Company Quick10K Filing
Quick10K
Ford Motor Credit
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-03 Other Events, Exhibits
8-K 2019-06-20 Other Events, Exhibits
8-K 2019-06-17 Other Events, Exhibits
8-K 2019-05-03 Other Events, Exhibits
8-K 2019-04-25 Earnings, Regulation FD, Exhibits
8-K 2019-04-04 Other Events, Exhibits
8-K 2019-03-18 Other Events, Exhibits
8-K 2019-01-23 Earnings, Regulation FD, Exhibits
8-K 2019-01-23 Earnings, Regulation FD, Exhibits
8-K 2019-01-16 Regulation FD, Exhibits
8-K 2019-01-07 Other Events, Exhibits
8-K 2019-01-03 Other Events, Exhibits
8-K 2018-12-03 Other Events, Exhibits
8-K 2018-11-01 Other Events, Exhibits
8-K 2018-10-24 Earnings, Regulation FD, Exhibits
8-K 2018-10-02 Other Events, Exhibits
8-K 2018-09-24 Other Events, Exhibits
8-K 2018-09-04 Other Events, Exhibits
8-K 2018-08-09 Other Events, Exhibits
8-K 2018-08-01 Other Events, Exhibits
8-K 2018-07-25 Earnings, Regulation FD, Exhibits
8-K 2018-07-03 Other Events, Exhibits
8-K 2018-06-28 Other Events, Exhibits
8-K 2018-06-01 Other Events, Exhibits
8-K 2018-05-15 Other Events, Exhibits
8-K 2018-05-03 Other Events, Exhibits
8-K 2018-05-01 Other Events, Exhibits
8-K 2018-04-25 Earnings, Regulation FD, Exhibits
8-K 2018-04-03 Other Events, Exhibits
8-K 2018-03-28 Other Events, Exhibits
8-K 2018-03-23 Other Events, Exhibits
8-K 2018-03-05 Other Events, Exhibits
8-K 2018-03-01 Other Events, Exhibits
8-K 2018-02-22 Other Events, Exhibits
8-K 2018-02-07 Other Events, Exhibits
8-K 2018-02-01 Other Events, Exhibits
8-K 2018-01-24 Earnings, Regulation FD, Exhibits
8-K 2018-01-16 Regulation FD, Exhibits
8-K 2018-01-03 Other Events, Exhibits
MTG MGIC Investment 5,000
AGI Alamos Gold 1,780
FNKO Funko 1,040
BOMN Boston Omaha 597
CASI CASI 317
RAND Rand Capital 19
PRTX Protalex 0
CLSK Cleanspark 0
RVIV Reviv3 Procare 0
XRM Xerium Technologies 0
FMCC 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Note 1. Presentation
Note 2. Accounting Policies
Note 3. Cash, Cash Equivalents, and Marketable Securities
Note 4. Finance Receivables
Note 5. Net Investment in Operating Leases
Note 6. Allowance for Credit Losses
Note 7. Transfers of Receivables
Note 8. Variable Interest Entities
Note 9. Derivative Financial Instruments and Hedging Activities
Note 10. Other Assets and Other Liabilities and Deferred Revenue
Note 11. Debt
Note 12. Accumulated Other Comprehensive Income / (Loss)
Note 13. Other Income, Net
Note 14. Segment Information
Note 15. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 5. Other Information.
Item 6. Exhibits.
EX-18 fmcc03312019ex18.htm
EX-31.1 fmcc03312019ex311.htm
EX-31.2 fmcc03312019ex312.htm
EX-32.1 fmcc03312019ex321.htm
EX-32.2 fmcc03312019ex322.htm

Ford Motor Credit Earnings 2019-03-31

FMCC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fmcc0331-201910xq.htm 10-Q Document

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
(Mark One)
þ
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
For the quarterly period ended March 31, 2019
 

or
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
For the transition period from ____________________ to ____________________
 
 
Commission file number 1-6368
 

Ford Motor Credit Company LLC
(Exact name of registrant as specified in its charter)
Delaware
38-1612444
(State of organization)
(I.R.S. employer identification no.)
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(Zip code)

(313) 322-3000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes  o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
Smaller reporting company o
Emerging growth company o
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes  þ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

