Ford Motor Credit Company reported a pre-tax profit of $498 million in the third quarter of 2014, compared with $427 million a year earlier. The higher pre-tax profit was more than explained by higher volume, reflecting increases in nearly all financing products, including non-consumer and consumer finance receivables globally, as well as leasing in North America. Ford Credit’s net income was $718 million in the third quarter of 2014, compared with $272 million in the previous year. The increase was primarily driven by favorable tax items recorded in the third quarter.
“We continue to provide solid profits and strong support for Ford Motor Company’s growth plans,” Chairman and CEO Bernard Silverstone said. “The foundation of our profitability and growth is the consistency and quality in our business fundamentals, including risk standards, portfolio performance and delivery of world-class customer and dealer service.”
On Sept. 30, 2014, Ford Credit’s total net receivables were $106 billion, compared with $100 billion at year-end 2013. Managed receivables were $110 billion on Sept. 30, 2014, up from $103 billion on Dec. 31, 2013. On Sept. 30, 2014, managed leverage was 8.5:1, equal to year-end 2013.
Ford Credit continues to expect full-year pre-tax profit of $1.8 billion to $1.9 billion. Ford Credit’s guidance for year-end managed receivables and managed leverage also is unchanged. Ford Credit now expects distributions to its parent of about $400 million, up from prior guidance of about $250 million, primarily driven by the favorable tax items. For 2015, Ford Credit expects full-year pre-tax profit about equal to or higher than 2014.
# # #
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 Sept. 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 September 30, 2013 and 2014 | ||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||
Financing revenue | ||||||||||||||||||||||||||||||||||||||||
Operating leases | $ | 888 | $ | 1,062 | $ | 2,460 | $ | 3,029 | ||||||||||||||||||||||||||||||||
Retail Financing | 702 | 708 | 2,079 | 2,095 | ||||||||||||||||||||||||||||||||||||
Dealer Financing | 360 | 424 | 1,123 | 1,241 | ||||||||||||||||||||||||||||||||||||
Other | 24 | 20 | 73 | 62 | ||||||||||||||||||||||||||||||||||||
Total financing revenue | 1,974 | 2,214 | 5,735 | 6,427 | ||||||||||||||||||||||||||||||||||||
Depreciation on vehicles subject to operating leases | (629 | ) | (801 | ) | (1,663 | ) | (2,248 | ) | ||||||||||||||||||||||||||||||||
Interest expense | (691 | ) | (663 | ) | (2,056 | ) | (2,002 | ) | ||||||||||||||||||||||||||||||||
Net financing margin | 654 | 750 | 2,016 | 2,177 | ||||||||||||||||||||||||||||||||||||
Other revenue | ||||||||||||||||||||||||||||||||||||||||
Insurance premiums earned | 28 | 31 | 87 | 94 | ||||||||||||||||||||||||||||||||||||
Other income, net | 81 | 67 | 204 | 184 | ||||||||||||||||||||||||||||||||||||
Total financing margin and other revenue | 763 | 848 | 2,307 | 2,455 | ||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Operating expenses | 289 | 276 | 779 | 807 | ||||||||||||||||||||||||||||||||||||
Provision for credit losses | 32 | 57 | 81 | 115 | ||||||||||||||||||||||||||||||||||||
Insurance expenses | 15 | 17 | 59 | 102 | ||||||||||||||||||||||||||||||||||||
Total expenses | 336 | 350 | 919 | 1,024 | ||||||||||||||||||||||||||||||||||||
Income before income taxes | 427 | 498 | 1,388 | 1,431 | ||||||||||||||||||||||||||||||||||||
Provision for/(Benefit from) income taxes | 155 | (220 | ) | 477 | 137 | |||||||||||||||||||||||||||||||||||
Net income | $ | 272 | $ | 718 | $ | 911 | $ | 1,294 | ||||||||||||||||||||||||||||||||
__________ | ||||||||||||||||||||||||||||||||||||||||
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 September 30, 2013 and 2014 | ||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||
Third Quarter | First Nine Months | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||
Net income | $ | 272 | $ | 718 | $ | 911 | $ | 1,294 | ||||||||||||||||||||||||||||||||
Other comprehensive income/(loss), net of tax | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation | 176 | (335 | ) | (62 | ) | (332 | ) | |||||||||||||||||||||||||||||||||
Total other comprehensive income/(loss), net of tax | 176 | (335 | ) | (62 | ) | (332 | ) | |||||||||||||||||||||||||||||||||
Comprehensive income | $ | 448 | $ | 383 | $ | 849 | $ | 962 | ||||||||||||||||||||||||||||||||
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||
PRELIMINARY | ||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||
December 31, | September 30, | |||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 9,424 | $ | 7,329 | ||||||||||||||||||||||||||||||||||||
Marketable securities | 1,943 | 3,767 | ||||||||||||||||||||||||||||||||||||||
Finance receivables, net | 81,636 | 85,197 | ||||||||||||||||||||||||||||||||||||||
Net investment in operating leases | 18,277 | 20,916 | ||||||||||||||||||||||||||||||||||||||
Notes and accounts receivable from affiliated companies | 1,077 | 828 | ||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 585 | 751 | ||||||||||||||||||||||||||||||||||||||
Other assets | 2,666 | 2,428 | ||||||||||||||||||||||||||||||||||||||
Total assets | $ | 115,608 | $ | 121,216 | ||||||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||
