Issuance Costs and Debt Premium and Discount	3,166			3,864
Non-Cash Compensation Expense—Related Party	621			930
Loss (Gain) from Disposal of Property and Equipment	14			(115		)
Originations of Finance Receivables	(591,277		)	(520,378		)
Collections and Recoveries on Finance Receivable Principal Balances	284,395			282,442
Change in Accrued Interest Receivable and Loan Origination Costs	(1,421		)	(2,512		)
Decrease in Vehicle Inventory	44,228			75,786
Change in Other Assets	12,266			8,425
Increase in Accounts Payable, Accrued Expenses and Other Liabilities	17,251			10,994
Change in Accrued Expenses-Related Party	(69		)	61
Net Cash (Used In) / Provided By Operating Activities	(31,585		)	43,317
Cash Flows from Investing Activities:
Originations of Dealer Finance Receivables	(65,071		)	(12,249		)
Collections and Recoveries of Dealer Finance Receivables, net	12,861			640
Proceeds from Disposal of Property and Equipment	932			780
Purchase of Property and Equipment	(17,031		)	(9,923		)
Net Cash Used in Investing Activities	(68,309		)	(20,752		)
Cash Flows from Financing Activities:
Increase in Restricted Cash	(14,475		)	(2,220		)
Deposits into Investments Held in Trust	(4,500		)	(4,500		)
Collections, Buybacks and Change in Investments Held in Trust	(20,792		)	31
Additions to Portfolio Term Financings	311,990			235,046
Repayment of Portfolio Term Financings	(252,540		)	(218,108		)
Additions to Portfolio Warehouse Facilities	474,700			437,300
Repayment of Portfolio Warehouse Facilities	(453,900		)	(436,500		)
Additions to Senior Secured Notes Payable	55,500			—
Additions to Other Secured Notes Payable	20,000			12,968
Repayment of Other Secured Notes Payable	(1,266		)	(20,769		)
Payment of Debt Issuance Costs	(3,340		)	(2,863		)
Dividend Distributions	(10,855		)	(25,724		)
Net Cash Provided by / (Used in) Financing Activities	100,522			(25,339		)
Net Increase / (Decrease) in Cash and Cash Equivalents	628			(2,774		)
Cash and Cash Equivalents at Beginning of Period	26,480			25,930
Cash and Cash Equivalents at End of Period	$	27,108		$	23,156
Supplemental Statement of Cash Flows Information:
Interest Paid	$	36,858		$	36,094
Interest Paid—Related Party	$	316		$	—
Income Taxes Paid	$	828		$	1,053
Supplemental Statement of Non-Cash Investing and Financing Activities:
Disposal of Fully Depreciated Property and Equipment	$	—		$	2,710

See accompanying notes to Condensed Consolidated Financial Statements.

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DRIVETIME AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Unaudited Financial Statements


(1)	Description of Business, Ownership Formation, Basis of Presentation, and Principles of Consolidation

Description of Business

DriveTime Automotive Group, Inc. (“DTAG”) and DT Acceptance Corporation ("DTAC") (together referred to herein as “we,” “our,” “the Company,” and “us”), through their subsidiaries, own and operate used automobile dealerships in the United States focusing primarily on the sale and financing of used vehicles to the subprime market. The subprime market is comprised of customers with modest incomes who have experienced credit difficulties or have very limited credit histories, and/or do not have access to obtain their own source of financing from third-party finance companies. Therefore, we provide financing for substantially all of the vehicles we sell. Since many of our customers may be unable to obtain financing to purchase a vehicle from another company, financing is an essential component of the services that we provide to our customers. We fund this portfolio primarily through portfolio warehouse facilities, securitizations, and other portfolio term financings.

In December 2011, as a supplement to our core operations, we launched a new indirect lending business segment, GO Financial (“GO”). GO provides indirect auto financing to third-party automobile dealerships collateralized by pools of subprime auto loans and is a separate operating segment.

Ownership

DTAG and DTAC are sister companies, generally with DTAG directing our retail vehicle sales and operations and DTAC directing our financing and collections operations. As of June 30, 2013, and December 31, 2012, the shareholders of DTAG and DTAC were Ernest C. Garcia II (Chairman) and the Garcia Family Trusts (collectively, herein also referred to as “Principal Shareholder” or “Mr. Garcia”) owning 100.0 shares, or 98.3% of each of DTAG and DTAC and Raymond C. Fidel (President and CEO) owning 1.8 shares, or 1.7% of each of DTAG and DTAC.

Basis of Presentation

We have determined that DTAC is a variable interest entity (“VIE”) and DTAG is the primary beneficiary of DTAC. Therefore, the accounts of DTAG and DTAC are consolidated and intercompany transactions between DTAG and DTAC are eliminated in consolidation. We determined DTAG is the primary beneficiary of DTAC because DTAG has both (1) the power to direct the activities of DTAC that most significantly impact DTAC's economic performance and (2) a potentially significant variable interest that carries with it the obligation to absorb the losses or the right to receive benefits of DTAC. DTAG has the power to direct the activities of DTAC because it originates and sells 100% of the loans DTAC is required to purchase, sets underwriting standards and origination terms, sets servicing and collection policies administered by DTAC, as well as the fact that DTAC was created and designed by DTAG to obtain third party financing for DTAG's originations. DTAG also has potentially significant variable interests in the form of debt capital provided to DTAC through various debt issuances, guarantees of DTAC's debt, as well as operational liabilities owed to DTAG, all of which carry the obligation to absorb losses or receive benefits of DTAC. Creditors of DTAC generally do not have recourse to the general credit of DTAG, except that the special purpose entity ("SPE") related to our term residual facility entered into a demand note with DTAC. The demand note is guaranteed by DTAG.

Total assets of DTAC consolidated into DTAG are comprised primarily of net finance receivables, dealer finance receivables, cash and cash equivalents, restricted cash, investments held in trust, and deferred financing costs. Total liabilities of DTAC consolidated into DTAG are comprised primarily of portfolio warehouse, portfolio term, and senior secured debt. Total revenue of DTAC consolidated into DTAG are comprised of interest and dealer finance income. DTAC expenses are comprised of provision for credit losses, interest expense and general and administrative expenses.

