FORD MOTOR CREDIT CO LLC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 26, 2011

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Exhibit 99.1
 
 
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FOR IMMEDIATE RELEASE

 
FORD CREDIT EARNS $383 MILLION IN THE SECOND QUARTER OF 2011*

DEARBORN, Mich., July 26, 2011 – Ford Motor Credit Company reported net income of $383 million in the second quarter of 2011, a decrease of $173 million from a year earlier.  On a pre-tax basis, Ford Credit earned $604 million in the second quarter, compared with $888 million in the previous year.  On a pre-tax basis, Ford Credit earned $1.3 billion in the first half of 2011, compared with $1.7 billion in the first half of 2010.

The decrease in pre-tax earnings reflects primarily lower credit loss reserve reductions and the non-recurrence of lower lease depreciation expense of the same magnitude as 2010.

“Ford Credit’s business continues to perform well, with low credit losses and strong originations capability,” Chairman and CEO Mike Bannister said. “We continue to succeed in our mission to support Ford sales.”

On June 30, 2011, Ford Credit’s net receivables totaled $84 billion, compared with $81 billion at year-end 2010.  Managed receivables were $86 billion on June 30, 2011, up from $83 billion on December 31, 2010. The higher receivables were primarily due to changes in currency exchange rates.

On June 30, 2011, managed leverage was 7.5 to 1.  In the second quarter of 2011, Ford Credit distributed $1.0 billion to its parent.

For full-year 2011, Ford Credit continues to expect to be solidly profitable but at a lower level than in 2010, reflecting the same factors mentioned above.  At year-end 2011, managed receivables are anticipated to be in the range of $82 billion to $87 billion.  Through June 30, 2011, Ford Credit has paid $1.9 billion in distributions to its parent and expects to pay a total of about $3 billion for full-year 2011.

# # #

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 an indirect, wholly owned subsidiary of Ford. For more information, visit www.fordcredit.com.

Contacts:
Margaret Mellott
Shawn Ryan
 
Ford Credit
Ford Fixed Income
  Communications  Investment Community
  313.322.5393  313.621.0881 
 
mmellott@ford.com
fixedinc@ford.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 June 30, 2011.
 
 
 
 
 
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:
 
•
Decline 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 or failure to achieve growth;
 
•
Lower-than-anticipated market acceptance of new or existing Ford products;
 
•
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;
 
•
An increase in fuel prices, continued volatility of fuel prices, or reduced availability of fuel;
 
•
Continued or increased price competition resulting from industry overcapacity, currency fluctuations or other factors;
 
•
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 constraints or 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, reputational damage 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, governmental investigations or adverse publicity arising out of alleged defects in Ford products, perceived environmental impacts, or otherwise;
 
•
A change in Ford’s requirements for parts where it has entered into long-term supply arrangements that commit it 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 Ford’s results from a decrease in or cessation or clawback 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;

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 other factors;
 
•
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 laws and regulations resulting in higher costs and/or additional financing restrictions;
 
•
Imposition of additional costs or restrictions due to the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing rules and regulations;
 
•
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 maintain competitive cost structure;
 
•
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 or investment returns); and
 
•
Inherent limitations of internal controls impacting financial statements and safeguarding of assets.

 
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.
 
 
 
 
 
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended June 30, 2011 and 2010
(in millions)
 
 
 
  
Second Quarter
     First Half  
   
2011
    
2010
    
2011
     2010
 
Financing revenue
                        
Operating leases
   $ 623     $ 864     $ 1,270     $ 1,852  
Retail
     521       593       1,050       1,217  
Interest supplements and other support costs earned                                
  from affiliated companies
     725       858       1,437       1,725  
Wholesale
     240       216       465       441  
Other
     14       12       28       32  
Total financing revenue
     2,123       2,543       4,250       5,267  
Depreciation on vehicles subject to operating leases
     (361 )     (475 )     (772 )     (1,116 )
Interest expense
     (895 )     (1,086 )     (1,788 )     (2,213 )
Net financing margin
     867       982       1,690       1,938  
Other revenue
                                
Insurance premiums earned, net
     23       24       46       50  
Other income, net
     7       39       84       135  
Total financing margin and other revenue
     897       1,045       1,820       2,123  
Expenses
                                
Operating expenses
     276       288       542       580  
Provision for credit losses
     (25 )     (151 )     (89 )     (202 )
Insurance expenses
     42       20       50       29  
Total expenses
     293       157       503       407  
Income before income taxes
     604       888       1,317       1,716  
Provision for income taxes
     221       332       483       632  
Net income
   $ 383     $ 556     $ 834     $ 1,084  

