Ford Motor Credit Company reported a pre-tax profit of $1.9
billion in 2014, its highest since 2011, up from $1.8 billion a
year earlier. The improvement is more than explained by higher
volume, partially offset by unfavorable lease residual performance
in North America and lower financing margin. Ford Credit’s net
income was $1.7 billion in 2014, compared with $1.5 billion in the
previous year. The increase in net income reflects favorable tax
items recorded during the year.
In the fourth quarter of 2014, Ford Credit’s pre-tax profit was
$423 million, an increase of $55 million from a year ago. The
improved pre-tax profit is more than explained by higher volume and
favorable market valuation adjustments to derivatives. A partial
offset is lower financing margin. Ford Credit reported fourth
quarter net income of $411 million, compared with $568 million
a year earlier. The decrease in net income was primarily driven by
the nonrecurrence of favorable tax items recorded in the fourth
quarter of 2013.
“Our team once again delivered a strong performance in 2014,”
Chairman and CEO Bernard Silverstone said. “In 2015, with continued
consistent standards, we remain focused on delivering exceptional
products and services to dealers and customers, as well as strong
strategic value and profits, in support of Ford’s business.”
On Dec. 31, 2014, Ford Credit’s total net receivables were $108
billion, compared with $100 billion at year-end 2013. Managed
receivables were $113 billion at year-end, up from $103 billion a
year ago. Year-end managed leverage was 8.7:1, compared with 8.5:1
at year-end 2013.
For 2015, Ford Credit expects full-year pre-tax profit to be
equal to or higher than 2014, year-end managed receivables of $123
billion to $128 billion, managed leverage to continue 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 Annual Report on Form 10-K for the year ended Dec. 31,
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 December 31, 2013 and
2014 (in millions) Fourth Quarter
Full Year 2013 2014 2013
2014 (unaudited) Financing revenue Operating
leases $
949 $ 1,100
$ 3,409 $
4,129 Retail Financing 706 681 2,785
2,776 Dealer Financing
396
379 1,519 1,620 Other 19 19 92 81 Total
financing revenue 2,070 2,179 7,805 8,606 Depreciation on vehicles
subject to operating leases (734 ) (840 ) (2,397 ) (3,088 )
Interest expense (674 ) (654 ) (2,730 ) (2,656 ) Net financing
margin 662 685 2,678 2,862
Other revenue Insurance premiums
earned 32 31 119 125 Other income, net 54 81 258
265 Total financing margin and other revenue 748 797
3,055 3,252
Expenses Operating expenses 311 287 1,090 1,094
Provision for credit losses 65 82 146 197 Insurance expenses 4
5 63 107 Total expenses 380 374
1,299 1,398
Income before income taxes
368 423 1,756 1,854 Provision for income taxes (200 ) 12 277
149
Net income $
568 $
411 $
1,479 $
1,705
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME For the Periods Ended
December 31, 2013 and 2014 (in millions)
Fourth Quarter Full Year 2013 2014
2013 2014 (unaudited) Net income $ 568
$ 411 $ 1,479 $ 1,705 Other comprehensive income/(loss), net of tax
Foreign currency translation (24 ) (215 ) (86 ) (547 )
Total
other comprehensive income/(loss), net of tax (24 ) (215 ) (86
) (547 )
Comprehensive income $
544 $
196 $
1,393 $
1,158
FORD MOTOR
CREDIT COMPANY LLC AND SUBSIDIARIES PRELIMINARY
CONSOLIDATED BALANCE SHEET (in millions) December
31, December 31, 2013 2014
(unaudited) ASSETS Cash and cash equivalents $ 9,424
$ 6,179 Marketable securities 1,943 3,258 Finance receivables, net
81,636 86,915 Net investment in operating leases 18,277 21,518
Notes and accounts receivable from affiliated companies 1,077 778
Derivative financial instruments 585 859 Other assets 2,666
2,601
Total assets $
115,608 $
122,108
LIABILITIES Accounts payable
Customer deposits, dealer reserves, and other $ 1,445 $ 1,148
Affiliated companies 211 330 Total accounts payable
1,656 1,478 Debt 98,693 105,037 Deferred income taxes 1,627 1,849
Derivative financial instruments 506 167 Other liabilities and
deferred income 2,522 2,210
Total liabilities
105,004 110,741
SHAREHOLDER’S INTEREST Shareholder’s
interest 5,217 5,227 Accumulated other comprehensive income 717 160
Retained earnings 4,670 5,980
Total shareholder’s
interest 10,604 11,367
Total liabilities and
shareholder’s interest $
115,608 $
122,108 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, December 31, 2013 2014
(unaudited) ASSETS Cash and cash equivalents $ 4,198
$ 2,094 Finance receivables, net 45,796 39,522 Net investment in
operating leases 8,116 9,631 Derivative financial instruments 5 27
LIABILITIES Debt $ 40,728 $ 37,156 Derivative
financial instruments 88 22
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, December 31, Net Finance
Receivables and Operating Leases 2013 2014
Receivables
(a)
(in billions) Net Receivables Finance receivables – North
America Segment Consumer retail financing $ 40.9 $ 44.1
Non-Consumer Dealer financing (b) 22.1 22.5 Other 1.0 1.0
Total finance receivables – North America Segment 64.0 67.6
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 ) (1.8 )
Allowance for credit losses (0.4 ) (0.3 ) Finance receivables, net
81.6 86.9 Net investment in operating leases 18.3 21.5
Total net receivables $
99.9 $
108.4 Managed receivables Total net receivables $
99.9 $ 108.4 Unearned interest supplements and residual support 3.1
3.9 Allowance for credit losses 0.4 0.4 Other, primarily
accumulated supplemental depreciation — 0.1 Total
managed receivables $
103.4 $ 112.8
December 31, December 31,
Managed Leverage Calculation 2013 2014 (in
billions) Total debt (c) $ 98.7 $ 105.0 Adjustments for cash,
cash equivalents, and marketable securities (d) (10.8 ) (8.9 )
Adjustments for derivative accounting (e) (0.2 ) (0.4 ) Total
adjusted debt $ 87.7
$ 95.7
Equity (f) $ 10.6 $ 11.4 Adjustments for derivative
accounting (e) (0.3 ) (0.4 ) Total adjusted equity $
10.3 $
11.0 Managed leverage (to 1) =
Total adjusted debt / Total adjusted equity 8.5 8.7 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.
Margaret MellottFord
CreditCommunications313.322.5393mmellott@ford.comStephen
DahleFixed IncomeInvestment
Community313.621.0881fixedinc@ford.com
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