Accounts payable | ||||||||||||||||||||||||||||||||||||||||
Customer deposits, dealer reserves, and other | $ | 1,445 | $ | 1,252 | ||||||||||||||||||||||||||||||||||||
Affiliated companies | 211 | 468 | ||||||||||||||||||||||||||||||||||||||
Total accounts payable | 1,656 | 1,720 | ||||||||||||||||||||||||||||||||||||||
Debt | 98,693 | 103,951 | ||||||||||||||||||||||||||||||||||||||
Deferred income taxes | 1,627 | 1,618 | ||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 506 | 291 | ||||||||||||||||||||||||||||||||||||||
Other liabilities and deferred income | 2,522 | 2,314 | ||||||||||||||||||||||||||||||||||||||
Total liabilities | 105,004 | 109,894 | ||||||||||||||||||||||||||||||||||||||
SHAREHOLDER’S INTEREST | ||||||||||||||||||||||||||||||||||||||||
Shareholder’s interest | 5,217 | 5,217 | ||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | 717 | 385 | ||||||||||||||||||||||||||||||||||||||
Retained earnings | 4,670 | 5,720 | ||||||||||||||||||||||||||||||||||||||
Total shareholder’s interest | 10,604 | 11,322 | ||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholder’s interest | $ | 115,608 | $ | 121,216 | ||||||||||||||||||||||||||||||||||||
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, | September 30, | |||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 4,198 | $ | 2,022 | ||||||||||||||||||||||||||||||||||||
Finance receivables, net | 45,796 | 37,590 | ||||||||||||||||||||||||||||||||||||||
Net investment in operating leases | 8,116 | 9,927 | ||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 5 | 13 | ||||||||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||
Debt | $ | 40,728 | $ | 35,869 | ||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 88 | 18 | ||||||||||||||||||||||||||||||||||||||
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: | ||||||||||||||||||||||||||||||||||||||||
December 31, | September 30, | |||||||||||||||||||||||||||||||||||||||
Net Finance Receivables and Operating Leases | ||||||||||||||||||||||||||||||||||||||||
Receivables (a) | (in billions) | |||||||||||||||||||||||||||||||||||||||
Net Receivables | ||||||||||||||||||||||||||||||||||||||||
Finance receivables – North America Segment | ||||||||||||||||||||||||||||||||||||||||
Consumer retail financing | $ | 40.9 | $ | 43.5 | ||||||||||||||||||||||||||||||||||||
Non-Consumer | ||||||||||||||||||||||||||||||||||||||||
Dealer financing (b) | 22.1 | 21.5 | ||||||||||||||||||||||||||||||||||||||
Other | 1.0 | 0.9 | ||||||||||||||||||||||||||||||||||||||
Total finance receivables – North America Segment | 64.0 | 65.9 | ||||||||||||||||||||||||||||||||||||||
Finance receivables – International Segment | ||||||||||||||||||||||||||||||||||||||||
Consumer retail financing | 10.8 | 11.8 | ||||||||||||||||||||||||||||||||||||||
Non-Consumer | ||||||||||||||||||||||||||||||||||||||||
Dealer financing (b) | 8.3 | 9.3 | ||||||||||||||||||||||||||||||||||||||
Other | 0.4 | 0.3 | ||||||||||||||||||||||||||||||||||||||
Total finance receivables – International Segment | 19.5 | 21.4 | ||||||||||||||||||||||||||||||||||||||
Unearned interest supplements | (1.5 | ) | (1.7 | ) | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses | (0.4 | ) | (0.4 | ) | ||||||||||||||||||||||||||||||||||||
Finance receivables, net | 81.6 | 85.2 | ||||||||||||||||||||||||||||||||||||||
Net investment in operating leases | 18.3 | 20.9 | ||||||||||||||||||||||||||||||||||||||
Total net receivables | $ | 99.9 | $ | 106.1 | ||||||||||||||||||||||||||||||||||||
Managed receivables | ||||||||||||||||||||||||||||||||||||||||
Total net receivables | $ | 99.9 | $ | 106.1 | ||||||||||||||||||||||||||||||||||||
Unearned interest supplements and residual support | 3.1 | 3.8 | ||||||||||||||||||||||||||||||||||||||
Allowance for credit losses | 0.4 | 0.4 | ||||||||||||||||||||||||||||||||||||||
Other, primarily accumulated supplemental depreciation | — | 0.1 | ||||||||||||||||||||||||||||||||||||||
Total managed receivables | $ | 103.4 | $ | 110.4 | ||||||||||||||||||||||||||||||||||||
December 31, | September 30, | |||||||||||||||||||||||||||||||||||||||
Managed Leverage Calculation | ||||||||||||||||||||||||||||||||||||||||
(in billions) | ||||||||||||||||||||||||||||||||||||||||
Total debt (c) | $ | 98.7 | $ | 104.0 | ||||||||||||||||||||||||||||||||||||
Adjustments for cash, cash equivalents, and marketable securities (d) | (10.8 | ) | (10.6 | ) | ||||||||||||||||||||||||||||||||||||
Adjustments for derivative accounting (e) | (0.2 | ) | (0.3 | ) | ||||||||||||||||||||||||||||||||||||
Total adjusted debt | $ | 87.7 | $ | 93.1 | ||||||||||||||||||||||||||||||||||||
Equity (f) | $ | 10.6 | $ | 11.3 | ||||||||||||||||||||||||||||||||||||
Adjustments for derivative accounting (e) | (0.3 | ) | (0.3 | ) | ||||||||||||||||||||||||||||||||||||
Total adjusted equity | $ | 10.3 | $ | 11.0 | ||||||||||||||||||||||||||||||||||||
Managed leverage (to 1) = Total adjusted debt / Total adjusted equity | 8.5 | 8.5 | ||||||||||||||||||||||||||||||||||||||
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. |
Contacts:
Ford Credit
Communications
313.322.5393
mmellott@ford.com
Stephen
Dahle
Fixed Income
Investment Community
313.621.0881
fixedinc@ford.com