Ford Credit Earns $497 Million in the Third Quarter of 2010*

Oct 26, 2010, 07:01 ET from Ford Motor Credit Company

DEARBORN, Mich., Oct. 26 /PRNewswire-FirstCall/ -- Ford Motor Credit Company reported net income of $497 million in the third quarter of 2010, an increase of $70 million from earnings of $427 million a year earlier.  On a pre-tax basis, Ford Credit earned $766 million in the third quarter and $2.5 billion in the first nine months of 2010, compared with $677 million and $1.3 billion, respectively, in the previous year.  The increase in pre-tax earnings primarily reflected a lower provision for credit losses and lower depreciation expense for leased vehicles, offset partially by lower volume and the non-recurrence of net gains related to unhedged currency exposure primarily from cross-border intercompany lending.

"The quality of our portfolio remains high and, linked with our solid business fundamentals, we continue to support Ford Motor Company's business with strong profits and distributions," Ford Credit Chairman and CEO Mike Bannister said.

On September 30, 2010, Ford Credit's on-balance sheet net receivables totaled $83 billion, compared with $93 billion at year-end 2009. Managed receivables were $85 billion on September 30, 2010, down from $95 billion on December 31, 2009.  The lower receivables primarily reflected the transition of Jaguar, Land Rover, Mazda, and Volvo financing to other finance providers and lower industry and financing volumes in 2009 and 2010 compared with prior years.

On September 30, 2010, managed leverage was 6.3 to 1.  Ford Credit distributed $1 billion to its parent in the third quarter of 2010 and expects to distribute $1 billion in the fourth quarter for a total of $2.5 billion of distributions in 2010.

Ford Credit expects profits in the fourth quarter to be lower compared with recent quarters because of smaller expected improvements in the provision for credit losses and depreciation expense for leased vehicles.  For full-year 2011, Ford Credit expects to be solidly profitable but at a lower level than in 2010, reflecting primarily the non-recurrence of lower lease depreciation expense and the non-recurrence of credit loss reserve reductions of the same magnitude as 2010.

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Ford Motor Credit Company LLC is one of the world's largest automotive finance companies and has provided dealer and customer financing to support the sale of Ford Motor Company products since 1959.  Ford Credit is an indirect, wholly owned subsidiary of Ford. For more information, visit www.fordcredit.com.

— — — — —

* The financial results discussed herein are presented on a preliminary basis; final data will be included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

Cautionary Statement Regarding Forward Looking Statements

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:

Automotive Related:

  • Further declines in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geo-political events or other factors;
  • Decline in Ford's market share;
  • Continued or increased price competition for Ford vehicles resulting from industry overcapacity, currency fluctuations or other factors;
  • An increase in or acceleration of market shift beyond Ford's current planning assumptions from sales of trucks, medium- and large-sized utilities, or other more profitable vehicles, particularly in the United States;
  • A return to elevated gasoline prices, as well as the potential for volatile prices or reduced availability;
  • Lower-than-anticipated market acceptance of new or existing Ford products;
  • Adverse effects from the bankruptcy, insolvency, or government-funded restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
  • Economic distress of suppliers may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase Ford's costs, affect Ford's liquidity, or cause production disruptions;
  • Work stoppages at Ford or supplier facilities or other interruptions of production;
  • Single-source supply of components or materials;
  • Restriction on use of tax attributes from tax law "ownership change";
  • The discovery of defects in Ford vehicles resulting in delays in new model launches, recall campaigns or increased warranty costs;
  • Increased safety, emissions, fuel economy or other regulation resulting in higher costs, cash expenditures and/or sales restrictions;
  • Unusual or significant litigation or governmental investigations arising out of alleged defects in Ford products, perceived environmental impacts, or otherwise;
  • A change in Ford's requirements for parts or materials where it has entered into long-term supply arrangements that commit it to purchase minimum or fixed quantities of certain parts or materials, or to pay a minimum amount to the seller ("take-or-pay contracts");
  • Adverse effects on Ford's results from a decrease in or cessation of government incentives related to capital investments;
  • Adverse effects on Ford's operations resulting from certain geo-political or other events;
  • Substantial levels of indebtedness adversely affecting Ford's financial condition or preventing Ford from fulfilling its debt obligations (which may grow because Ford is able to incur substantially more debt, including additional secured debt);