Also included in the consolidated financial statements are SPEs of DTAC, which are all bankruptcy remote entities formed in conjunction with our securitizations, warehouse facilities, residual facility, real estate financing, and bank term financing transactions. We have determined that these SPEs are VIEs and DTAC is the primary beneficiary. Therefore, all intercompany accounts and transactions have been eliminated in consolidation for all periods presented. We determined DTAC is the primary beneficiary of these SPEs because DTAC has both (1) the power to direct the activities of the SPEs that most significantly impact the SPEs' economic performance and (2) a potentially significant variable interest that carries with it the obligation to absorb the losses or the right to receive benefits of DTAC. DTAC has the power to direct the activities of these SPEs because it services the loans in each of the securitizations, warehouse facilities and other lending arrangements. DTAC also has potentially significant variable interests in the form of holding the residual certificates for securitizations and rights to residual cash flows of the warehouse facilities. Creditors of the SPEs generally do not have recourse to the general credit of DTAC, except through servicing performance guarantees.

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Non-controlling Interests

DTAG and DTAC are consolidated for financial reporting purposes, therefore, we are required to separately present the non-controlling equity interest of the VIE (DTAC) on the condensed consolidated balance sheets and condensed consolidated statements of operations for all periods presented. The non-controlling interest is DTAC’s GAAP equity and income for the periods presented and there are no third-party competing interests in DTAC. For the amounts of assets, liabilities, revenue, and income of DTAC consolidated into DTAG at June 30, 2013, see Note 13- Supplemental Consolidating Financial Information.

In June 2013 we acquired a 51% controlling interest in Inilex for $1.00. Inilex is a provider of GPS technology and telemetry solutions and has been our provider of GPS installed on vehicle inventory for approximately the last two years. Prior to June 30, 2013, we determined Inilex to be a VIE for financial reporting purposes, however, did not previously consolidate the VIE since it was not material; however, we have reflected the prior period effects of the consolidation as an adjustment to beginning retained earnings. The effects of consolidating on our financial position and results of operations as of and for the three and six months ended June 30, 2013 are not material. The current period income attributable to the remaining noncontrolling interest in Inilex is presented both on the condensed consolidated statements of operations as well as in equity within the condensed consolidated balance sheets.

For more information regarding DTAC's financial position and results of operations and the SPEs' financial position and results of operations consolidated into DTAG and DTAC, respectively, see Note-13 Supplemental Consolidating Financial Information.

These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such interim condensed consolidated financial statements reflect all normal recurring adjustments considered necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes as of and for the year-ended December 31, 2012, which are included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 28, 2013.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities. Certain accounting estimates involve significant judgments, assumptions, and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of income and expenses during the reporting period which management considers to be critical accounting estimates. The judgments, assumptions, and estimates used by management are based on historical experience, managements’ experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Significant items subject to estimates and assumptions include the allowance for credit losses, inventory valuation, fair value measurements, certain legal reserves, our reserve for sales returns and allowances, our recovery receivables, and our warranty accrual. Actual results could differ from these estimates.


(2)	Restricted Cash and Investments Held in Trust

We maintain various cash accounts, which are pledged as collateral under our debt agreements. We are permitted to invest funds in these accounts in short-term liquid investments. The following is a summary of restricted cash and investments held in trust:



	As of June 30, 2013		As of December 31, 2012
	(In thousands)
Restricted cash	$	36,972	$	22,496
Investments Held in Trust	109,868		84,576
	$	146,840	$	107,072

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(3)	Finance Receivables - DriveTime

The following is a summary of DriveTime customer finance receivables:



	As of June 30, 2013		As of December 31, 2012
	(In thousands)
Principal Balances	$	1,792,566	$	1,601,710
Accrued Interest	16,635		16,414
Loan Origination Costs	17,698		16,498
Finance Receivables	$	1,826,899	$	1,634,622

Our finance receivables are defined as one segment and class of loan, which is the sub-prime consumer auto loan. Therefore, the disaggregation of information into portfolio segments and classes for assets with different risk characteristics is limited, and the level of risks inherent in our financing receivables are managed as one homogeneous pool and further segmented with our proprietary credit scoring system as described below in "—Credit Quality Indicators." We have chosen our proprietary credit scoring system to segregate risk characteristics of the portfolio since it has a direct impact in managing our portfolio risk and monitoring loan performance.

Finance receivables pledged as collateral associated with liabilities in our warehouse facilities, asset backed securitizations, and bank term financings, are provided in Note 5—Debt Obligations. We do not place loans on nonaccrual status, nor do we classify loans as impaired, since accounts are charged-off when the loan becomes 91 -121 days contractually past due at month end under our charge-off policy. We do not have loans that meet the definition of troubled debt restructurings.

Credit quality information for our finance receivables portfolio is provided as of the dates indicated below:

Age Analysis of Past Due Finance Receivables



	June 30, 2013				December 31, 2012				June 30, 2012
	Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal		Percent of Portfolio		Loan Principal
	($ In thousands)
Days Delinquent:
Current	58.3	%	$	1,045,473	49.1	%	$	786,765	59.0	%	$	953,725
01-30 Days	29.3	%	524,428		33.0	%	528,300		31.2	%	504,339
31-60 Days	8.3	%	148,636		10.0	%	161,157		6.5	%	104,500
61-90 Days	3.8	%	67,975		5.1	%	81,378		2.9	%	46,574
91-120 Days	0.3	%	6,054		2.8	%	44,110		0.4	%	7,027
Total Past Due	41.7	%	$	747,093	50.9	%	$	814,945	41.0	%	$	662,440
Total Finance Receivables	100.0	%	$	1,792,566	100.0	%	$	1,601,710	100.0	%	$	1,616,165

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Delinquencies are presented on a Sunday-to-Sunday basis, which reflects delinquencies as of the nearest Sunday to period end. Sunday is used to eliminate any impact of the day of the week on delinquencies since delinquencies tend to be higher mid-week.

