Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - FORD MOTOR CREDIT CO LLC | a1q18fordearningsreleasefili.pdf |
| EX-99.1 - EXHIBIT 99.1 - FORD MOTOR CREDIT CO LLC | a1q18fordearningsrelease.htm |
| 8-K - 8-K - FORD MOTOR CREDIT CO LLC | earnings8-kdated4x25x2018.htm |
1Q Earnings Review
April 25, 2018
2
1Q 2018 Highlights
• Strong first quarter EBT across all segments
• Achieved record quarterly EBT in China
• Receivables grew globally led by retail financing
• Credit loss metrics remain strong
• Auction values trending better than expectations
3
Key Metrics
• Strong 1Q EBT up 33% YoY
• Receivables up globally, led by
retail financing in all segments
• U.S. consumer credit metrics
healthy with improved LTR
• Balance sheet and liquidity
strong; managed leverage
within target range of 8:1 to 9:1
• Plan to maintain receivables
around present level and deliver
strong distributions to Ford
Net Receivables (Bils)
Managed Receivables* (Bils)
Loss-to-Receivables** (LTR)
Auction Values***
EBT (Mils)
ROE (Pct)*
Debt (Bils)
Liquidity (Bils)
Financial Statement Leverage (to 1)
Managed Leverage* (to 1)
Other Balance Sheet Metrics
2017 2018 H / (L)
FIRST QUARTER
133$ 148$ 11 %
140$ 156$ 11 %
54 bps 51 bps (3) bps
17,090$ 17,325$ 1 %
481$ 641$ 160$
10 % 18 % 8 ppts
* See Appendix for reconciliation to GAAP and definitions
** U.S. retail and lease
*** U.S. 36-month off-lease at 1Q18 mix
129$ 142$ 10 %
29$ 28$ (3) %
9.8 9.1 (0.7) ppts
9.1 8.4 (0.7) ppts
4
Volume /
Mix
Financing
Margin
Lease
Residual
Credit
Loss 1Q 20181Q 2017 Exchange Other
1Q 2018 EBT YoY (Mils)
• YoY EBT improvement of
$160M
• All factors positive, except
Other due to derivatives market
valuation
• Volume and mix higher due to
global receivables growth
• Higher auction values drove
lease residual improvement
Derivatives Market Valuation $ (49)
Operating Costs & Other 11
Residual Losses $80
Supplemental Depreciation (30)
5
2018 H / (L) 2017
Results (Mils)
Americas segment 515$ 157$
Europe segment 111 34
Asia Pacific segment 46 18
Total segments 672$ 209$
Unallocated other* (31) (49)
Earnings before taxes 641$ 160$
(Provision for) / Benefit from income taxes 60 208
Net income 701$ 368$
Contract placement volumes (000) 514 6
1Q
1Q 2018 EBT By Segment
• EBT higher YoY in all segments
• Benefit from income taxes
driven by tax planning
* See Appendix for definitions
6
Americas Financing Shares And Contract
Placement Volume
2017 2018
Financing Shares (%)
Retail Installment and Lease Share of Ford Retail Sales (excl. Fleet)
United States 57 % 61 %
Canada 75 70
Wholesale Share
United States 76 % 76 %
Canada 60 60
Contract Placement Volume - New and Used Retail / Lease (000)
United States 264 272
Canada 36 33
Mexico 10 10
Total Americas Segment 310 315
1Q
7
Europe Financing Shares And Contract
Placement Volume
2017 2018
Financing Shares (incl. Fleet) (%)
Retail Installment and Lease Share of Total Ford Sales
U.K. 36 % 37 %
Germany 47 48
Total Europe Segment 35 36
Wholesale Share
U.K. 100 % 100 %
Germany 94 94
Total Europe Segment 99 98
Contract Placement Volume - New and Used Retail / Lease (000)
U.K. 59 46
Germany 39 39
All Other 53 62
Total Europe Segment 151 147
1Q
8
Asia Pacific Financing Shares And Contract
Placement Volume
2017 2018
Financing Shares (incl. Fleet) (%)
Retail Installment Share of Total Ford Sales
China 24 % 35 %
India 9 9
Wholesale Share
China 51 % 61 %
India 34 38
Contract Placement Volume - New and Used Retail (000)
China 45 50
India 2 2
Total Asia Pacific Segment 47 52
1Q
9
1Q 2018 Net Receivables Mix (Bils)
• Prudent management of lease
mix
• Operating lease portfolio was
18% of total net receivables
• U.S. and Canada represent
99% of operating lease portfolio
$45.2
$31.8
$10.8
$75.8
$55.2
$15.9
$26.7
$26.3
Total Asia PacificAmericas
Net Investment in Operating Leases
Consumer Financing
Non-Consumer Financing
Europe
$11.5
$147.7
$113.3
$27.1
$7.3
1Q 2018 H/(L) 2017
(Pct.) (Ppts.)