 
Exhibit Index begins on page 48 



FORD MOTOR CREDIT COMPANY LLC
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2019
 
 
 
 
 
Table of Contents
 
Page
 
 
 
 
 
Part I. Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II. Other Information
 
 
 
 
 
 
 


i



PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions)

 
For the periods ended March 31,
 
2018
 
2019
 
First Quarter
 
(unaudited)
Financing revenue
 
 
 
Operating leases
$
1,415

 
$
1,477

Retail financing
948

 
984

Dealer financing
536

 
608

Other financing
22

 
24

Total financing revenue
2,921

 
3,093

Depreciation on vehicles subject to operating leases
(1,053
)
 
(924
)
Interest expense
(912
)
 
(1,121
)
Net financing margin
956

 
1,048

Other revenue
 

 
 
Insurance premiums earned
41

 
47

Fee based revenue and other
58

 
54

Total financing margin and other revenue
1,055

 
1,149

Expenses
 

 
 
Operating expenses
345

 
364

Provision for credit losses (Note 6)
94

 
33

Insurance expenses
12

 
10

Total expenses
451

 
407

 
 
 
 
Other income, net (Note 13)
37

 
59

 
 
 


Income before income taxes
641

 
801

Provision for / (Benefit from) income taxes
(60
)
 
198

Net income
$
701

 
$
603



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended March 31,
 
2018
 
2019
 
First Quarter
 
(unaudited)
Net income
$
701

 
$
603

Other comprehensive income / (loss), net of tax (Note 12)
 
 
 
Foreign currency translation
113

 
20

Comprehensive income / (loss)
$
814

 
$
623


The accompanying notes are part of the financial statements.

1


Item 1. Financial Statements (Continued)


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

 
December 31,
2018
 
March 31,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents (Note 3)
$
9,607

 
$
11,733

Marketable securities (Note 3)
1,308

 
1,846

Finance receivables, net
 
 
 
Retail installment contracts, dealer financing, and other financing
110,388

 
110,595

Finance leases
8,426

 
8,655

Total finance receivables, net (Note 4)
118,814

 
119,250

Net investment in operating leases (Note 5)
27,449

 
27,606

Notes and accounts receivable from affiliated companies
905

 
907

Derivative financial instruments (Note 9)
670

 
631

Other assets (Note 10)
3,456

 
3,442

Total assets
$
162,209

 
$
165,415

 
 
 
 
LIABILITIES
 
 
 
Accounts payable
 
 
 
Customer deposits, dealer reserves, and other
$
1,097

 
$
1,126

Affiliated companies
426

 
872

Total accounts payable
1,523

 
1,998

Debt (Note 11)
140,146

 
142,950

Deferred income taxes
2,595

 
2,642

Derivative financial instruments (Note 9)
663

 
684

Other liabilities and deferred revenue (Note 10)
2,307

 
2,218

Total liabilities
147,234

 
150,492

 
 
 
 
SHAREHOLDER’S INTEREST
 
 
 
Shareholder’s interest
5,227

 
5,227

Accumulated other comprehensive income / (loss) (Note 12)
(829
)
 
(809
)
Retained earnings
10,577

 
10,505

Total shareholder’s interest
14,975

 
14,923

Total liabilities and shareholder’s interest
$
162,209

 
$
165,415


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.  See Notes 7 and 8 for additional information on our VIEs.
 
December 31,
2018
 
March 31,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,728

 
$
2,990

Finance receivables, net
58,662

 
60,745

Net investment in operating leases
16,332

 
16,013

Derivative financial instruments
27

 
14

 
 
 
 
LIABILITIES
 
 
 
Debt
$
53,269

 
$
52,248

Derivative financial instruments
24

 
45


The accompanying notes are part of the financial statements.