Credit Quality Indicators

Our proprietary credit grading system segments our customers into eight distinct credit grades. These credit grades range from A+ to D-, with A+ being the lowest risk credit grade and a D- being the highest risk credit grade. Generally, the lower the risk grade, the lower the unit loss rate. A summary of our portfolio by our internally assigned credit risk ratings at June 30, 2013, and December 31, 2012, is as follows:

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At June 30, 2013



Grade	Average FICO Score ⁽¹⁾	Percentage of Portfolio Loans	Total Loans	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	554	10.3%	15,418	10.5%	$	187,442
A	540	18.3%	27,316	18.6%	333,029
B	517	37.6%	55,909	38.1%	684,806
C	504	28.8%	43,094	28.5%	510,086
C-	491	3.6%	5,387	3.1%	55,793
D+/D/D-	484	1.4%	2,066	1.2%	21,410
		100.0%	149,190	100.0%	$	1,792,566

At December 31, 2012



Grade	Average FICO Score ⁽¹⁾	Percentage of Portfolio Contracts	Total Loans	Percentage of Portfolio Principal	Loan Principal
					(In thousands)
A+	556	10.4%	14,660	10.6%	$	169,023
A	539	18.5%	25,998	18.8%	301,173
B	517	37.3%	52,476	38.2%	612,084
C	503	28.4%	40,066	27.8%	445,497
C-	488	3.9%	5,447	3.3%	53,512
D+/D/D-	478	1.5%	2,101	1.3%	20,421
		100.0%	140,748	100.0%	$	1,601,710


⁽¹⁾	^{Average FICO score is provided as an external metric of credit quality. FICO score is not utilized as the primary tool in determining internal credit grade.}

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Concentration of Credit Risk

As of June 30, 2013 and December 31, 2012, our portfolio concentration by state was as follows:



As of June 30, 2013					As of December 31, 2012
State	Percent of Portfolio		Loan Principal (In thousands)		State	Percent of Portfolio		Loan Principal (In thousands)
Texas	21.9	%	$	393,122	Texas	23.0	%	$	369,021
Florida	15.4	%	276,175		Florida	15.4	%	247,281
North Carolina	9.4	%	165,688		North Carolina	9.9	%	157,670
Georgia	7.7	%	138,694		Georgia	7.6	%	122,027
Virginia	6.3	%	113,696		Arizona	6.8	%	108,792
Arizona	6.3	%	113,374		Virginia	6.7	%	106,749
Tennessee	5.2	%	92,078		Tennessee	4.6	%	72,967
California	4.4	%	79,261		California	4.4	%	71,005
South Carolina	3.8	%	68,118		Nevada	4.0	%	63,346
Nevada	3.7	%	66,635		South Carolina	3.6	%	58,163
Alabama	3.3	%	59,663		New Mexico	3.0	%	48,421
New Mexico	2.7	%	48,712		Alabama	2.8	%	44,787
Oklahoma	2.3	%	41,490		Oklahoma	2.3	%	36,109
Ohio	2.0	%	36,271		Colorado	2.2	%	35,268
Colorado	2.0	%	35,304		Indiana	1.3	%	21,603
Indiana	1.4	%	25,921		Ohio	1.1	%	17,417
Mississippi	1.2	%	20,856		Mississippi	1.0	%	15,847
Missouri	0.5	%	9,179		Arkansas	0.2	%	3,218
Arkansas	0.5	%	8,329		Missouri	0.1	%	2,019
	100.0	%	$	1,792,566		100.0	%	$	1,601,710

Allowance for Credit Losses

The following table sets forth the rollforward of the allowance for credit losses for the periods indicated:



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	($ In thousands)
Allowance Activity:
Balance, beginning of period	$	269,622		$	237,027		$	252,590		$	221,533
Provision for credit losses	70,313			51,387			148,155			111,729
Net charge-offs	(55,216		)	(43,603		)	(116,026		)	(88,451		)
Balance, end of period	$	284,719		$	244,811		$	284,719		$	244,811
Allowance as a percent of portfolio principal, end of period	15.8		%	15.1		%	15.8		%	15.1		%
Charge off Activity:
Principal balances	$	(86,942	)	$	(73,075	)	$	(184,859	)	$	(155,926	)
Recoveries, net	31,726			29,472			68,833			67,475
Net charge-offs	$	(55,216	)	$	(43,603	)	$	(116,026	)	$	(88,451	)

At June 30, 2013 and December 31, 2012 recovery receivables of $25.2 million and $37.0 million, respectively, were included as a component of other assets in the accompanying condensed consolidated balance sheets.

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(4)	Dealer Finance Receivables - GO

The following is a summary of the activity in Dealer Finance Receivables:



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(In thousands)
Balance, Beginning of Period	$	74,753		$	5,473		$	40,956		$	24
Advances During the Period	26,111			6,746			65,071			12,249
Revenue Recognized	4,331			409			6,368			534
Payments to Reduce Amount Advanced	(12,029		)	(995		)	(19,229		)	(1,174		)
Provision for Credit Losses	(888		)	—			(888		)	—
Balance, End of Period	$	92,278		$	11,633		$	92,278		$	11,633

For the three and six months ended June 30, 2013 we recorded $0.9 million of total impairment to certain pools of dealer finance receivables. We did not recognize any impairment during the same periods in 2012.

Accretable yield represents the amount of revenue the Company expects over the remaining life of existing portfolios. Changes in accretable yield were as follows:



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(In thousands)
Balance, Beginning of Period	$	16,849		$	1,667		$	8,887		$	—
Revenue Recognized	(4,331		)	(409		)	(6,368		)	(534		)
Additions	27,512			1,333			37,511			3,125
Reclassification from (to) Nonaccretable Yield	—			—			—			—
Balance, End of Period	$	40,030		$	2,591		$	40,030		$	2,591

Non-accretable yield represents the difference between the total contractual net cash flows of Dealer Finance Receivables and the expected cash flows. This difference is neither accreted into income nor recorded on our balance sheet since it represents the portion of cash flows not expected to be received. Contractual net cash flows are comprised of the underlying contractual cash flows from consumer loans aggregated with the total accretable yield to be earned on Dealer Finance receivables over the life of the Dealer Pool. Although we are required to present contractual cash flows, we do not believe that contractual net cash flows on the underlying consumer loans are relevant in assessing our potential future cash flows because we are not entitled to the contractual cash flows and do not expect to receive 100% of contractual cash. Expected net cash flows represent the loss adjusted contractual cash flows, including earnings thereon. Components of non-accretable yield are as follows:



	As of June 30, 2013
	(In thousands)
Contractual Net Cash Flows ⁽¹⁾	$	191,734
Expected Net Cash Flows	(132,308		)
Non-accretable Yield	$	59,426

^{(1) Contractual net cash flows represents total cash payments due across all dealer servicing agreements for repayment of dealer advances and contract servicing.}

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(5)	Debt Obligations

Portfolio Term Financings

The following is a summary of portfolio term financings:



	As of June 30, 2013		As of December 31, 2012
	(In thousands)
Securitization Debt:
Asset backed security obligations	$	720,967	$	677,118
Bank Term Financing:
Variable rate secured financing transactions for our finance receivable portfolio	287,829		347,360
Portfolio Term Residual Financing:
Variable rate financing facility secured by residual interests in finance receivables of certain warehouse facilities and securitization trusts	100,000		25,000
Total Portfolio Term Financings	$	1,108,796	$	1,049,478

Securitization debt

The following is a summary of securitization transactions with outstanding balances for each period presented:



	As of June 30, 2013							As of December 31, 2012
Transaction	Debt Balance		Gross Receivables Pledged		Cash Reserve		Interest Rate ⁽¹⁾	Debt Balance		Gross Receivables Pledged		Cash Reserve		Interest Rate ⁽¹⁾
	($ In thousands)							($ In thousands)
2010-1	$	11,850	$	30,375	$	4,500	3.6%	$	23,036	$	55,525	$	4,500	3.6%
2011-1	38,399		53,320		4,200		3.0%	60,335		84,198		4,200		3.0%
2011-2	57,078		69,076		4,500		2.9%	84,977		103,779		4,500		2.9%
2011-3	89,730		109,880		4,500		3.9%	130,347		159,068		4,500		3.9%
2012-1	125,640		161,453		4,500		3.5%	170,198		219,252		4,500		3.5%
2012-2	161,280		199,302		4,500		2.9%	208,225		251,409		4,500		2.9%
2013-1	236,990		274,230		4,500		2.7%	—		—		—
	$	720,967	$	897,636	$	31,200		$	677,118	$	873,231	$	26,700

^{(1) These rates represent the original duration weighted average rates of the outstanding asset-backed securities.}

Asset-backed securities outstanding are secured by underlying pools of finance receivables (collateral) and investments held in trust (cash reserve). Credit enhancement for the asset-backed securities consists of a cash reserve account, over collateralization, and subordination of certain classes of notes in each trust to more senior classes of notes in such trust. Asset-backed securities outstanding have interest payable monthly at the fixed rates represented in the table above. All outstanding securitizations were rated in tranches with credit ratings from AAA to BBB by Standard & Poor's Ratings Service, a Standard & Poor's Financial Services LLC business and DBRS, Inc., with the 2013-1 securitization also being rated by Kroll Bond Rating Agency, Inc.

Individual securitization trusts are not cross-collateralized or cross-defaulted. Additionally, we have the option to purchase the remaining loans in a trust when the remaining principal balances of the loans reach 10% of their original principal balance.

Bank term financing

Bank term financings are secured by underlying pools of finance receivables and a cash reserve account. At June 30, 2013 and December 31, 2012, our outstanding bank term financing bears interest at LIBOR plus 2.00% (2.2% at both June 30, 2013 and December 31, 2012). This facility includes overcollateralization and a cash reserve similar to a securitization transaction, but consists of only one class of bonds and is unrated. At June 30, 2013 and December 31, 2012, $362.2 million and $443.9 million in receivables were pledged as collateral to this facility, respectively. At June 30, 2013 and December 31, 2012, $6.9 million was held as a cash reserve for this facility.

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Portfolio term residual financing

The term residual facility with Santander Consumer USA Inc. ("Santander") is secured by residual interests in our warehouse facilities and certain securitization trusts. The amounts outstanding under the facility bear interest at LIBOR + 3.50% or LIBOR + 6.00%, depending upon whether certain conditions are satisfied. This facility provides for funding through December 2019, with a term-out feature resulting in a final maturity of December 2020. At June 30, 2013, we were in compliance with all financial covenants of the facility. At June 30, 2013 and December 31, 2012 outstanding balances under the term residual facility accrued interest at LIBOR + 3.50% (3.70% at June 30, 2013 and December 31, 2012).

Portfolio warehouse facilities

The following is a summary of portfolio warehouse facilities:



	As of June 30, 2013
	Amount Drawn		Facility Amount		Stated Advance Rate		Collateral ⁽¹⁾		Interest Rate⁽²⁾		Expiration Date	Final Maturity
	($ In thousands)
Portfolio Warehouse Facilities
Deutsche Bank	$	27,500	$	150,000	65	%	$	68,730	2.44	%	Dec 2014	Dec 2015
Wells Fargo	28,000		150,000		58	%	94,778		2.44	%	Dec 2013	Dec 2015
RBS	22,500		125,000		65	%	56,736		2.50	%	Mar 2014	Mar 2015
Total Portfolio Warehouse Facilities	$	78,000	$	425,000



	As of December 31, 2012
	Amount Drawn		Facility Amount		Stated Advance Rate		Collateral⁽¹⁾		Interest Rate ⁽²⁾		Expiration Date	Final Maturity
	($ In thousands)
Portfolio Warehouse Facilities
Deutsche Bank	$	19,300	$	150,000	65	%	$	38,881	2.46	%	Dec 2014	Dec 2015
Wells Fargo	23,000		150,000		58	%	42,778		2.46	%	Dec 2013	Dec 2015
RBS	14,900		125,000		53	%	26,707		1.65	%	Mar 2013	Mar 2014
Total Portfolio Warehouse Facilities	$	57,200	$	425,000


⁽¹⁾	^{Collateral represents underlying pools of finance receivables pledged to each facility.}


⁽²⁾	^{Interest rate at period end equal to contractual benchmark plus index.}

Deutsche Bank Warehouse Facility

We have a revolving warehouse facility with Deutsche Bank AG, New York Branch (Deutsche Bank). The amounts outstanding under the facility bear interest at LIBOR plus 2.25%. At June 30, 2013, we were in compliance with all financial covenants of this facility.

Wells Fargo Warehouse Facility

We have a revolving warehouse facility with Wells Fargo Bank, N.A. (Wells Fargo). The amounts outstanding under the facility bear interest at LIBOR plus 2.25%. At June 30, 2013, we were in compliance with all financial covenants of this facility.

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RBS Warehouse Facility

We have a revolving warehouse facility with The Royal Bank of Scotland plc (RBS). The amounts outstanding under the facility bear interest at LIBOR plus 2.25%. At June 30, 2013, we were in compliance with all financial covenants of this facility.