Ford Credit Related:

  • A prolonged disruption of the debt and securitization markets;
  • Inability 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 otherwise;
  • Inability to obtain competitive funding;
  • Higher-than-expected credit losses;
  • Adverse effects from the government-supported restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
  • Increased competition from banks or other financial institutions seeking to increase their share of retail installment financing Ford vehicles;
  • Collection and servicing problems related to our finance receivables and net investment in operating leases;
  • Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;
  • New or increased credit, consumer or data protection or other laws and regulations resulting in higher costs and/or additional financing restrictions;
  • Changes in Ford's operations or changes in Ford's marketing programs could result in a decline in our financing volumes;

General:

  • Fluctuations in foreign currency exchange rates and interest rates;
  • Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
  • Labor or other constraints on Ford's or our ability to restructure its or our business;
  • Substantial pension and postretirement healthcare and life insurance liabilities impairing Ford's or our liquidity or financial condition; and
  • Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns).

We cannot be certain that any expectations, forecasts, or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections 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 statements, whether as a result of new information, future events, or otherwise.  For additional discussion of these risk factors, see Item 1A of Part I of our 2009 10-K Report and Item 1A of Part I of Ford's 2009 10-K Report.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended September 30, 2010 and 2009
(in millions)



Third Quarter


Nine Months


2010


2009


2010


2009

Financing revenue








Operating leases

$         741


$   1,168


$    2,593


$      3,854

Retail

561


750


1,778


2,266

Interest supplements and other support costs earned

from affiliated companies

789


917


2,514


2,813

Wholesale

220


188


661


709

Other

15


18


47


60

Total financing revenue

2,326


3,041


7,593


9,702

Depreciation on vehicles subject to operating leases

(404)


(842)


(1,520)


(3,200)

Interest expense

(1,025)


(1,259)


(3,238)


(3,969)

Net financing margin

897


940


2,835


2,533

Other revenue








Insurance premiums earned, net

25


20


75


76

Other income, net

75


144


210


574

Total financing margin and other revenue

997


1,104


3,120


3,183

Expenses








Operating expenses

271


306


851


956

Provision for credit losses

(53)


111


(255)


893

Insurance expenses

13


10


42


47

Total expenses

231


427


638


1,896

Income before income taxes

766


677


2,482


1,287

Provision for income taxes

269


250


901


462

Income from continuing operations

497


427


1,581


825

Gain on disposal of discontinued operations




2

Net income

$         497


$      427


$    1,581


$         827




FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)



September 30,


December 31,


2010


2009





ASSETS




Cash and cash equivalents

$              8,763


$            10,882

Marketable securities

11,537


6,864

Finance receivables, net

72,102


77,968

Net investment in operating leases

10,461


14,578

Notes and accounts receivable from affiliated companies

977


1,090

Derivative financial instruments

1,683


1,862

Other assets

3,096


4,100

Total assets

$          108,619


$          117,344





LIABILITIES AND SHAREHOLDER'S INTEREST




Liabilities




Accounts payable




Customer deposits, dealer reserves and other

$              1,266


$              1,082

Affiliated companies

1,478


1,145

Total accounts payable

2,744


2,227

Debt

88,473


96,333

Deferred income taxes

1,760


1,816

Derivative financial instruments

662


1,179

Other liabilities and deferred income

4,047


4,809

Total liabilities

97,686


106,364





Shareholder's interest




Shareholder's interest

5,274


5,149

Accumulated other comprehensive income

799


1,052

Retained earnings

4,860


4,779

Total shareholder's interest

10,933


10,980

Total liabilities and shareholder's interest

$          108,619


$          117,344





— — — — —






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.