2


Item 1. Financial Statements (Continued)


FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER’S INTEREST
(in millions, unaudited)

 
 
Shareholder’s Interest
 
Accumulated Other Comprehensive Income / (Loss)
(Note 12)
 
Retained Earnings
 
Total Shareholder’s Interest
Balance at December 31, 2017
 
$
5,227

 
$
(419
)
 
$
11,076

 
$
15,884

Net income
 

 

 
701

 
701

Other comprehensive income / (loss), net of tax
 

 
113

 

 
113

Distributions declared
 

 

 
(1,013
)
 
(1,013
)
Balance at March 31, 2018
 
$
5,227

 
$
(306
)
 
$
10,764

 
$
15,685

 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
$
5,227

 
$
(829
)
 
$
10,577

 
$
14,975

Net income
 

 

 
603

 
603

Other comprehensive income / (loss), net of tax
 

 
20

 

 
20

Distributions declared
 

 

 
(675
)
 
(675
)
Balance at March 31, 2019
 
$
5,227

 
$
(809
)
 
$
10,505

 
$
14,923



The accompanying notes are part of the financial statements.


3


Item 1. Financial Statements (Continued)


FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)

 
 
For the periods ended March 31,
 
 
2018
 
2019
 
 
First Three Months
 
 
(unaudited)
Cash flows from operating activities
 
 
 
 
Net cash provided by / (used in) operating activities
 
$
2,009

 
$
1,692

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Purchases of finance receivables
 
(11,085
)
 
(8,542
)
Principal collections of finance receivables
 
10,814

 
10,432

Purchases of operating lease vehicles
 
(3,592
)
 
(3,184
)
Proceeds from termination of operating lease vehicles
 
2,481

 
2,306

Net change in wholesale receivables and other short-duration receivables
 
(3,668
)
 
(1,844
)
Purchases of marketable securities
 
(2,287
)
 
(803
)
Proceeds from sales and maturities of marketable securities
 
1,422

 
274

Settlements of derivatives
 
100

 
12

All other investing activities
 
143

 
(14
)
Net cash provided by / (used in) investing activities
 
(5,672
)
 
(1,363
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
Proceeds from issuances of long-term debt
 
16,779

 
15,411

Principal payments on long-term debt
 
(12,156
)
 
(12,683
)
Change in short-term debt, net
 
(793
)
 
(276
)
Cash distributions to parent
 
(1,013
)
 
(675
)
All other financing activities
 
(28
)
 
(37
)
Net cash provided by / (used in) financing activities
 
2,789

 
1,740

 
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
106

 
38

 
 
 
 
 
Net increase / (decrease) in cash, cash equivalents and restricted cash
 
$
(768
)
 
$
2,107

 
 
 
 
 
Cash, cash equivalents and restricted cash at January 1 (Note 3)
 
$
9,682

 
$
9,747

Net increase / (decrease) in cash, cash equivalents and restricted cash
 
(768
)
 
2,107

Cash, cash equivalents and restricted cash at March 31 (Note 3)
 
$
8,914

 
$
11,854


The accompanying notes are part of the financial statements.


4


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


Table of Contents

Footnote
 
Page
Presentation
Accounting Policies
Cash, Cash Equivalents, and Marketable Securities
Finance Receivables
Net Investment in Operating Leases
Allowance for Credit Losses
Transfers of Receivables
Variable Interest Entities
Derivative Financial Instruments and Hedging Activities
Other Assets and Other Liabilities and Deferred Revenue
Debt
Accumulated Other Comprehensive Income / (Loss)
Other Income, Net
Segment Information
Commitments and Contingencies




5


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 1. PRESENTATION

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries and consolidated VIEs in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit,” “we,” “our,” or “us”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). We reclassify certain prior period amounts in our consolidated financial statements to conform to current year presentation.

Restructuring and Other Actions

In the first three months of 2019, we executed separation and restructuring actions associated with our plans to transform the operational fitness of our business.

NOTE 2. ACCOUNTING POLICIES

Provision for Income Taxes

For interim tax reporting we estimate one single effective tax rate, which is applied to the year-to-date ordinary income / (loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

Adoption of New Accounting Standards
Accounting Standards Update (“ASU”) 2016-02, Leases.  On January 1, 2019, we adopted the Accounting Standards Codification 842, Leases, and all the related amendments (“new lease standard”) to contracts using the modified retrospective method. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods. Adoption of the standard as a lessor did not significantly impact our financial statements. As a lessee, it added about $100 million of right-of-use assets and lease obligations to our consolidated balance sheet and did not significantly impact our income statement. We do not expect the adoption of the new lease standard to have a significant impact to our net income on an ongoing basis. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

We also adopted the following ASUs during 2019, none of which had a material impact to our financial statements or financial statement disclosures:
ASU
 
 
Effective Date
2018-16
Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
 
January 1, 2019
2018-08
Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
 
January 1, 2019


6


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 2. ACCOUNTING POLICIES (Continued)

Accounting Standards Issued But Not Yet Adopted

The following standard is expected to result in a significant change in practice to Ford Credit.

ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. We plan to adopt the new standard and the related amendment on the effective date of January 1, 2020 by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of Retained earnings. We anticipate adoption will increase the amount of expected credit losses reported in Finance receivables, net on our consolidated balance sheet and do not expect a material impact to our income statement.

Change in Accounting Method

As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on operating leases. See Note 5 for additional information.

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The following table categorizes the fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis (in millions):
 
Fair Value Level
 
December 31, 2018
 
March 31, 2019
Cash and cash equivalents
 
 
 
 
 
U.S. government
1
 
$
139

 
$
1,112

U.S. government and agencies
2
 
25

 
599

Non-U.S. government and agencies
2
 
114

 
394

Corporate debt
2
 
884

 
639

Total marketable securities classified as cash equivalents
 
 
1,162

 
2,744

Cash, time deposits and money market funds
 
 
8,445

 
8,989

Total cash and cash equivalents
 
 
$
9,607

 
$
11,733

 
 
 
 
 
 
Marketable Securities
 
 
 
 
 
U.S. government
1
 
$
289

 
$
241

U.S. government and agencies
2
 
65

 
40

Non-U.S. government and agencies
2
 
610

 
803

Corporate debt
2
 
198

 
556

Other marketable securities
2
 
146

 
206

Total marketable securities
 
 
$
1,308

 
$
1,846


Cash, Cash Equivalents, and Restricted Cash 

Cash, cash equivalents, and restricted cash as reported in the statement of cash flows are presented separately on our consolidated balance sheet as follows (in millions):
 
December 31, 2018
 
March 31, 2019
Cash and cash equivalents
$
9,607

 
$
11,733

Restricted cash included in other assets (a)
140

 
121

Total cash, cash equivalents, and restricted cash
$
9,747

 
$
11,854

__________
(a)
Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

7


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 4. FINANCE RECEIVABLES

We manage finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables, net were as follows (in millions):
 
December 31, 2018
 
March 31, 2019
Consumer
 
 
 
Retail installment contracts, gross
$
70,999

 
$
69,380

Finance leases, gross
8,748

 
9,012

Retail financing, gross
79,747

 
78,392

Unearned interest supplements from Ford and affiliated companies
(3,508
)
 
(3,478
)
Consumer finance receivables
76,239

 
74,914

 
 
 
 
Non-Consumer
 
 
 
Dealer financing
40,996

 
42,804

Other financing
2,168

 
2,045

Non-Consumer finance receivables
43,164

 
44,849

Total recorded investment
$
119,403

 
$
119,763

 
 
 
 
Recorded investment in finance receivables
$
119,403

 
$
119,763

Allowance for credit losses
(589
)
 
(513
)
Finance receivables, net
$
118,814

 
$
119,250

 
 
 
 
Net finance receivables subject to fair value (a)
$
110,388

 
$
110,595

Fair value (b)
109,794

 
110,296

__________
(a)
Net finance receivables subject to fair value exclude finance leases.  Previously, certain consumer financing products in Europe were classified as retail installment contracts.  We now classify these products as finance leases.  Comparative information has been revised to reflect this change. 
(b)
The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

At December 31, 2018 and March 31, 2019, accrued uncollected interest was $264 million and $275 million, respectively, which we report in Other assets on our balance sheet.

Included in recorded investment in finance receivables at December 31, 2018 and March 31, 2019, were consumer receivables of $40.7 billion and $43.2 billion, respectively, and non-consumer receivables of $25.7 billion and $26.3 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables 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 or the claims of Ford Credit’s other creditors. 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 (see Note 7 for additional information).