Senior secured notes payable

A summary of Senior Secured Notes payable follows:



	As of June 30, 2013		As of December 31, 2012
	(In thousands)
Senior Secured Notes Payable	$	248,766	$	193,320
Senior Secured Notes Payable - Related Party	5,000		5,000
Total Senior Secured Notes Payable	$	253,766	$	198,320

In June 2010 we issued $200.0 million of 12.625% Senior Secured Notes due 2017 (the “Senior Secured Notes”). The notes were issued with an original issuance price of 98.854%, resulting in an effective yield of 12.875%. In May 2013 we issued an additional $50.0 million of Senior Secured Notes in a private offering under Rule 144A and Regulation S of the Securities Act of 1933. These notes were additional notes allowed under the indenture executed in June 2010. The notes were issued with an original issuance price of 111.0%, resulting in an effective "yield to first call date" of 7.67%. Interest, maturity and covenant terms of this secondary offering are identical to those of the initial offering. Interest on the Senior Secured Notes is payable semi- annually in arrears on June 15th and December 15th of each year. As of June 30, 2013, we were in compliance with all financial covenants of the Senior Secured Notes. At June 30, 2013 and December 31, 2012, the Senior Secured Notes are shown net of unamortized premium of $3.8 million and unamortized discount of $1.7 million, respectively.

Other secured notes payable

A summary of other secured notes payable follows:



	As of June 30, 2013
	Balance		Max Facility Capacity			Advance Rate		Interest Rate ⁽¹⁾	Expiration Date
	($ In thousands)
Other Secured Notes Payable
Revolving Inventory Facility	$	111,321	$	130,000		85%	⁽²⁾	3.75%	Nov 2014
Mortgage Note Payable	12,343		n/a			n/a		5.87%	Mar 2017
Real Estate Facility	10,806		25,000			70%		4.19%	Oct 2020
Equipment Note Payable	1,546		n/a			n/a		4.25%	Apr 2015
Total Other Secured Notes Payable	$	136,016	$	155,000

	As of December 31, 2012
	Balance		Max Facility Capacity			Advance Rate		Interest Rate ⁽¹⁾	Expiration Date
	($ In thousands)
Other Secured Notes Payable
Revolving Inventory Facility	$	91,320	$	140,000	⁽³⁾	85%	⁽²⁾	3.75%	Nov 2014
Mortgage Note Payable	12,454		n/a			n/a		5.87%	Mar 2017
Real Estate Facility	11,733		25,000			70%		4.21%	Oct 2020
Equipment Note Payable	1,774		n/a			n/a		4.75%	Apr 2013
Total Other Secured Notes Payable	$	117,281	$	165,000


⁽¹⁾	^{Interest rate at period end equal to contractual benchmark plus index.}


⁽²⁾	^{Advance rate is based on qualifying vehicle cost and is secured by our entire vehicle inventory.}


⁽³⁾	^{Inclusive of a}^{$10.0 million}^{seasonal increase in the months of November through the end of January.}

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Revolving inventory facility

We have a revolving inventory facility with Wells Fargo, Santander and Manheim Automotive Financial Services, Inc. The interest rate on the facility is based on the Adjusted One Month LIBOR rate plus 3.5%. At June 30, 2013, we were in compliance with all financial covenants of this facility.

Mortgage note payable

We have a mortgage note payable which is secured by our operations call center building in Mesa, Arizona (a commercial property). Terms of the note agreement provide for monthly principal and interest payments with a final balloon payment. At June 30, 2013, we were in compliance with all financial covenants of this loan.

Real Estate Facility

We have a seven year fully amortizing real estate facility with Wells Fargo. The amounts outstanding under the facility bear interest at LIBOR plus 4.0%. At June 30, 2013, we were in compliance with all financial covenants of this facility, and the line was collateralized by nine properties.

Equipment note payable

We have an equipment note payable, which is secured by an aircraft and bears interest at the Prime rate plus 1.0%. Terms of the note agreement provide for monthly principal and interest payments with a final balloon payment. At June 30, 2013, we were in compliance with all financial covenants of this loan.

(6) Accrued Service Contract Liability and Deferred Revenue

Limited warranty and service contract liabilities

Our limited warranty accrual/service contract liability is recorded as a component of Accrued Expenses and Other Liabilities on the accompanying condensed consolidated balance sheets for each period presented. The following table reflects activity in the warranty accrual for the periods indicated:



	Three Months Ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(In thousands)
Warranty Accrual Activity
Balance, Beginning of Period	$	24,908		$	27,436		$	24,030		$	24,004
Warranty Expense	6,060			3,992			14,616			11,433
Warranty Claims Paid	(7,751		)	(5,650		)	(15,429		)	(9,659		)
Balance, End of Period	$	23,217		$	25,778		$	23,217		$	25,778

Deferred revenue

Beginning in the fourth quarter of 2012 we began offering our DriveCare® limited warranty as a separately priced service contract in our dealerships located in certain regions in which we operate. As a result, the revenue and costs of these service contracts are deferred and recognized over the life of the service contract, in relation to the usage and expected duration of the contracts. The net deferred income balance is recorded as part of Accrued Expenses and Other Liabilities in the accompanying condensed consolidated balance sheets.

The following table sets forth information regarding the changes in deferred income and cost:

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	Three Months Ended June 30, 2013									Six months ended June 30, 2013
	Deferred Revenue			Deferred Expense			Deferred Income			Deferred Revenue			Deferred Expense			Deferred Income
	(In thousands)
Deferred Balance, Beginning of Period	$	9,011		$	(1,713	)	$	7,298		$	2,332		$	(390	)	$	1,942
Gross Revenue Deferred	6,167			—			6,167			13,204			—			13,204
Gross Cost Deferred	—			(1,236		)	(1,236		)	—			(2,612		)	(2,612		)
Revenue Recognized	(1,348		)	—			(1,348		)	(1,706		)	—			(1,706		)
Cost Recognized	—			256			256			—			309			309
Deferred Balance, End of Period	$	13,830		$	(2,693	)	$	11,137		$	13,830		$	(2,693	)	$	11,137


(7)	Related Party Transactions

During the three and six months ended June 30, 2013 and 2012, we recorded related party operating expenses as follows:



	Three Months Ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(In thousands)
General and Administrative Expenses—Related Party
Property lease expense	$	1,190		$	1,189		$	2,388		$	2,409
Restricted stock compensation expense	310			465			620			930
Aircraft operating and lease expense	1,005			1,066			2,093			2,082
Salaries and wages, general & administrative and other expenses	126			105			258			333
Reimbursement of certain general and administrative expenses	(77		)	(71		)	(154		)	(142		)
Total General and Administrative Expenses—Related Party	$	2,554		$	2,754		$	5,205		$	5,612

Interest Expense

During the three and six months ended June 30, 2013 and 2012, we recorded related party interest expense as follows:



	Three Months Ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
	(In thousands)
Senior Secured Notes Interest Expense—Related Party
Senior Secured Notes Payable—Verde	$	142	$	—	$	284	$	—
Senior Secured Notes Payable—CEO	16		—		32		—
Total Senior Secured Notes Interest Expense—Related Party	$	158	$	—	$	316	$	—

For a description of the nature of these transactions, see Note 10 - Related Party Transactions to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed on March 28, 2013.