September 30,


December 31,


2010


2009

Cash and cash equivalents              

$              4,385


$             4,895

Finance receivables, net              

52,827


57,353

Net investment in operating leases            

6,783


10,246

Derivative financial instruments assets        

24


55

Debt                              

43,203


46,153

Derivative financial instruments liabilities                

327


528



FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
OPERATING HIGHLIGHTS



Third Quarter


First Nine Months


2010


2009


2010


2009

Financing Shares








United States








Financing share – Ford, Lincoln and Mercury








Retail installment and lease

32%


30%


32%


30%

Wholesale

81


80


81


79









Europe








Financing share – Ford








Retail installment and lease

27%


27%


25%


27%

Wholesale

99+


99


99


99









Contract Volume – New and used retail/lease (in thousands)








North America Segment








United States

178


161


534


449

Canada

34


15


79


68

Total North America Segment

212


176


613


517









International Segment








Europe

77


112


262


358

Other international

9


11


26


37

Total International Segment

86


123


288


395

Total contract volume

298


299


901


912









Borrowing Cost Rate*

4.5%


4.9%


4.6%


4.9%









Charge-offs On-Balance Sheet (in millions)








Retail installment and lease

$             90


$           204


$           312


$           774

Wholesale

1


33


1


73

Other

4


3


1


10

Total charge-offs on-balance sheet

$             95


$           240


$           314


$           857









Total loss-to-receivables ratio on-balance sheet

0.44%


0.97%


0.47%


1.10%









Memo :








Total charge-offs managed (in millions)**

$             95


$           241


$           314


$           862

Total loss-to-receivables ratio managed**

0.44%


0.97%


0.47%


1.10%

















— — — — —








*  On-balance sheet debt includes the effects of derivatives and facility fees.







** See Appendix for additional information.











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.  Included below are brief definitions of key terms, information about the impact of on-balance sheet securitization and a reconciliation of non-GAAP measures to GAAP:

  • Managed receivables:  receivables reported on Ford Credit's balance sheet, excluding unearned interest supplements related to finance receivables, and securitized off-balance sheet receivables that Ford Credit continues to service
  • Charge-offs on managed receivables:  charge-offs associated with receivables reported on Ford Credit's balance sheet and charge-offs associated with receivables that Ford Credit sold in off-balance sheet securitizations and continues to service
  • Equity:  shareholder's interest reported on Ford Credit's balance sheet

IMPACT OF ON-BALANCE SHEET SECURITIZATION:  Finance receivables (retail and wholesale) and net investment in operating leases reported on Ford Credit's balance sheet include assets that have been sold for legal purposes in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit's other creditors.  Debt reported on Ford Credit's balance sheet includes obligations issued or arising in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements.  Ford Credit holds the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions.





RECONCILIATION OF NON-GAAP MEASURES TO GAAP:











Managed Leverage Calculation



September 30,


December 31,




2010


2009




(in billions)

Total debt



$                  88.5


$                  96.3

Securitized off-balance sheet receivables outstanding



0.1

Retained interest in securitized off-balance sheet receivables



0.0

Adjustments for cash, cash equivalents, and marketable securities*


(19.8)


(17.3)

Adjustments for derivative accounting**



(0.4)


(0.2)

Total adjusted debt



$                  68.3


$                  78.9







Equity



$                  10.9


$                  11.0

Adjustments for derivative accounting**



(0.1)


(0.2)

Total adjusted equity



$                  10.8


$                  10.8







Managed leverage (to 1) = Total adjusted debt / Total adjusted equity


6.3


7.3

Memo:  Financial statement leverage (to 1) = Total debt / Equity


8.1


8.8


Net Finance Receivables and Operating Leases


September 30,


December 31,



2010


2009

Receivables – On-Balance Sheet


(in billions)

Retail installment


$                  51.1


$                  56.3

Wholesale


21.5


22.4

Other finance receivables


2.4


2.4

Unearned interest supplements


(2.0)


(1.9)

Allowance for credit losses


(0.9)


(1.3)

    Finance receivables, net


72.1


77.9

Net investment in operating leases


10.5


14.6

    Total receivables – on-balance sheet


$                  82.6


$                  92.5






Memo:  Total receivables – managed***


$                  84.6


$                  94.5








— — — — —





*  Excludes marketable securities related to insurance activities.

**  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.

***  Includes on-balance sheet receivables, excluding unearned interest supplements related to finance receivables of about $2 billion and $1.9 billion at September 30, 2010 and December 31, 2009, respectively; and includes off-balance sheet retail receivables of about $100 million at December 31, 2009.




SOURCE Ford Motor Credit Company



RELATED LINKS

http://www.fordcredit.com