Finance Leases

Our finance leases are comprised of sales-type and direct financing leases. We offer finance leases to individuals, leasing companies, government entities, daily rental companies, and fleet customers. These financings include primarily lease plans for terms of 24 to 60 months. In limited cases, a customer may extend the lease term. Early terminations of leases may also occur at the customer’s request subject to our approval. We offer financing products in which the customer may be required to pay any shortfall, or may receive as payment any excess amount between the fair market value and the contractual vehicle value at the end of the term, which are classified as finance leases. In some markets, we finance a vehicle with a series of monthly payments followed by a single balloon payment or the option for the customer to return the vehicle to Ford Credit; these arrangements containing a purchase option are classified as finance leases.


8


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 4. FINANCE RECEIVABLES (Continued)

The amounts contractually due on our finance lease receivables were as follows (in millions):
 
March 31,
2019
Within one year
$
2,065

After one year and within two years
1,955

After two years and within three years
1,646

After three years and within four years
691

After four years and within five years
124

After five years
2

   Total future cash payments
6,483

Less: Present value discount
(315
)
   Finance lease receivables
$
6,168


The reconciliation from our finance lease receivables to our finance leases, gross and our finance leases, net is as follows (in millions):
 
March 31,
2019
Finance lease receivables
$
6,168

Unguaranteed residual assets
2,713

Initial direct costs
131

   Finance leases, gross
9,012

Unearned interest supplements from Ford and affiliated companies
(340
)
Allowance for credit losses
(17
)
   Finance leases, net
$
8,655


Financing revenue from finance leases was $95 million and $92 million for the periods ended March 31, 2018 and March 31, 2019, respectively, and is included in Retail financing on the income statement. Revenue is recognized using the interest method and includes the accretion of certain direct origination costs that are deferred and interest supplements received from Ford and affiliated companies.



9


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 4. FINANCE RECEIVABLES (Continued)

Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $20 million at December 31, 2018. At March 31, 2019, there were no balances greater than 90 days past due for which we are still accruing interest.
 
The aging analysis of finance receivables balances was as follows (in millions):
 
December 31, 2018
 
March 31,
2019
Consumer
 
 
 
31-60 days past due
$
859

 
$
563

61-90 days past due
123

 
82

91-120 days past due
39

 
34

Greater than 120 days past due
39

 
40

Total past due
1,060

 
719

Current
75,179

 
74,195

Consumer finance receivables
76,239

 
74,914

 
 
 
 
Non-Consumer
 
 
 
Total past due
76

 
81

Current
43,088

 
44,768

Non-Consumer finance receivables
43,164

 
44,849

  Total recorded investment
$
119,403

 
$
119,763


Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on our aging analysis. Consumer receivables credit quality ratings are as follows:

Pass – current to 60 days past due;
Special Mention61 to 120 days past due and in intensified collection status; and
Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

Non-Consumer Portfolio. Dealers are assigned to one of four groups according to risk ratings as follows:

Group I – strong to superior financial metrics;
Group II – fair to favorable financial metrics;
Group III – marginal to weak financial metrics; and
Group IV – poor financial metrics, including dealers classified as uncollectible.

The credit quality analysis of our dealer financing receivables was as follows (in millions):
 
December 31, 2018
 
March 31,
2019
Dealer financing
 
 
 
Group I
$
33,656

 
$
35,403

Group II
5,635

 
5,744

Group III
1,576

 
1,533

Group IV
129

 
124

Total recorded investment
$
40,996

 
$
42,804



10


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 4. FINANCE RECEIVABLES (Continued)

Impaired Receivables

Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at December 31, 2018 and March 31, 2019 was $370 million and $359 million, or 0.5% and 0.5% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2018 and March 31, 2019 was $129 million and $124 million, or 0.3% and 0.3% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of our receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.





