Ford Motor Credit Company reported a pre-tax profit of $434
million in the second quarter of 2014, compared with $454 million a
year earlier. The lower pre-tax profit was more than explained by a
higher level of insurance losses from storm damage to dealer
inventory. Ford Credit’s net income was $264 million in the second
quarter of 2014, compared with $275 million in the previous
year.
“We have grown our receivables, maintaining our principles of
prudent lending and our record of consistent profitability,”
Chairman and CEO Bernard Silverstone said. “Our focus on
exceptional dealer and customer service and our integrated market
approach with Ford Motor Company continue to benefit the
enterprise.”
On June 30, 2014, Ford Credit’s total net receivables were
$107 billion, compared with $100 billion at year-end 2013. Managed
receivables were $111 billion on June 30, 2014, up from $103
billion on Dec. 31, 2013. On June 30, 2014, managed leverage
was 8.6:1, compared with 8.5:1 at year-end 2013.
Ford Credit now expects full-year pre-tax profit to be higher
than 2013, improved from about equal to or higher than 2013. Ford
Credit also now expects year-end managed receivables of $112
billion to $115 billion, up from prior guidance of about $110
billion. Ford Credit continues to expect managed leverage in the
range of 8:1 to 9:1, and distributions to its parent of about
$250 million.
# # #
About Ford Motor Credit Company
Ford Motor Credit Company LLC has provided dealer and customer
financing to support the sale of Ford Motor Company products since
1959. Ford Credit is a wholly owned subsidiary of Ford. For more
information, visit www.fordcredit.com
or www.lincolnafs.com.
— — — — —* The financial results discussed herein are presented
on a preliminary basis; final data will be included in Ford
Credit’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2014.
Risk Factors
Statements included or incorporated by reference herein may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on expectations, forecasts, and assumptions by
our management and involve a number of risks, uncertainties, and
other factors that could cause actual results to differ materially
from those stated, including, without limitation:
- Decline in industry sales volume,
particularly in the United States or Europe, due to financial
crisis, recession, geopolitical events, or other factors;
- Decline in Ford’s market share or
failure to achieve growth;
- Lower-than-anticipated market
acceptance of Ford’s new or existing products;
- Market shift away from sales of larger,
more profitable vehicles beyond Ford’s current planning assumption,
particularly in the United States;
- An increase in or continued volatility
of fuel prices, or reduced availability of fuel;
- Continued or increased price
competition resulting from industry excess capacity, currency
fluctuations, or other factors;
- Fluctuations in foreign currency
exchange rates, commodity prices, and interest rates;
- Adverse effects resulting from
economic, geopolitical, or other events;
- Economic distress of suppliers that may
require Ford to provide substantial financial support or take other
measures to ensure supplies of components or materials and could
increase costs, affect liquidity, or cause production constraints
or disruptions;
- Work stoppages at Ford or supplier
facilities or other limitations on production (whether as a result
of labor disputes, natural or man-made disasters, tight credit
markets or other financial distress, production constraints or
difficulties, or other factors);
- Single-source supply of components or
materials;
- Labor or other constraints on Ford’s
ability to maintain competitive cost structure;
- Substantial pension and postretirement
health care and life insurance liabilities impairing our liquidity
or financial condition;
- Worse-than-assumed economic and
demographic experience for postretirement benefit plans
(e.g., discount rates or investment returns);
- Restriction on use of tax attributes
from tax law “ownership change;”
- The discovery of defects in vehicles
resulting in delays in new model launches, recall campaigns, or
increased warranty costs;
- Increased safety, emissions, fuel
economy, or other regulations resulting in higher costs, cash
expenditures, and/or sales restrictions;
- Unusual or significant litigation,
governmental investigations, or adverse publicity arising out of
alleged defects in products, perceived environmental impacts, or
otherwise;
- A change in requirements under
long-term supply arrangements committing Ford to purchase minimum
or fixed quantities of certain parts, or to pay a minimum amount to
the seller (“take-or-pay” contracts);
- Adverse effects on results from a
decrease in or cessation or clawback of government incentives
related to investments;
- Inherent limitations of internal
controls impacting financial statements and safeguarding of
assets;
- Cybersecurity risks to operational
systems, security systems, or infrastructure owned by Ford, Ford
Credit, or a third-party vendor or supplier;
- Failure of financial institutions to
fulfill commitments under committed credit and liquidity
facilities;
- Inability of Ford Credit to access
debt, securitization, or derivative markets around the world at
competitive rates or in sufficient amounts, due to credit rating
downgrades, market volatility, market disruption, regulatory
requirements, or other factors;
- Higher-than-expected credit losses,
lower-than-anticipated residual values, or higher-than-expected
return volumes for leased vehicles;
- Increased competition from banks or
other financial institutions seeking to increase their share of
financing Ford vehicles; and
- New or increased credit, consumer, or
data protection or other regulations resulting in higher costs
and/or additional financing restrictions.