SUV / CUV 55 0
Truck 24 4
Car 21 (4)
10
U.S. Origination Metrics
• Disciplined and consistent
underwriting practices
• Portfolio quality evidenced by
FICO scores and steady risk
mix
• Extended-term contracts
relatively small part of our
business
64 mo 65 mo 65 mo 66 mo 65 mo 65 mo
1% 2% 2% 2% 3%
4%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
741 741 744
748 750
743
6% 6% 6% 6% 6% 6%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Retail and Lease FICO and Higher Risk Mix (Pct)
Retail Contract Terms
???????????? ?????? ??
Average Retail Placement Term
Higher Risk Portfolio Mix
Average Placement FICO
11
U.S. Retail And Lease Credit Loss Drivers
• Delinquencies and
repossessions remain low
• Severity trended favorably YoY
consistent with improved
auction market
• Charge-offs and LTR continue
to be within our placement
expectations
• Strong loss metrics reflect
healthy consumer credit
conditions
$108 $96
$82
$95
$109
$93
0.59% 0.54% 0.46% 0.53%
0.60% 0.51%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
$10.7 $10.6 $10.5
$9.8
$10.2 $10.3
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Severity (000) Charge-Offs (Mils) and LTR Ratio (Pct)
10
9
8
9
10 10
1.16% 1.16% 1.06% 1.12% 1.16%
1.22%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Repossessions (000) and Repo. Rate (Pct)
0.16% 0.16%
0.13%
0.15%
0.13% 0.12%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Over-60-Day Delinquencies (excl. Bankruptcies)
Repo. Rate
Repossessions
LTR Ratio
Charge-Offs
12
Worldwide Credit Loss Metrics
• Worldwide credit loss metrics
remain strong
• Credit loss reserve based on
historical losses, portfolio
quality, and receivables level
• YoY increase in reserve reflects
historical losses and growth in
receivables
$548 $584 $588 $644 $668 $671
0.40% 0.42% 0.41% 0.44% 0.44% 0.43%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
$132 $119 $101 $118 $143 $118
0.39% 0.35%
0.29% 0.33%
0.39%
0.31%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Charge-Offs (Mils) and LTR Ratio (Pct)
Credit Loss Reserve (Mils) and
Reserve as a Pct of EOP Managed Receivables (Pct)
Reserve as a Pct of EOP Managed Receivables
Credit Loss Reserve
LTR Ratio
Charge-Offs
13
U.S. Lease Origination Metrics
• Lease share continues to be
below industry reflecting Ford
sales mix
29% 31% 30% 28% 28%
31%
19%
24% 22%
19% 17%
23%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
10 11 11 9 9 23
70 77 76 72 65
58
11 10 10 10 8 12
91 98 97 91 82
93
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Lease Placement Volume (000)
Lease Share of Retail Sales (Pct)
24-Month
36-Month
39-Month / Other
Ford Credit
Industry*
* Source: JD Power PIN
14
U.S. Lease Residual Performance
• Healthy used car market
supporting lease residual and
credit loss performance
• Auction values stronger than
expected and higher YoY
• Now expect 2018 average
auction values to be about
1% to 2% lower at constant mix
$16,935 $17,090 $17,385
$17,665 $17,365 $17,325
$20,290 $20,815
$21,465 $21,685 $21,365 $21,145
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
65 79 80 70 61 68
81% 83% 81% 79% 78% 79%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Lease Return Volume (000) and Return Rates (Pct)
Off-Lease Auction Values (at 1Q18 Mix)
Return Rates
Return Volume
24-Month
36-Month
15
Funding Structure – Managed Receivables*
(Bils)
• Funding is diversified across
platforms and markets
• Well capitalized with strong
investment grade balance
sheet profile
* See Appendix for reconciliation to GAAP and definitions
2016 2017 2018
Dec 31 Dec 31 Mar 31
Term Debt (incl. Bank Borrowings) 66$ 75$ 76$
Term Asset-Backed Securities 50 53 56
Commercial Paper 4 5 5
Ford Interest Advantage / Deposits 6 5 5
Other 9 9 10
Equity 13 16 16
Adjustments For Cash (11) (12) (12)
Total Managed Receivables 137$ 151$ 156$
Securitized Funding as Pct
of Managed Receivables 37% 35% 36%
16
Public Term Funding Plan* (Bils)
2016 2017 Through
Actual Actual Apr 24
Unsecured -- Currency of issuance
(USD Equivalent)
USD 9$ 10$ $ 5 - 7 1$
CAD 1 2 1 - 2 0
EUR / GBP 3 3 4 - 6 3
Other 1 1 1 0
Total unsecured 14$ 16$ $ 11 - 16 5$
Securitizations 13$ 15$ $ 13 - 15 6$
Total public 28$ 32$ $ 24 - 31 11$
Forecast
2018
* Numbers may not sum due to rounding; see Appendix for definitions
17
2018 Guidance (Mils)
• Expect 2018 EBT to be flat to
lower than 2017
• Distributions are planned to
maintain leverage within
target range of 8:1 to 9:1
• Expect distributions to Ford to
be higher than plan in 2018
Key Metric 2017 FY Results 2018 FY Plan 2018 FY Outlook
EBT $2,310 < 2017 FY Flat To Lower Than 2017
Distributions $406 ~ $2,000 Higher Than Plan
18
Key Takeaways
• Strong 1Q EBT
