Ford Credit Earns Third Quarter 2014 Pre-Tax Profit of $498 Million; Net Income of $718 Million*

DEARBORN, Mich.--()--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.

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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.

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* 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,
2013

September 30,
2014

(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,
2013

September 30,
2014

(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,
2013

September 30,
2014

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,
2013

September 30,
2014

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

Margaret Mellott
Ford Credit
Communications
313.322.5393
mmellott@ford.com
Stephen Dahle
Fixed Income
Investment Community
313.621.0881
fixedinc@ford.com

Contacts

Margaret Mellott
Ford Credit
Communications
313.322.5393
mmellott@ford.com
Stephen Dahle
Fixed Income
Investment Community
313.621.0881
fixedinc@ford.com