11


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 5. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consist primarily of lease contracts for vehicles with individuals, daily rental companies, and fleet customers with terms of 60 months or less. Payment extensions may be requested by the customer and are generally limited to a maximum of six months over the term of the lease.  Term extensions may also be requested by the customer. Term and payment extensions in total generally do not exceed twelve months. A lease can be terminated at any time by satisfying the obligations under the lease agreement. Early termination programs may be occasionally offered to eligible lessees. At the end of the lease, the customer returns the vehicle to the dealer or may have the option to buy the leased vehicle. In the case of a contract default and repossession, the customer typically remains liable for any deficiency between net auction proceeds and the defaulted contract obligations, including any repossession-related expenses.
Accumulated depreciation reduces the value of the vehicles from their initial acquisition value to their expected residual value at the end of the lease. At the time of purchase, we establish the expected residual value for the vehicle based on recent auction values, return volumes for our leased vehicles, industry-wide used vehicle prices, marketing incentive plans, and vehicle quality data. We monitor residual values each month and review the accuracy of our accumulated depreciation on a quarterly basis.
Change in Accounting Method. As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on operating leases.  Prior to the first quarter of 2019, we presented the early termination loss reserve on operating leases due to customer default events as part of the allowance for credit losses which reduces Net investment in operating leases on the balance sheet.  On the income statement, the incurred losses were included in Provision for credit losses.  We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within Net investment in operating leases on the balance sheet, and Depreciation on vehicles subject to operating leases on the income statement.
In conjunction with the January 1, 2019 adoption of ASU 2016-02, Leases (described in Note 2), we reviewed our leasing-related accounting policies and updated our depreciation policy for operating leases so that the useful life of the vehicles incorporates our historical experience on early terminations due to customer defaults.  We believe this change in accounting method is preferable as the characterization of these changes are better reflected as depreciation.  At December 31, 2018, this reclassification increased accumulated depreciation and decreased allowance for credit losses by $78 million, respectively, and had no impact on Net Investment in operating leases.  On the income statement, this reclassification increased Depreciation on vehicles subject to operating leases and decreased Provision for credit losses by $25 million, respectively, for the first quarter of 2018.
These changes had no impact on Income before income taxes, Net investment in operating leases, Retained earnings, or to the Net cash provided by / (used in) operating activities. We have reclassified prior period amounts to reflect the above changes.
Net investment in operating leases were as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Vehicles, at cost (a)
$
33,593

 
$
33,585

Accumulated depreciation
(6,144
)
 
(5,979
)
Net investment in operating leases
$
27,449

 
27,606

__________
(a)
Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs. We recognize these upfront collections from Ford and other vehicle acquisition costs as part of Net investment in operating leases, which are amortized to Depreciation on vehicles subject to operating leases over the term of the lease contract.


12


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 5. NET INVESTMENT IN OPERATING LEASES (Continued)

At December 31, 2018 and March 31, 2019, net investment in operating leases includes $16.3 billion and $16.0 billion, respectively, that have been included in securitization transactions but continue to be reported in our consolidated financial statements. These net investments in operating leases 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 our other obligations or the claims of our other creditors. We hold 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 (see Note 7 for additional information).
The amounts contractually due for minimum rentals on operating leases at December 31, 2018 were as follows (in millions):
 
2019
 
2020
 
2021
 
2022
 
2023
 
Total
Minimum rentals on operating leases
$
4,708

 
$
2,929

 
$
1,083

 
$
83

 
$
6

 
$
8,809

The amounts contractually due on our operating leases at March 31, 2019 were as follows (in millions):
 
Within 1 year
 
After 1 year and within 2 years
 
After 2 years and within 3 years
 
After 3 years and within 4 years
 
After 4 years and within 5 years
 
Total
Operating lease payments
$
4,719

 
$
2,924

 
$
1,040

 
$
80

 
$
5

 
$
8,768

Our operating leases are generally pre-payable without penalty and may cause actual amounts to differ from amounts contractually due.

13


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 6. ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables for the periods ended March 31 was as follows (in millions):
 
First Quarter 2018
 
Consumer
 
Non-Consumer
 
Total Allowance
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
582

 
$
15

 
$
597

Charge-offs
(131
)
 
(2
)
 
(133
)
Recoveries
39

 
1

 
40

Provision for credit losses
92

 
2

 
94

Other
2

 

 
2

Ending balance
$
584

 
$
16

 
$
600

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
 
 
 
 
 
Collective impairment allowance
$
563

 
$
15

 
$
578

Specific impairment allowance
21

 
1

 
22

Ending balance
584

 
16

 
600

 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
Collectively evaluated for impairment
75,989

 
45,059

 
121,048

Specifically evaluated for impairment
380

 
108

 
488

Recorded investment
76,369

 
45,167

 
121,536

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
75,785

 
$
45,151

 
$
120,936


 
First Quarter 2019
 
Consumer
 
Non-Consumer
 
Total Allowance
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
566

 
$
23

 
$
589

Charge-offs
(137
)
 