• Now expect 2018 EBT to be flat to lower than 2017; projected
distributions higher than plan
• Funding plan well-positioned for business cycles
• Consistent originations, servicing, and collections
• Strategic asset to Ford, supporting sales and delivering profits
• Plan to maintain Ford Credit's managed receivables for the foreseeable
future at about the same level as at the end of the quarter. Our focus is
to maintain a strong risk profile for Ford and Ford Credit balancing
receivables, funding requirements, liquidity, profitability, and
distributions. This will allow us to continue supporting auto sales while
preserving capacity for future mobility initiatives
19
Cautionary Note On 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:
• Ford’s long-term competitiveness depends on the successful execution of fitness actions;
• Industry sales volume, particularly in the United States, Europe, or China, could decline if there is a financial crisis, recession, or significant geopolitical event;
• Ford’s new and existing products and mobility services are subject to market acceptance;
• Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States;
• Ford may face increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
• Fluctuations in commodity prices, foreign currency exchange rates, and interest rates can have a significant effect on results;
• With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events;
• Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor disputes, natural or man- made disasters, financial distress, production difficulties, or other factors;
• Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;
• Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition;
• Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;
• Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs;
• Safety, emissions, fuel economy, and other regulations affecting Ford may become more stringent;
• Ford could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or
otherwise;
• Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;
• Operational systems, security systems, and vehicles could be affected by cyber incidents;
• Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility,
market disruption, regulatory requirements, or other factors;
• Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
• Ford Credit could face increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles; and
• Ford Credit could be subject to new or increased credit regulations, consumer or data protection regulations, or other regulations.
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 2017 Form 10-K
Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Total Net Receivables Reconciliation to Managed Receivables A1
Financial Statement Leverage Reconciliation to Managed Leverage A2
Liquidity Sources A3
Non-GAAP Financial Measures that Supplement GAAP Measures A4
Definitions and Calculations A5
SECRET
Appendix
21
2016 2017 2017 2018
Dec 31 Mar 31 Dec 31 Mar 31
Finance receivables, net (GAAP) 103.0$ 106.6$ 116.0$ 121.0$
Net investment in operating leases (GAAP) 27.2 26.4 26.7 26.7
Total net receivables* 130.2$ 133.0$ 142.7$ 147.7$
Unearned interest supplements and residual support 5.3 5.5 6.1 6.2
Allowance for credit losses 0.5 0.6 0.7 0.7
Other, primarily accumulated supplemental depreciation 0.9 0.9 1.0 1.1
Total managed receivables (Non-GAAP) 136.9$ 140.0$ 150.5$ 155.7$
Total Net Receivables Reconciliation To
Managed Receivables (Bils)
A
* See Appendix for definitions
22
Financial Statement Leverage Reconciliation To
Managed Leverage* (Bils)
2017 2017 2018
Mar 31 Dec 31 Mar 31
Leverage Calculation
Total debt 129.2$ 137.8$ 142.0$
Adjustments for cash (11.3) (11.8) (11.8)
Adjustments for derivative accounting (0.2) - 0.3
Total adjusted debt 117.7$ 126.0$ 130.5$
Equity 13.2$ 15.9$ 15.7$
Adjustments for derivative accounting (0.3) (0.1) (0.2)
Total adjusted equity 12.9$ 15.8$ 15.5$
Financial statement leverage (to 1) (GAAP) 9.8 8.7 9.1
Managed leverage (to 1) (Non-GAAP) 9.1 8.0 8.4
A
* See Appendix for definitions
23
2017 2017 2018
Mar 31 Dec 31 Mar 31
Liquidity Sources
Cash 11.3$ 11.8$ 11.8$
Committed ABS facilities 34.8 33.4 33.9
Other unsecured credit facilities 2.6 3.3 3.4
Ford corporate credit facility allocation 3.0 3.0 3.0
Total liquidity sources 51.7$ 51.5$ 52.1$
Utilization of Liquidity
Securitization cash (3.0)$ (3.8)$ (3.2)$
Committed ABS facilities (18.4) (17.2) (19.9)
Other unsecured credit facilities (1.3) (1.1) (1.1)
Ford corporate credit facility allocation - - -
Total utilization of liquidity (22.7)$ (22.1)$ (24.2)$
Gross liquidity 29.0$ 29.4$ 27.9$
Adjustments 0.3 0.1 0.3
Net liquidity available for use 29.3$ 29.5$ 28.2$