We cannot be certain that any expectation, forecast, or
assumption made in preparing forward-looking statements will prove
accurate, or that any projection will be realized. It is to be
expected that there may be differences between projected and actual
results. Our forward-looking statements speak only as of the
date of their initial issuance, and we do not undertake any
obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events,
or otherwise. For additional discussion, see “Item 1A, Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2013, as updated by our subsequent Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K.
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED INCOME STATEMENT For the
Periods Ended June 30, 2013 and 2014 (in millions)
Second Quarter First Half 2013
2014 2013 2014
(unaudited) Financing revenue Operating leases $
818 $
1,001 $ 1,572 $ 1,967
Retail Financing 680 691 1,377 1,387 Dealer Financing 385 424 763
817 Other 24 21 49 42 Total financing
revenue 1,907 2,137 3,761 4,213 Depreciation on vehicles subject to
operating leases (553 ) (742 ) (1,034 ) (1,447 ) Interest expense
(682 ) (673 ) (1,365 ) (1,339 ) Net financing margin 672 722 1,362
1,427
Other revenue Insurance premiums earned 30 31 59 63
Other income, net 46 66 123 117 Total
financing margin and other revenue 748 819 1,544 1,607
Expenses Operating expenses 240 281 490 531 Provision for
credit losses 20 27 49 58 Insurance expenses 34 77 44
85 Total expenses 294 385 583
674
Income before income taxes 454 434 961 933
Provision for income taxes 179 170 322 357
Net income $
275 $
264 $ 639 $
576 __________ Certain
prior period amounts in our Consolidated Income Statement were
reclassified to conform to the presentation in our 2013 Form 10-K
Report.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME For the Periods Ended June 30, 2013 and 2014
(in millions) Second Quarter First Half
2013 2014 2013 2014 (unaudited)
Net income $ 275 $ 264 $ 639 $ 576 Other comprehensive
income/(loss), net of tax Foreign currency translation (51 ) 85
(238 ) 3
Total other comprehensive income/(loss),
net of tax (51 ) 85 (238 ) 3
Comprehensive
income $
224 $
349 $ 401 $
579
FORD MOTOR CREDIT COMPANY
LLC AND SUBSIDIARIES PRELIMINARY CONSOLIDATED BALANCE
SHEET (in millions) December 31, 2013
June 30, 2014 (unaudited) ASSETS Cash
and cash equivalents $ 9,424 $ 6,825 Marketable securities 1,943
3,020 Finance receivables, net 81,636 86,718 Net investment in
operating leases 18,277 19,875 Notes and accounts receivable from
affiliated companies 1,077 794 Derivative financial instruments 585
673 Other assets 2,666 2,536
Total assets $
115,608 $ 120,441
LIABILITIES Accounts payable Customer deposits,
dealer reserves, and other $ 1,445 $ 1,182 Affiliated companies 211
526 Total accounts payable 1,656 1,708 Debt 98,693
103,038 Deferred income taxes 1,627 1,864 Derivative financial
instruments 506 320 Other liabilities and deferred income 2,522
2,356
Total liabilities 105,004 109,286
SHAREHOLDER’S INTEREST Shareholder’s interest 5,217 5,217
Accumulated other comprehensive income 717 720 Retained earnings
4,670 5,218
Total shareholder’s interest
10,604 11,155
Total liabilities and shareholder’s
interest $ 115,608 $
120,441 The following table includes assets to
be used to settle the liabilities of the consolidated variable
interest entities (“VIEs”). These assets and liabilities are
included in the consolidated balance sheet above.
