Ford Motor Credit Earns $334 Million in the Third Quarter Of 2007*
DEARBORN, Mich., Nov. 8, 2007 -- Ford Motor Credit Company reported net income of $334 million in the third quarter of 2007, down $118 million from earnings of $452 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $546 million in the third quarter compared with $730 million in the previous year. The decrease in earnings primarily reflected the non-recurrence of credit loss reserve reductions, higher depreciation expense for leased vehicles and higher borrowing costs.
In the third quarters of 2007 and 2006, pre-tax earnings were $341 million and $521 million, excluding the net gains related to market valuation adjustments from derivatives, which were $205 million and $209 million, respectively.
Ford Motor Credit expects to earn on a pre-tax basis $1.3 billion to $1.4 billion this year, excluding the impact of gains and losses related to market valuation adjustments from derivatives, consistent with the previous estimate.
"Our sound risk management practices, high-quality portfolio, strong liquidity and ongoing restructuring continue to produce solid operating results," said Mike Bannister, chairman and CEO. "As we effectively execute the fundamentals of the business, we remain on track to meet our earnings outlook."
On September 30, 2007, Ford Motor Credit's on-balance sheet net receivables totaled $141 billion, compared with $135 billion at year-end 2006. Managed receivables were $148 billion, largely unchanged compared with December 31, 2006.
On September 30, 2007, managed leverage was 10.1 to 1.
Ford Motor Credit Company LLC is one of the world's largest automotive finance companies and has supported the sale of Ford products since 1959. Ford Motor Credit is an indirect, wholly owned subsidiary of Ford Motor Company. It provides automotive financing for Ford, Lincoln, Mercury, Jaguar, Land Rover, Mazda and Volvo dealers and customers. More information can be found at http://www.fordcredit.com/ and at Ford Motor Credit's investor center, http://www.fordcredit.com/investorcenter/.
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* 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, 2007.
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:
-- Continued 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 away from sales of
trucks, sport utility vehicles, or other more profitable vehicles,
particularly in the United States;
-- A significant decline in industry sales and our financing of those
sales, particularly in the United States or Europe, resulting from
slowing economic growth, geo-political events or other factors;
-- Lower-than-anticipated market acceptance of new or existing Ford
products;
-- Continued or increased high prices for or reduced availability of fuel;
-- Adverse effects from the bankruptcy or insolvency of, change in
ownership or control of, or alliances entered into by a major
competitor;
-- Economic distress of suppliers that has in the past or may in the
future require Ford to provide financial support or take other measures
to ensure supplies of components or materials;
-- Work stoppages at Ford or supplier facilities or other interruptions of
supplies;
-- Single-source supply of components or materials;
-- The discovery of defects in Ford vehicles resulting in delays in new
model launches, recall campaigns or increased warranty costs;
-- Increased safety, emissions (e.g., CO2), fuel economy or other (e.g.,
pension funding) 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 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 our results from a decrease in or cessation of
government incentives;
-- Adverse effects on Ford's operations resulting from geo-political or
other events;
-- Substantial negative operating-related cash flows for the near- to
medium-term affecting Ford's ability to meet its obligations, invest in
its business or refinance its debt;
-- 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:
-- Inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts due to additional credit
rating downgrades, market volatility, market disruptions or otherwise;
-- Higher-than-expected credit losses;
-- Increased competition from banks or other financial institutions
seeking to increase their share of 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
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:
-- 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;
-- Worse-than-assumed economic and demographic experience for
postretirement benefit plans (e.g., discount rates, investment returns,
and health care cost trends);
-- Currency or commodity price fluctuations; and
-- Changes in interest rates.
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 2006 10-K Report and Item 1A of Part I of Ford's 2006 10-K Report.
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended September 30, 2007 and 2006
(in millions)
Third Quarter Nine Months
------------------- -------------------
2007 2006 2007 2006
------ ------ ------ ------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $1,614 $1,443 $4,663 $4,143
Retail 884 938 2,580 2,770
Interest supplements
and other support
costs earned from
affiliated companies 1,186 901 3,378 2,483
Wholesale 515 607 1,607 1,848
Other 43 53 133 163
------ ------ ------ ------
Total financing
revenue 4,242 3,942 12,361 11,407
Depreciation on vehicles
subject to operating
leases (1,596) (1,374) (4,521) (3,819)
Interest expense (2,149) (2,022) (6,464) (5,722)
------ ------ ------ ------
Net financing margin 497 546 1,376 1,866
Other revenue
Investment and other
income related to
sales of receivables 97 169 308 542
Insurance premiums
earned, net 43 40 130 142
Other income, net 546 554 964 689
------ ------ ------ ------
Total financing
margin and other
revenue 1,183 1,309 2,778 3,239
Expenses
Operating expenses 445 482 1,451 1,491
Provision for credit
losses 173 66 301 64
Insurance expenses 19 31 74 137
------ ------ ------ ------
Total expenses 637 579 1,826 1,692
------ ------ ------ ------
Income from continuing
operations before
income taxes 546 730 952 1,547
Provision for income
taxes 212 278 363 543
------ ------ ------ ------
Income from continuing
operations before
minority interests 334 452 589 1,004
Minority interests in
net income of
subsidiaries 0 0 0 0
------ ------ ------ ------
Net income $ 334 $ 452 $ 589 $1,004