(8)	Income Taxes

The condensed consolidated financial statements consist of financial and operating data of DTAG and DTAC, which are both S corporations. Since DTAC and DTAG are flow-through entities for federal income tax purposes, there is no federal income tax expense related to the income of DTAC and DTAG, other than for two of DTAG’s C corporation subsidiaries, one of which is wholly owned with the other majority owned. The taxable income flows through to our shareholders who are responsible for paying the associated taxes.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities recorded in jurisdictions that either do not recognize the Company's S corporation status and/or assess a tax on the Company's operations at the entity level. The Company's policy is to record a

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valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that management believes is more likely than not to be realized. As of June 30, 2013, our deferred tax assets and liabilities are immaterial to the financial statements.

Although most states follow the federal recognition of S corporation status, some states do impose an entity level tax on that income; therefore, the tax expense is adjusted accordingly. We did not have an income tax liability as of June 30, 2013. Our income tax liability was $0.2 million as of December 31, 2012.

At June 30, 2013 and December 31, 2012, the Company had no unrecognized tax benefits. The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had not accrued any amounts related to the payment of interest and penalties as of June 30, 2013 and December 31, 2012.


(9)	Shareholders’ Equity, Dividends & Stock Compensation

Share Information

DTAG has authorized shares with par value of $.001 per share. Of the 1,000 shares authorized, 101.8 shares are issued and outstanding. DTAC has authorized shares with no par value. Of the 1,000,000 shares authorized, 101.8 shares are issued and outstanding.

Dividends

Certain of our debt facilities place restrictions on the amount of cash dividends we are permitted to pay to our shareholders. If we are in compliance with the indebtedness ratio restriction in the Senior Notes, specifically related to our ability to pay dividends, we are permitted to pay cash dividends limited to an amount not greater than the percentage of S corporation taxable income for such quarterly periods equal to the highest combined federal, state, and/or local tax rate for individuals, plus 50% of the difference between pre-tax earnings less amounts paid for tax. If we are not in compliance with the indebtedness ratio restriction in the Senior Notes, specifically related to our ability to pay dividends, we are only permitted to pay cash dividends limited to an amount not greater than the percentage of S corporation taxable income for such quarterly periods equal to the highest combined federal, state, and/or local tax rate for individuals. As of June 30, 2013, we exceeded the indebtedness ratio , which restricted our ability to pay dividends to the amount relative to taxable income.

During the six months ended June 30, 2013, we distributed $10.9 million of dividends to pay taxes related to fourth quarter 2012 and first quarter 2013 earnings, which were approved by the board of directors in April 2013. We did not pay or accrue for second quarter 2013 dividends.

Chief Executive Officer Restricted Stock Grant

For the three and six months ended June 30, 2013 we recorded $0.3 million and $0.6 million, respectively, in restricted stock compensation expense associated with the December 2010 Restricted Stock Agreements between Mr. Fidel and each of DTAG and DTAC. We recorded $0.5 million and $0.9 million in restricted stock expense for the same periods in 2012. The stock compensation recorded for these periods also credited our Paid-in Capital accounts for both companies during these periods.

(10)Commitments and Contingencies

Lease commitments

At June 30, 2013, we leased the majority of our dealership and reconditioning center locations. We also leased our corporate office in Phoenix, Arizona, and operations collection facilities in Dallas, Texas. As of June 30, 2013, we had approximately $67.5 million in aggregate operating lease obligations.

Legal matters

We are involved in various claims and actions arising in the ordinary course of business. In the opinion of management, based on consultation with legal counsel, the ultimate disposition of these matters will not have a material adverse effect on us. We believe appropriate accruals have been made for the disposition of these matters. In accordance with ASC 450, Contingencies, we establish an accrual for a liability when it is both probable that the liability has been incurred and the amount of the loss can be reasonably estimated. These accruals are reviewed monthly and adjusted to reflect the impact of negotiations, settlements and payments, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal expenses related to defense, negotiations, settlements, rulings, and advice of outside legal counsel are expensed as incurred.

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There have been no material changes to the status of pending litigation or our accruals for legal matters disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 28, 2013. We continue to work closely with the CFPB to provide details and clarity related to their original request.

Additionally, in the ordinary course of business, we are a defendant in various other types of legal proceedings. Although we cannot determine at this time the amount of the ultimate exposure from these lawsuits, if any, based on the advice of counsel, management does not expect the final outcome to have a material adverse effect on us.


(11)	Fair Value of Financial Instruments

Fair values of financial instruments are based on estimates using quoted market prices, discounted cash flows, or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts that ultimately may be realized or paid at settlement or maturity of the financial instruments and those differences may be material. Accordingly, the aggregate fair value amounts presented do not represent our underlying institutional value.

Limitations

Fair value of financial instruments are based on relevant market information and information about the financial instrument; they are subjective in nature and involve uncertainties, matters of judgment and, therefore, cannot be determined with ultimate precision. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular instrument. Changes in assumptions could significantly affect these estimates. Because the fair value is estimated as of each balance sheet date presented, the amounts that will actually be realized or paid in settlement of the instruments could be significantly different.

