Ford Credit Earns $413 Million in the Second Quarter of 2009*
DEARBORN, Mich., July 23 -- Ford Motor Credit Company reported net income of $413 million in the second quarter of 2009, an improvement of $1.8 billion from a net loss of $1.4 billion a year earlier. On a pre-tax basis, Ford Credit earned $646 million in the second quarter, compared with a loss of $2.4 billion in the previous year. Excluding the $2.1 billion impairment charge for operating leases in the second quarter of 2008, Ford Credit incurred a pre-tax loss of $294 million in the previous year. On a pre-tax basis, Ford Credit earned $610 million in the first half of 2009.
The improvement in pre-tax earnings primarily reflected non-recurrence of the second quarter 2008 impairment charge to the North America operating lease portfolio, lower depreciation expense for leased vehicles due to higher auction values, net gains related to unhedged currency exposure from cross-border intercompany lending, a lower provision for credit losses, and lower operating costs. These factors were offset partially by lower volume and non-recurrence of a gain related to the sale of approximately half of our ownership interest in our Nordic operations.
"We are pleased with our second quarter results as market conditions remain challenging around the world," Chairman and CEO Mike Bannister said. "With our solid business fundamentals and our focus on prudent lending, sound risk management and high-quality servicing, we continue to provide valuable support to Ford Motor Company, its dealers and its customers."
On June 30, 2009, Ford Credit's on-balance sheet net receivables totaled $99 billion, compared with $116 billion at year-end 2008. Managed receivables were $100 billion on June 30, 2009, down from $118 billion on December 31, 2008. The lower receivables primarily reflected lower North America and Europe receivables, mainly due to lower industry volumes, lower dealer stocks, and the transition of Jaguar, Land Rover and Mazda financing to other finance providers.
On June 30, 2009, managed leverage was 8.4 to 1. During the second quarter of 2009, Ford Credit completed the cash tender offer, commenced in the first quarter of 2009, pursuant to which it purchased $3.4 billion principal amount of Ford Motor Company's unsecured, nonconvertible debt securities for an aggregate cost of $1.1 billion including transaction costs. Ford Credit transferred these debt securities to Ford Motor Company in satisfaction of $1.1 billion of tax liabilities to Ford Motor Company.
Ford Credit expects its second half results to be lower than its first half 2009 results. Ford Credit does not expect the net gains related to unhedged currency exposures or improvements in lease residual losses in the amounts experienced in the second quarter of 2009 to continue. A continuing decline in receivables will also contribute to lower second half 2009 results.
Ford Motor Credit Company LLC is one of the world's largest automotive finance companies and has supported the sale of Ford Motor Company products since 1959. Ford Credit is an indirect, wholly owned subsidiary of Ford. It provides automotive financing for Ford, Lincoln, Mercury and Volvo dealers and customers. More information can be found at http://www.fordcredit.com/ and at Ford Credit's investor center, http://www.fordcredit.com/investorcenter/.
-- -- -- -- --
* 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 June 30, 2009.
# # #
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended June 30, 2009 and 2008
(in millions)
Second Quarter First Half
-------------------- ----------------
2009 2008 2009 2008
------ ------ ------ ------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $ 1,288 $ 1,695 $ 2,686 $ 3,402
Retail 760 779 1,516 1,638
Interest supplements and
other support costs earned 926 1,247 1,896 2,493
from affiliated companies
Wholesale 230 438 521 915
Other 22 36 42 71
------- ------- ------- -------
Total financing revenue 3,226 4,195 6,661 8,519
Depreciation on vehicles
subject to operating leases (943) (4,090) (2,358) (5,904)
Interest expense (1,290) (1,901) (2,710) (3,893)
------- ------- ------- -------
Net financing margin 993 (1,796) 1,593 (1,278)
Other revenue
Insurance premiums earned,
net 27 42 56 82
Other income, net 366 351 430 538
------- ------- ------- -------
Total financing margin and
other revenue 1,386 (1,403) 2,079 (658)
Expenses
Operating expenses 322 379 650 746
Provision for credit losses 397 545 782 872
Insurance expenses 21 53 37 72
------- ------- ------- -------
Total expenses 740 977 1,469 1,690