December 31, 2013 June 30, 2014
(unaudited) ASSETS Cash and cash equivalents $ 4,198
$ 2,186 Finance receivables, net 45,796 43,085 Net investment in
operating leases 8,116 9,012 Derivative financial instruments 5 3
LIABILITIES Debt $ 40,728 $ 38,322 Derivative
financial instruments 88 40
FORD MOTOR CREDIT COMPANY LLC
AND SUBSIDIARIES APPENDIX In evaluating Ford
Credit’s financial performance, Ford Credit management uses
financial measures based on Generally Accepted Accounting
Principles (“GAAP”), as well as financial measures that include
adjustments from GAAP.
RECONCILIATION OF
NON-GAAP MEASURES TO GAAP:
Net Finance Receivables and Operating Leases
December 31, 2013 June 30, 2014
Receivables
(a)
(in billions) Net Receivables Finance Receivables – North
America Segment
Consumer
Retail financing $ 40.9 $ 41.7
Non-Consumer
Dealer financing (b) 22.1 23.4 Other 1.0 1.0 Total
finance receivables -- North America Segment 64.0 66.1 Finance
Receivables – International Segment
Consumer
Retail financing 10.8 11.8
Non-Consumer
Dealer financing (b) 8.3 10.4 Other 0.4 0.3 Total
finance receivables -- International Segment 19.5 22.5 Unearned
interest supplements (1.5 ) (1.6 ) Allowance for credit losses (0.4
) (0.3 ) Finance receivables, net 81.6 86.7 Net investment in
operating leases 18.3 19.9 Total net receivables $
99.9 $ 106.6
Managed receivables Total net receivables $ 99.9 $ 106.6
Unearned interest supplements and residual support 3.1 3.5
Allowance for credit losses 0.4 0.4 Other, primarily accumulated
supplemental depreciation — 0.1 Total managed
receivables $ 103.4 $
110.6
Managed Leverage Calculation
December 31, 2013 June 30, 2014 (in
billions) Total debt (c) $ 98.7 $ 103.0 Adjustments for cash,
cash equivalents, and marketable securities (d) (10.8 ) (9.3 )
Adjustments for derivative accounting (e) (0.2 ) (0.3 ) Total
adjusted debt $ 87.7 $
93.4 Equity (f) $ 10.6 $ 11.2 Adjustments for
derivative accounting (e) (0.3 ) (0.4 ) Total adjusted equity $
10.3 $ 10.8
Managed leverage (to 1) = Total adjusted debt / Total adjusted
equity 8.5 8.6
Memo: Financial statement leverage (to 1)
= Total debt / Equity
9.3 9.2
__________
(a) Includes finance receivables (retail and wholesale) sold
for legal purposes and net investment in operating leases included
in securitization transactions that do not satisfy the requirements
for accounting sale treatment. These receivables and operating
leases are reported on Ford Credit’s balance sheet and are
available only for payment of the debt issued by, and other
obligations of, the securitization entities that are parties to
those securitization transactions; they are not available to pay
the other obligations of Ford Credit or the claims of Ford Credit’s
other creditors. (b) Dealer financing primarily includes wholesale
loans to dealers to finance the purchase of vehicle inventory. (c)
Includes debt reported on Ford Credit’s balance sheet that is
issued in securitization transactions and payable only out of
collections on the underlying securitized assets and related
enhancements. Ford Credit holds the right to receive the excess
cash flows not needed to pay the debt issued by, and other
obligations of, the securitization entities that are parties to
those securitization transactions. (d) Excludes marketable
securities related to insurance activities. (e) Primarily related
to market valuation adjustments to derivatives due to movements in
interest rates. Adjustments to debt are related to designated fair
value hedges and adjustments to equity are related to retained
earnings. (f) Shareholder’s interest reported on Ford Credit’s
balance sheet.
Media:Margaret MellottFord
CreditCommunications313.322.5393mmellott@ford.comFixed
Income Investment Community:Steve
Dahle313.621.0881fixedinc@ford.com
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