The following is a summary of carrying value and fair value of our financial instruments for each period presented:



	June 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)				(In thousands)
Finance Receivables, net⁽¹⁾	$	1,532,810	$	1,624,120	$	1,370,800	$	1,441,026
Dealer Finance Receivables - GO, net	92,278		96,615		40,956		40,956
Securitization Debt	720,967		729,689		677,118		702,031
Portfolio Term Residual Financing	100,000		112,961		25,000		25,000
Bank Term Financings	287,829		287,829		347,360		347,360
Portfolio Warehouse Facilities	78,000		78,000		57,200		57,200
Senior Secured Notes Payable	253,766		274,067		198,320		220,135
Revolving Inventory Facility	111,321		110,171		91,320		91,600
Mortgage Note Payable	12,343		11,100		12,454		11,200
Real Estate Facility	10,806		10,776		11,733		11,700


⁽¹⁾	^{Represents finance receivable principal balances, plus accrued interest, less the allowance for credit losses.}

Valuation methodologies

Finance receivables

The fair value of finance receivables was estimated by discounting future cash flows expected to be collected using current rates at which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities. This discounted cash flow is estimated utilizing an internal valuation model, which uses a combination of market inputs (i.e. discount rates for similar and like transactions) and our own assumptions regarding credit losses, recoveries, and prepayment rates in our portfolio. We estimate the cash flow of the portfolio and the cash flow of our retained interests in securitization, warehouse and bank term financing transactions in measuring total cash flow. These cash flows are developed on a leveraged basis since our finance receivable portfolio is financed by these debt instruments and are not separable transactions.

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Dealer Finance Receivables - GO

The fair value of Dealer Finance Receivables was estimated by discounting future cash flows expected to be collected utilizing an internal loss adjusted cash flow model. The cash flow model uses internally generated assumptions regarding credit losses, recoveries, and prepayment rates in our portfolio, and a discount rate consistent with that of similar and like transactions.

Securitization debt

At June 30, 2013 and December 31, 2012, the fair value of securitization debt was determined using a third-party quoted market price.

Portfolio term residual financing

At June 30, 2013, the fair value of the portfolio term residual financing was estimated by discounting future expected cash flows over the life of the facility, using market rates for similar facilities. At December 31, 2012, the fair value was determined to approximate carrying value as the facility was amended December 2012.

Bank term financings

In November 2012, we executed a bank term financing with Wells Fargo. Because this financing was recently executed, we believe the fair value approximates carrying value at June 30, 2013 and December 31, 2012.

Portfolio warehouse facilities

The portfolio warehouse facilities are short term in nature and the interest rates adjust in conjunction with the lender’s cost of funds or 30-day LIBOR. The Deutsche Bank Warehouse Facility was renewed in December 2012. The Royal Bank of Scotland Warehouse Facility was renewed in March 2013. The Wells Fargo Warehouse Facility was executed in December 2011. Since the majority of the warehouse facilities were recently renewed or executed and contain a floating market rate of interest, we believe the fair value of these facilities approximate carrying value at June 30, 2013 and December 31, 2012.

Senior secured notes payable

The fair value of senior secured notes payable at June 30, 2013 and December 31, 2012 was determined using third-party quoted market prices.

Revolving inventory facility

At June 30, 2013, the fair value of revolving inventory facility was estimated by discounting future cash flows expected to be paid over the life of the facility, using market rates for similar facilities. At December 31, 2012, the fair value of the inventory facility was determined using a third party discounted cash flow using market interest rates for this debt.

Mortgage note payable

At June 30, 2013, and December 31, 2012, the fair value of this note was determined using third-party market prices for similar commercial real estate mortgages. Both periods utilize the December 31, 2012 analysis, as the market for these instruments is not considered volatile.

Real estate facility

At June 30, 2013 and December 31, 2012, the fair value of the real estate facility was determined using a third-party discounted cash flow using market interest rates for this debt. Both periods utilize the December 31, 2012 analysis, as the market for these instruments is not considered volatile.


(12)	Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other accounting standards setting bodies, which we may adopt as of the specified date required by each standard. We believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

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(13)	Supplemental Consolidating Financial Information

In accordance with the indenture governing the 12.625% Senior Secured Notes due 2017 (see Note 5—Debt Obligations), certain wholly-owned U.S. subsidiaries of the Company have fully and unconditionally guaranteed the Senior Secured Notes on a joint and several basis. Pursuant to Regulation S-X, Rule 3-10(f), we are required to present condensed consolidating financial information for subsidiaries that have guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional, joint and several, and where the voting interest of the subsidiary is 100% owned by the registrant.

The following tables present condensed consolidating balance sheets as of June 30, 2013, and December 31, 2012; condensed consolidating statements of operations for the three and six months ended June 30, 2013 and 2012; and cash flows for the six months ended June 30, 2013 and 2012 for (i) DTAG and DTAC, —the co-issuers of the Senior Secured Notes, (ii) the separate DTAG and DTAC guarantor subsidiaries on a combined basis, (iii) the separate DTAG and DTAC non-guarantor subsidiaries on a combined basis, (iv) elimination adjustments, and (v) total consolidated amounts. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management believes that such information is not material to the senior note holders. Consolidating adjustments include elimination of investment in subsidiaries, elimination of intercompany accounts; elimination of intercompany sales between guarantor and non-guarantor subsidiaries; and elimination of equity in earnings (losses) of subsidiaries. The condensed consolidating financial information should be read in conjunction with the condensed consolidated financial statements herein.

Included in the column for DTAG Guarantor Subsidiaries Combined are DriveTime Sales and Finance Company, LLC and DriveTime Car Sales Company, LLC, DriveTime Ohio Company, LLC, and Carvana, LLC. Included in the column for DTAC Guarantor Subsidiaries Combined are DT Credit Company, LLC, GFC Lending, LLC and DT Jet Leasing, LLC. Included in the column for DTAG Non-Guarantor Subsidiaries Combined are all other subsidiaries that are wholly-owned by DTAG and our 51% interest in Inilex. Included in the column for DTAC Non-Guarantor Subsidiaries Combined are all SPEs, which are VIEs and for which DTAC is the primary beneficiary. The column for the Issuers includes the accounts for DTAG and DTAC as issuers and as parent companies for each of its respective subsidiaries.

Consolidated amounts may be immaterially different compared to the condensed consolidated financial statements due to rounding.

