2008-07-24 06:02:00
Ford Motor Credit Reports Second Quarter 2008 Preliminary Results*
DEARBORN, Mich., July 24 /EMWNews/ -- Ford Motor Credit Company reported a net loss of $1,427 million in the second quarter of 2008, down $1,489 million from net income of $62 million a year earlier. On a pre-tax basis, Ford Motor Credit reported a loss of $2,380 million, compared with earnings of $112 million in the previous year. Excluding a $2.1 billion impairment charge for operating leases, Ford Motor Credit incurred a pre-tax loss of $294 million in the second quarter of 2008. The decrease in pre-tax earnings primarily reflected the impairment charge for operating leases, higher depreciation expense for leased vehicles, and higher provision for credit losses. These were offset partially by the non-recurrence of net losses related to market valuation adjustments from derivatives, higher financing margin, a gain related to the sale of approximately half of our ownership interest in our Nordic operations, and lower operating costs. During the second quarter of 2008, higher fuel prices and the weak economic climate in North America resulted in a pronounced shift in consumer preferences from full-size trucks and traditional sport utility vehicles to smaller, more fuel-efficient vehicles. This shift in consumer preferences combined with a weak economic climate caused a significant reduction in auction values for used full-size trucks and traditional sport utility vehicles. In addition, Ford Motor Credit completed its quarterly North America operating lease review and projected that lease-end residual values would be significantly lower than previously expected for full-size trucks and traditional sport utility vehicles. As a result of these market factors and Ford Motor Credit's portfolio review, Ford Motor Credit determined a pre-tax impairment charge of $2.1 billion was required. "Dramatic, rapid marketplace changes are driving increased weakness in the vehicle auction markets, in turn affecting the entire industry, including Ford Motor Credit," said Mike Bannister, chairman and CEO of Ford Motor Credit. "We regularly review and adjust lease residual values to align with market conditions. In addition, the core of our business remains strong, because it is built upon lending practices, risk management and collections activities that are consistent and prudent." On June 30, 2008, Ford Motor Credit's on-balance sheet net receivables totaled $136 billion, compared with $141 billion at year-end 2007. Managed receivables were $140 billion on June 30, 2008, down from $147 billion on December 31, 2007. The lower receivables were more than explained by lower North America receivables, the impact of divestitures, and the impairment charge for operating leases, offset partially by changes in currency exchange rates.
On June 30, 2008, managed leverage was 10 to 1. 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 Motor Credit is an indirect, wholly owned subsidiary of Ford. 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/. - - - - - * 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, 2008. FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES PRELIMINARY CONSOLIDATED STATEMENT OF INCOME For the Periods Ended June 30, 2008 and 2007 (in millions) Second Quarter First Half --------------- --------------- 2008 2007 2008 2007 ------- ------- ------- ------- (Unaudited) (Unaudited) Financing revenue Operating leases $ 1,695 $ 1,554 $ 3,402 $ 3,049 Retail 779 837 1,638 1,696 Interest supplements and other support costs earned from affiliated companies 1,247 1,125 2,493 2,192 Wholesale 438 552 915 1,092 Other 36 43 71 90 ------- ------- ------- ------- Total financing revenue 4,195 4,111 8,519 8,119 Depreciation on vehicles subject to operating leases (4,090) (1,450) (5,904) (2,925) Interest expense (1,901) (2,166) (3,893) (4,315) ------- ------- ------- ------- Net financing margin (1,796) 495 (1,278) 879 Other revenue Investment and other income related to sales of receivables 48 102 117 211 Insurance premiums earned, net 42 43 82 87 Other income, net 303 42 421 418 ------- ------- ------- ------- Total financing margin and other revenue (1,403) 682 (658) 1,595 Expenses Operating expenses 379 450 746 1,006 Provision for credit losses 545 82 872 128 Insurance expenses 53 38 72 55 ------- ------- ------- ------- Total expenses 977 570 1,690 1,189 ------- ------- ------- ------- Income/(Loss) before income taxes (2,380) 112 (2,348) 406 Provision for/(Benefit from) income taxes (945) 50 (936) 151 ------- ------- ------- ------- Income/(Loss) before minority interests (1,435) 62 (1,412) 255 Minority interests in net income of subsidiaries 0 0 0 0 ------- ------- ------- ------- Income/(Loss) from continuing operations (1,435) 62 (1,412) 255 Gain on disposal of discontinued operations 8 - 9 - ------- ------- ------- ------- Net income/(loss) $(1,427)$ 62 $(1,403)$ 255 ======= ======= ======= ======= FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES PRELIMINARY CONSOLIDATED BALANCE SHEET (in millions) June 30, December 31, 2008 2007 ------------ ------------- (Unaudited) ASSETS Cash and cash equivalents $ 12,673 $ 14,137 Marketable securities 7,425 3,155 Finance receivables, net 109,088 111,468 Net investment in operating leases 26,553 29,663 Retained interest in securitized assets 380 653 Notes and accounts receivable from affiliated companies 875 906 Derivative financial instruments 2,148 2,811 Other assets 5,259 6,230 -------- -------- Total assets $164,401 $169,023 ======== ======== LIABILITIES AND SHAREHOLDER'S INTEREST Liabilities Accounts payable Customer deposits, dealer reserves and other $ 1,866 $ 1,837 Affiliated companies 1,919 2,308 -------- -------- Total accounts payable 3,785 4,145 Debt 137,519 139,411 Deferred income taxes 3,685 5,380 Derivative financial instruments 1,297 1,376 Other liabilities and deferred income 5,810 5,314 -------- -------- Total liabilities 152,096 155,626 Minority interests in net assets of subsidiaries 0 3 Shareholder's interest Shareholder's interest 5,149 5,149 Accumulated other comprehensive income 2,038 1,730 Retained earnings 5,118 6,515 -------- -------- Total shareholder's interest 12,305 13,394 -------- -------- Total liabilities and shareholder's interest $164,401 $169,023 ======== ======== FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES OPERATING HIGHLIGHTS Second Quarter First Half ---------------- ---------------- 2008 2007 2008 2007 ------ ------ ------ ------ Financing Shares United States Financing share - Ford, Lincoln and Mercury Retail installment and lease 39% 38% 38% 37% Wholesale 77 78 77 78 Europe Financing share - Ford Retail installment and lease 28% 27% 27% 26% Wholesale 98 97 97 97 Contract Volume - New and used retail/lease (in thousands) North America segment United States 312 354 587 659 Canada 48 59 79 94 ----- ----- ----- ----- Total North America segment 360 413 666 753 International segment Europe 177 186 355 371 Other international 29 47 78 106 ----- ----- ----- ----- Total International segment 206 233 433 477 ----- ----- ----- ----- Total contract volume 566 646 1,099 1,230 ===== ===== ===== ===== Borrowing Cost Rate* 5.4% 6.1% 5.5% 6.0% Charge-offs (in millions) On-Balance Sheet Receivables Retail installment and lease $232 $116 $458 $218 Wholesale 12 8 13 12 Other 2 1 4 2 ----- ----- ----- ----- Total charge-offs - on-balance sheet receivables $246 $125 $475 $232 ===== ===== ===== ===== Total loss-to-receivables ratio 0.70% 0.36% 0.67% 0.34% Managed Receivables** Retail installment and lease $240 $130 $480 $250 Wholesale 12 8 13 12 Other 2 1 4 2 ----- ----- ----- ----- Total charge-offs - managed receivables $254 $139 $497 $264 ===== ===== ===== ===== Total loss-to-receivables ratio 0.70% 0.38% 0.68% 0.36% - - - - - * 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 non-GAAP measures to GAAP:
-- Managed receivables: receivables reported on Ford Motor Credit's balance sheet, excluding unearned interest supplements related to finance receivables, 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 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 NON-GAAP MEASURES TO GAAP: Managed Leverage Calculation June 30, December 31, 2008 2007 ---------- ------------ (in billions) Total debt $137.5 $139.4 Securitized off-balance sheet receivables outstanding 3.0 6.0 Retained interest in securitized off-balance sheet receivables (0.4) (0.7) Adjustments for cash, cash equivalents and marketable securities* (19.6) (16.7) Adjustments for hedge accounting** (0.1) 0.0 ------ ------ Total adjusted debt $120.4 $128.0 ====== ====== Total equity (including minority interest) $ 12.3 $ 13.4 Adjustments for hedge accounting** (0.2) (0.3) ------ ------ Total adjusted equity $ 12.1 $ 13.1 ====== ====== Managed leverage (to 1) = Total adjusted debt / Total adjusted equity 10.0 9.8 Memo: Financial statement leverage (to 1) = Total debt / Total equity 11.2 10.4 Net Finance Receivables and Operating Leases June 30, December 31, 2008 2007 ---------- ------------ On-Balance Sheet Receivables (in billions) Retail installment $ 70.9 $ 73.3 Wholesale 35.9 34.7 Other finance receivables 3.3 3.4 Unearned interest supplements (1.0) - ------ ------ Finance receivables, net 109.1 111.4 Net investment in operating leases 26.6 29.7 ------ ------ Total net finance receivables and operating leases $135.7 $141.1 ====== ====== Off-Balance Sheet Receivables - Retail $ 3.0 $ 6.0 Managed Receivables Retail installment $ 73.9 $ 79.3 Wholesale 35.9 34.7 Other finance receivables 3.3 3.4 Unearned interest supplements - - ------ ------ Finance receivables, net 113.1 117.4 Net investment in operating leases 26.6 29.7 ------ ------ Total net finance receivables and operating leases $139.7 $147.1 ====== ====== - - - - - * Excludes marketable securities related to insurance activities. ** Primarily related to market valuation adjustments from derivatives due to movements in interest rates.
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