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)
September 30, December 31,
2007 2006
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 8,033 $ 12,331
Marketable securities 4,626 10,161
Finance receivables, net 111,644 109,405
Net investment in operating leases 29,188 25,939
Retained interest in securitized assets 760 990
Notes and accounts receivable from
affiliated companies 859 950
Derivative financial instruments 1,876 1,804
Other assets 5,259 5,752
-------- --------
Total assets $162,245 $167,332
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LIABILITIES AND SHAREHOLDER'S INTEREST/EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and
other $ 1,862 $ 1,509
Affiliated companies 2,760 3,648
-------- --------
Total accounts payable 4,622 5,157
Debt 133,108 139,740
Deferred income taxes 5,610 6,783
Derivative financial instruments 838 296
Other liabilities and deferred income 5,041 3,588
-------- --------
Total liabilities 149,219 155,564
Minority interests in net assets of subsidiaries 3 3
Shareholder's interest/equity
Capital stock and paid-in surplus - 5,149
Shareholder's interest 5,149 -
Accumulated other comprehensive income 1,545 825
Retained earnings 6,329 5,791
-------- --------
Total shareholder's interest/equity 13,023 11,765
-------- --------
Total liabilities and shareholder's
interest/equity $162,245 $167,332
======== ========
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
OPERATING HIGHLIGHTS*
Third Quarter First Nine Months
---------------- -----------------
2007 2006 2007 2006
---- ---- ---- ----
Financing Shares
United States
Financing share - Ford,
Lincoln and Mercury
Retail installment
and lease 45% 56% 39% 48%
Wholesale 79 80 79 80
Europe
Financing share - Ford
Retail installment
and lease 26% 28% 26% 26%
Wholesale 95 95 96 95
Contract Volume - New and
used retail/lease (in
thousands)
North America segment
United States 349 471 1,008 1,312
Canada 54 55 148 146
---- ---- ----- -----
Total North America
segment 403 526 1,156 1,458
International segment
Europe 170 173 541 540
Other international 53 60 159 181
---- ---- ----- -----
Total International
segment 223 233 700 721
---- ---- ----- -----
Total contract
volume 626 759 1,856 2,179
==== ==== ===== =====
Borrowing Cost Rate** 6.2% 5.7% 6.1% 5.4%
Charge-offs (in millions)
On-Balance Sheet
Receivables
Retail installment
& lease $170 $132 $388 $307
Wholesale 13 6 25 25
Other 1 2 3 2
---- ---- ---- ----
Total charge-offs
- on-balance sheet
receivables $184 $140 $416 $334
==== ==== ==== ====
Total loss-to-receivables
ratio 0.53% 0.41% 0.40% 0.33%
Managed Receivables***
Retail installment
& lease $186 $153 $436 $372
Wholesale 13 6 25 25
Other 1 2 3 2
---- ---- ---- ----
Total charge-offs -
managed receivables $200 $161 $464 $399
==== ==== ==== ====
Total loss-to-receivables
ratio 0.54% 0.43% 0.42% 0.36%
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* Continuing operations
** 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 Motor Credit's financial performance, Ford Motor Credit management uses financial statements and other financial measures in accordance with Generally Accepted Accounting Principles ("GAAP"). Included below are brief definitions of key terms, information about the impact of on- balance sheet securitization and a reconciliation of other measures to GAAP.
KEY TERMS:
-- Managed receivables: receivables reported on Ford Motor Credit's
balance sheet and receivables Ford Motor Credit sold in off-balance
sheet securitizations and continues to service
-- Charge-offs on managed receivables: charge-offs associated with
receivables reported on Ford Motor Credit's balance sheet and charge-
offs associated with receivables that Ford Motor Credit sold in off-
balance sheet securitizations and continues to service
-- Equity: shareholder's interest and historical stockholder's equity
reported on Ford Motor Credit's balance sheet
IMPACT OF ON-BALANCE SHEET SECURITIZATION: Finance receivables (retail and wholesale) and net investment in operating leases reported on Ford Motor Credit's balance sheet include assets included in securitizations that do not qualify for accounting sale treatment. These assets are available only for repayment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay the other obligations of Ford Motor Credit or the claims of Ford Motor Credit's other creditors. Debt reported on Ford Motor Credit's balance sheet includes obligations issued or arising in securitizations that are payable only out of collections on the underlying securitized assets and related enhancements.
RECONCILIATION OF MEASURES TO GAAP:
Managed Leverage Calculation September 30, December 31,
2007 2006
-------------- ------------
(in billions)
Total debt $133.1 $139.7
Securitized off-balance sheet
receivables outstanding 7.6 12.2
Retained interest in securitized
off-balance sheet receivables (0.8) (1.0)
Adjustments for cash and cash
equivalents, and marketable
securities* (12.0) (21.8)
Adjustments for hedge accounting
on total debt 0.0 (0.1)
------ ------
Total adjusted debt $127.9 $129.0
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Total shareholder's equity
(including minority interest) $ 13.0 $ 11.8
Adjustments for hedge accounting
on equity (0.3) (0.5)
------ ------
Total adjusted equity $ 12.7 $ 11.3
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Managed leverage (to 1) =
adjusted debt / adjusted equity 10.1 11.4
Memo: Financial statement
leverage (to 1) = total debt /
shareholder's equity 10.2 11.9
Net Finance Receivables and
Operating Leases Managed Receivables
---------------------------------------------
On-Balance Off-Balance
Sheet Sheet Total
---------- ----------- ---------
September 30, 2007 (in billions)
Retail installment $ 74.3 $ 7.6 $ 81.9
Wholesale 34.0 - 34.0
Other finance receivables 3.3 - 3.3
Net investment in operating
leases 29.2 - 29.2
------ ----- ------
Total net finance receivables
and operating leases $140.8 $ 7.6 $148.4
====== ===== ======
December 31, 2006
Retail installment $ 70.4 $12.2 $ 82.6
Wholesale 35.2 - 35.2
Other finance receivables 3.8 - 3.8
Net investment in operating
leases 25.9 - 25.9
------ ----- ------
Total net finance receivables
and operating leases $135.3 $12.2 $147.5
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*Excludes marketable securities related to insurance activities.