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

   
June 30,
    
December 31,
  
   
2011
    
2010
  
ASSETS
            
Cash and cash equivalents
   $ 7,472     $ 8,347  
Marketable securities
     4,111       6,759  
Finance receivables, net
     73,802       71,302  
Net investment in operating leases
     10,184       9,956  
Notes and accounts receivable from affiliated companies
     1,135       1,095  
Derivative financial instruments
     1,048       1,246  
Other assets
     2,583       2,991  
Total assets
   $ 100,335     $ 101,696  
                 
LIABILITIES AND SHAREHOLDER’S INTEREST
                
Liabilities
                
Accounts payable
                
Customer deposits, dealer reserves and other
   $ 975     $ 1,272  
Affiliated companies
     1,326       884  
Total accounts payable
     2,301       2,156  
Debt
     82,444       82,879  
Deferred income taxes
     1,580       1,494  
Derivative financial instruments
     288       534  
Other liabilities and deferred income
     4,034       4,311  
Total liabilities
     90,647       91,374  
                 
Shareholder’s interest
                
Shareholder’s interest
     5,274       5,274  
Accumulated other comprehensive income
     1,253       821  
Retained earnings
     3,161       4,227  
Total shareholder’s interest
     9,688       10,322  
Total liabilities and shareholder’s interest
   $ 100,335     $ 101,696  
 
 
— — — — —
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.  
 
 
   
June 30,
    
December 31,
  
   
2011
    
2010
  
ASSETS
            
Cash and cash equivalents
   $ 3,866     $ 4,031  
Finance receivables, net
     52,622       50,001  
Net investment in operating leases
     3,706       6,121  
Derivative financial instruments
     93       26  
                 
LIABILITIES
                
Debt
   $ 39,973     $ 40,247  
Derivative financial instruments
     103       222  


 
 
 
 
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
OPERATING HIGHLIGHTS


   
Second Quarter
    
First Half
  
   
2011
    
2010
    
2011
    
2010
  
Financing Shares
                        
United States
                        
Financing share – Ford and Lincoln
                        
Retail installment and lease
     34 %     30 %     35 %     32 %
Wholesale
     81       81       81       81  
                                 
Europe
                                
Financing share – Ford
                                
Retail installment and lease
     28 %     25 %     27 %     24 %
Wholesale
     98       98       99       99  
                                 
Contract Placement Volume – New and used retail/lease                                 
  (in thousands)
                                
North America Segment
                                
United States
     219       181       418       356  
Canada
     29       28       55       45  
Total North America Segment
     248       209       473       401  
                                 
International Segment
                                
Europe
     95       86       199       185  
Other international
     15       7       25       17  
Total International Segment
     110       93       224       202  
Total contract placement volume
     358       302       697       603  
                                 
Borrowing Cost Rate*
     4.1 %     4.7 %     4.1 %     4.7 %
                                 
Charge-offs (in millions)
                                
Retail installment and lease
   $ 41     $ 79     $ 100     $ 222  
Wholesale
     6       5       2       0  
Other
     2       2       2       (3 )
Total charge-offs
   $ 49     $ 86     $ 104     $ 219  
                                 
Total loss-to-receivables ratio
     0.23 %     0.39 %     0.25 %     0.49 %
 
— — — — —
*
The rate includes the effects of derivatives and facility fees and the amortization of discounts, premiums and direct issuance fees.

 
 
 
 
 
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
 
●
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,
  
   
2011
    
2010
  
   
(in billions)
  
Total debt
   $ 82.4     $ 82.9  
Adjustments for cash, cash equivalents, and marketable securities*
     (11.1 )     (14.6 )
Adjustments for derivative accounting**
     (0.3 )     (0.3 )
Total adjusted debt
   $ 71.0     $ 68.0  
                 
Equity
   $ 9.7     $ 10.3  
Adjustments for derivative accounting**
     (0.2 )     (0.1 )
Total adjusted equity
   $ 9.5     $ 10.2  
                 
Managed leverage (to 1) = Total adjusted debt / Total adjusted equity
     7.5       6.7  
Memo:  Financial statement leverage (to 1) = Total debt / Equity
     8.5       8.0  

 
Net Finance Receivables and Operating Leases  
June 30,
    
December 31,
  
   
2011
    
2010
  
Receivables  
(in billions)
  
Retail installment
   $ 49.1     $ 49.7  
Wholesale
     24.6       22.0  
Other finance receivables
     2.6       2.3  
Unearned interest supplements
     (1.9 )     (1.9 )
Allowance for credit losses
     (0.6 )     (0.8 )
Finance receivables, net
     73.8       71.3  
Net investment in operating leases
     10.2       10.0  
Total receivables
   $ 84.0     $ 81.3  
                 
Memo:  Total managed receivables***
   $ 85.9     $ 83.2  
 
— — — — —
*
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 receivables, excluding unearned interest supplements related to finance receivables of about $1.9 billion at June 30, 2011 and December 31, 2010.
 

FORD MOTOR CREDIT CO LLC Reports