Table of Contents

DriveTime Automotive Group, Inc. and Subsidiaries

Condensed Consolidating Balance Sheets

June 30, 2013

(In thousands)



	DriveTime Automotive Group, Inc.											DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non-Guarantor Subsidiaries		Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined			Non-Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
ASSETS
Cash and Cash Equivalents	$	9,313	$	2,893	$	5	$	—		$	12,211	$	335		$	329	$	14,233		$	—		$	14,897		$	—		$	27,108
Restricted Cash and Investments Held in Trust	—		—		—		—			—		23,505			123,335		—			—			146,840			—			146,840
Finance Receivables	—		—		—		—			—		1,035			—		1,825,864			—			1,826,899			—			1,826,899
Allowance for Credit Losses	—		—		—		—			—		—			—		(284,719		)	—			(284,719		)	—			(284,719		)
Finance Receivables, Net	—		—		—		—			—		1,035			—		1,541,145			—			1,542,180			—			1,542,180
Dealer Finance Receivables	—		—		—		—			—		92,278			—		—			—			92,278			—			92,278
Vehicle Inventory	226,505		—		—		—			226,505		—			—		—			—			—			—			226,505
Property and Equipment, Net	76,028		311		—		—			76,339		5,450			15,077		2,310			—			22,837			—			99,176
Investments in Subsidiaries	—		—		314,220		(314,220		)	—		—			—		340,246			(340,246		)	—			—			—
Other Assets	1,654,173		28,775		537,333		(722,397		)	1,497,884		852,694			1,482,704		1,457,333			(2,417,101		)	1,375,630			(2,814,906		)	58,608
Total Assets	$	1,966,019	$	31,979	$	851,558	$	(1,036,617	)	$	1,812,939	$	975,297		$	1,621,445	$	3,355,267		$	(2,757,347	)	$	3,194,662		$	(2,814,906	)	$	2,192,695
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	20,876	$	—	$	—	$	—		$	20,876	$	6		$	—	$	—		$	—		$	6		$	—		$	20,882
Accrued Expenses and Other Liabilities	1,538,002		349		601,132		(722,397		)	1,417,086		1,037,690			6,045		2,855,115			(2,405,031		)	1,493,819			(2,814,906		)	95,999
Portfolio Term Financings	—		—		—		—			—		—			1,120,866		—			(12,070		)	1,108,796			—			1,108,796
Portfolio Warehouse Facilities	—		—		—		—			—		—			78,000		—			—			78,000			—			78,000
Senior Secured Notes Payable	—		—		126,883		—			126,883		—			—		126,883			—			126,883			—			253,766
Other Secured Notes Payable	111,321		10,806		—		—			122,127		1,546			12,343		—			—			13,889			—			136,016
Total Liabilities	1,670,199		11,155		728,015		(722,397		)	1,686,972		1,039,242			1,217,254		2,981,998			(2,417,101		)	2,821,393			(2,814,906		)	1,693,459
Shareholders’ Equity:
Total Shareholders’ Equity	295,820		20,824		123,543		(314,220		)	125,967		(63,945		)	404,191		373,269			(340,246		)	373,269			—			499,236
Total Liabilities & Shareholders’ Equity	$	1,966,019	$	31,979	$	851,558	$	(1,036,617	)	$	1,812,939	$	975,297		$	1,621,445	$	3,355,267		$	(2,757,347	)	$	3,194,662		$	(2,814,906	)	$	2,192,695

Table of Contents

DriveTime Automotive Group, Inc. and Subsidiaries

Condensed Consolidating Balance Sheets

December 31, 2012

(In thousands)



	DriveTime Automotive Group, Inc.											DT Acceptance Corp
	Guarantor Subsidiaries Combined		Non- Guarantor Subsidiaries		Parent Company		Eliminations			Consolidated		Guarantor Subsidiaries Combined		Non- Guarantor Subsidiaries Combined		Parent Company			Eliminations			Consolidated			Eliminations			DriveTime Automotive Group, Inc. and Subsidiaries
ASSETS
Cash and Cash Equivalents	$	6,937	$	482	$	5	$	—		$	7,424	$	9	$	423	$	18,624		$	—		$	19,056		$	—		$	26,480
Restricted Cash and Investments Held in Trust	—		—		—		—			—		16,163		90,909		—			—			107,072			—			107,072
Finance Receivables	—		—		—		—			—		—		—		1,634,622			—			1,634,622			—			1,634,622
Allowance for Credit Losses	—		—		—		—			—		—		—		(252,590		)	—			(252,590		)	—			(252,590		)
Finance Receivables, Net	—		—		—		—			—		—		—		1,382,032			—			1,382,032			—			1,382,032
Dealer Finance Receivables	—		—		—		—			—		40,956		—		—			—			40,956			—			40,956
Vehicle Inventory	270,733		—		—		—			270,733		—		—		—			—			—			—			270,733
Property and Equipment, Net	70,668		—		—		—			70,668		5,807		15,216		2,706			—			23,729			—			94,397
Investments in Subsidiaries	—		—		473,828		(473,828		)	—		—		—		348,577			(348,577		)	—			—			—
Other Assets	1,226,409		26,480		383,689		(711,814		)	924,764		496,384		1,352,295		887,248			(1,857,217		)	878,710			(1,736,027		)	67,447
Total Assets	$	1,574,747	$	26,962	$	857,522	$	(1,185,642	)	$	1,273,589	$	559,319	$	1,458,843	$	2,639,187		$	(2,205,794	)	$	2,451,555		$	(1,736,027	)	$	1,989,117
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	17,342	$	—	$	—	$	—		$	17,342	$	4	$	—	$	—		$	—		$	4		$	—		$	17,346
Accrued Expenses and Other Liabilities	1,006,791		695		602,314		(711,814		)	897,986		521,476		6,703		2,228,522			(1,836,721		)	919,980			(1,736,027		)	81,939
Portfolio Term Financings	—		—		—		—			—		—		1,069,974		—			(20,496		)	1,049,478			—			1,049,478
Portfolio Warehouse Facilities	—		—		—		—			—		—		57,200		—			—			57,200			—			57,200
Senior Secured Notes Payable	—		—		99,160		—			99,160		—		—		99,160			—			99,160			—			198,320
Other Secured Notes Payable	91,320		11,733		—		—			103,053		1,774		12,454		—			—			14,228			—			117,281
Total Liabilities	1,115,453		12,428		701,474		(711,814		)	1,117,541		523,254		1,146,331		2,327,682			(1,857,217		)	2,140,050			(1,736,027		)	1,521,564
Shareholders’ Equity:
Total Shareholders’ Equity	459,294		14,534		156,048		(473,828		)	156,048		36,065		312,512		311,505			(348,577		)	311,505			—			467,553
Total Liabilities & Shareholders’ Equity	$	1,574,747	$	26,962	$	857,522	$	(1,185,642	)	$	1,273,589	$	559,319	$	1,458,843

DRIVETIME AUTOMOTIVE GROUP INC 10-Q