Liquidity Sources* (Bils)
A
* See Appendix for definitions
24
Non-GAAP Financial Measures That Supplement GAAP Measures
• We use both GAAP and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment
business performance. The non-GAAP measures listed below are intended to be considered by users as supplemental information to their
equivalent GAAP measures, to aid investors in better understanding our financial results. We believe that these non-GAAP measures provide
useful perspective on underlying business results and trends, and a means to assess our period-over-period results. These non-GAAP measures
should not be considered as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. These non-
GAAP measures may not be the same as similarly titled measures used by other companies due to possible differences in method and in items or
events being adjusted.
• Ford Credit Managed Receivables – (Most Comparable GAAP Measure: Net Finance Receivables plus Net Investment in Operating Leases) –
Measure of Ford Credit’s Total net receivables, excluding unearned interest supplements and residual support, allowance for credit losses, and
other (primarily accumulated supplemental depreciation). The measure is useful to management and investors as it closely approximates the
customer’s outstanding balance on the receivables, which is the basis for earning revenue.
• Ford Credit Managed Leverage (Most Comparable GAAP Measure: Financial Statement Leverage) – Ford Credit’s debt-to-equity ratio adjusted (i) to
exclude cash, cash equivalents, and marketable securities (other than amounts related to insurance activities), and (ii) for derivative accounting.
The measure is useful to investors because it reflects the way Ford Credit manages its business. Cash, cash equivalents, and marketable
securities are deducted because they generally correspond to excess debt beyond the amount required to support operations and on-balance
sheet securitization transactions. Derivative accounting adjustments are made to asset, debt, and equity positions to reflect the impact of interest
rate instruments used with Ford Credit’s term-debt issuances and securitization transactions. Ford Credit generally repays its debt obligations as
they mature, so the interim effects of changes in market interest rates are excluded in the calculation of managed leverage.
A4A
25
Definitions And Calculations
A5
Adjustments (as shown on the Liquidity Sources chart)
• Include certain adjustments for asset-backed capacity in excess of eligible receivables and cash related to the Ford Credit Revolving Extended Variable-utilization program (“FordREV”), which can be
accessed through future sales of receivables
Cash (as shown on the Funding Structure, Liquidity Sources and Leverage charts)
• Cash and cash equivalents and Marketable securities reported on Ford Credit’s balance sheet, excluding amounts related to insurance activities
Committed Asset-Backed Security (“ABS”) Facilities (as shown on the Liquidity Sources chart)
• Committed ABS facilities are subject to availability of sufficient assets, ability to obtain derivatives to manage interest rate risk, and exclude FCE Bank plc (“FCE”) access to the Bank of England’s Discount
Window Facility
Earnings Before Taxes (EBT)
• Reflects Income before income taxes as reported on Ford Credit’s income statement
ROE (as shown on the Key Metrics chart)
• Reflects an annualized return on equity. This metric is calculated by taking net income for the period divided by average equity for the period and annualizing the result by dividing by the number of days in
the quarter and multiplying by 365
Securitizations (as shown on the Public Term Funding Plan chart)
• Public securitization transactions, Rule 144A offerings sponsored by Ford Motor Credit, and widely distributed offerings by Ford Credit Canada
Securitization Cash (as shown on the Liquidity Sources chart)
• Securitization cash is cash held for the benefit of the securitization investors (for example, a reserve fund)
Term Asset-Backed Securities (as shown on the Funding Structure chart)
• Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements
Total Debt (as shown on the Leverage chart)
• Debt on Ford Credit’s balance sheet. Includes debt issued in securitizations 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
Total Net Receivables (as shown on the Total Net Receivables Reconciliation To Managed Receivables chart)
• 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
Unallocated Other (as shown on the 1Q 2018 EBT By Segment chart)
• Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign
currency-denominated transactions
A