------- ------- ------- -------
Income/(Loss) before income
taxes 646 (2,380) 610 (2,348)
Provision for/(Benefit
from) income taxes 235 (945) 212 (936)
------- ------- ------- -------
Income/(Loss) from
continuing operations 411 (1,435) 398 (1,412)
Gain on disposal of
discontinued operations 2 8 2 9
------- ------- ------- -------
Net income/(loss) $ 413 $(1,427) $ 400 $(1,403)
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2009 2008
---------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 11,881 $ 15,473
Marketable securities 7,760 8,606
Finance receivables, net 80,269 93,331
Net investment in operating leases 18,220 22,506
Notes and accounts receivable from
affiliated companies 821 1,047
Derivative financial instruments 2,195 3,791
Assets of held-for-sale operations - 214
Other assets 4,625 5,159
-------- --------
Total assets $125,771 $150,127
======== ========
LIABILITIES AND SHAREHOLDER'S INTEREST
Liabilities
Accounts payable
Customer deposits, dealer reserves and
other $ 1,171 $ 1,781
Affiliated companies 1,385 1,015
-------- --------
Total accounts payable 2,556 2,796
Debt 104,868 126,458
Deferred income taxes 2,345 2,668
Derivative financial instruments 1,739 2,145
Liabilities of held-for-sale operations - 56
Other liabilities and deferred income 3,954 5,438
-------- --------
Total liabilities 115,462 139,561
Shareholder's interest
Shareholder's interest 5,149 5,149
Accumulated other comprehensive income 829 432
Retained earnings 4,331 4,985
-------- --------
Total shareholder's interest 10,309 10,566
-------- --------
Total liabilities and shareholder's
interest $125,771 $150,127
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
OPERATING HIGHLIGHTS
Second Quarter First Half
---------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Financing Shares
United States
Financing share - Ford,
Lincoln and Mercury
Retail installment and lease 28% 39% 29% 38%
Wholesale 79 77 78 77
Europe
Financing share - Ford
Retail installment and lease 28% 28% 27% 27%
Wholesale 99 98 99 97
Contract Volume - New and
used retail/lease
(in thousands)
North America segment
United States 153 312 288 587
Canada 33 48 53 79
---- ---- ---- -----
Total North America segment 186 360 341 666
International segment
Europe 124 177 246 355
Other international 9 29 26 78
---- ---- ---- -----
Total International segment 133 206 272 433
---- ---- ---- -----
Total contract volume 319 566 613 1,099
==== ==== ==== =====
Borrowing Cost Rate* 5.0% 5.4% 5.0% 5.5%
Charge-offs - On-Balance
Sheet (in millions)
Retail installment and lease $261 $232 $570 $458
Wholesale 21 12 40 13
Other 3 2 7 4
---- ---- ---- ----
Total charge-offs -
on-balance sheet $285 $246 $617 $475
==== ==== ==== ====
Total loss-to-receivables
ratio - on-balance sheet 1.09% 0.70% 1.15% 0.67%
Memo:
Total charge-offs - managed
(in millions)** $286 $254 $621 $497
Total loss-to-receivables
ratio - managed** 1.09% 0.70% 1.16% 0.68%
-- -- -- -- --
* 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 June 30, December 31,
2009 2008
-------- ------------
(in billions)
Total debt $104.9 $126.5
Securitized off-balance sheet receivables
outstanding 0.1 0.6
Retained interest in securitized off-balance
sheet receivables (0.1) (0.1)
Adjustments for cash, cash equivalents, and
marketable securities* (19.1) (23.6)
Adjustments for derivative
accounting** (0.2) (0.4)
------ ------
Total adjusted debt $ 85.6 $103.0
====== ======
Equity $ 10.3 $ 10.6
Adjustments for derivative accounting** (0.1) (0.2)
------ ------
Total adjusted equity $ 10.2 $ 10.4
====== ======
Managed leverage (to 1) = Total adjusted
debt / Total adjusted equity 8.4 9.9
Memo: Financial statement leverage (to 1) =
Total debt / Equity 10.2 12.0
Net Finance Receivables and
Operating Leases June 30, December 31,
2009 2008
-------- ------------
Receivables - On-Balance Sheet (in billions)
------------------------------
Retail installment $ 61.2 $ 65.5
Wholesale 19.7 27.7
Other finance receivables 2.7 2.8
Unearned interest supplements (1.7) (1.3)
Allowance for credit losses (1.6) (1.4)
------ ------
Finance receivables, net 80.3 93.3
Net investment in operating leases 18.2 22.5
------ ------
Total receivables - on-balance sheet $ 98.5 $115.8
====== ======
Memo: Total receivables - managed*** $100.3 $117.7
-- -- -- -- --
* 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 $1.7 billion and $1.3
billion at June 30, 2009 and December 31, 2008, respectively; and
includes off-balance sheet retail receivables of about $100 million
and about $600 million at June 30, 2009 and December 31, 2008,
respectively.