(17
)
 
(154
)
Recoveries
43

 
2

 
45

Provision for credit losses
24

 
9

 
33

Other

 

 

Ending balance
$
496

 
$
17

 
$
513

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
 
 
 
 
 
Collective impairment allowance
$
477

 
$
16

 
$
493

Specific impairment allowance
19

 
1

 
20

Ending balance
496

 
17

 
513

 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
Collectively evaluated for impairment
74,555

 
44,725

 
119,280

Specifically evaluated for impairment
359

 
124

 
483

Recorded investment
74,914

 
44,849

 
119,763

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
74,418

 
$
44,832

 
$
119,250


14


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 7. TRANSFERS OF RECEIVABLES

We securitize finance receivables and net investment in operating leases through a variety of programs using amortizing, variable funding, and revolving structures. We also sell finance receivables in structured financing transactions. Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions. Our securitization programs are targeted to institutional investors in both public and private transactions in capital markets primarily in the United States, Canada, the United Kingdom, Germany and China.

We engage in securitization transactions to fund operations and to maintain liquidity. Our securitization transactions are recorded as asset-backed debt and the associated assets are not derecognized and continue to be included in our financial statements.

The finance receivables sold for legal purposes and net investment in operating leases included in securitization transactions 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 our other obligations or the claims of our other creditors. We hold 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. The debt is the obligation of our consolidated securitization entities and not the obligation of Ford Credit or our other subsidiaries.

Most of these securitization transactions utilize VIEs. See Note 8 for additional information concerning VIEs. The following tables show the assets and debt related to our securitization transactions that were included in our financial statements (in billions):

 
December 31, 2018
 
Cash and Cash Equivalents
 
Finance Receivables and Net Investment in Operating Leases (a)
 
Related Debt
(c)
 
Before Allowance
for Credit Losses
 
Allowance for
Credit Losses
 
After Allowance
for Credit Losses
 
VIE (b)
 
 
 
 
 
 
 
 
 
Retail financing
$
1.9

 
$
34.0

 
$
0.2

 
$
33.8

 
$
29.2

Wholesale financing
0.3

 
24.9

 

 
24.9

 
13.9

Finance receivables
2.2

 
58.9

 
0.2

 
58.7

 
43.1

Net investment in operating leases
0.5

 
16.3

 

 
16.3

 
10.2

Total VIE
$
2.7

 
$
75.2

 
$
0.2

 
$
75.0

 
$
53.3

 
 
 
 
 
 
 
 
 
 
Non-VIE
 
 
 
 
 
 
 
 
 
Retail financing
$
0.3

 
$
6.7

 
$

 
$
6.7

 
$
5.9

Wholesale financing

 
0.8

 

 
0.8

 
0.6

Finance receivables
0.3

 
7.5

 

 
7.5

 
6.5

Net investment in operating leases

 

 

 

 

Total Non-VIE
$
0.3

 
$
7.5

 
$

 
$
7.5

 
$
6.5

 
 
 
 
 
 
 
 
 
 
Total securitization transactions
 
 
 
 
 
 
 
 
 
Retail financing
$
2.2

 
$
40.7

 
$
0.2

 
$
40.5

 
$
35.1

Wholesale financing
0.3

 
25.7

 

 
25.7

 
14.5

Finance receivables
2.5

 
66.4

 
0.2

 
66.2

 
49.6

Net investment in operating leases
0.5

 
16.3

 

 
16.3

 
10.2

Total securitization transactions
$
3.0

 
$
82.7

 
$
0.2

 
$
82.5

 
$
59.8

__________
(a)
Unearned interest supplements and residual support are excluded from securitization transactions.
(b)
Includes assets to be used to settle the liabilities of the consolidated VIEs.
(c)
Includes unamortized discount and debt issuance costs.



15


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 7. TRANSFERS OF RECEIVABLES (Continued)

 
March 31, 2019
 
Cash and Cash Equivalents
 
Finance Receivables and Net Investment in Operating Leases (a)
 
Related Debt
(c)
 
Before Allowance
for Credit Losses
 
Allowance for
Credit Losses
 
After Allowance
for Credit Losses
 
VIE (b)
 
 
 
 
 
 
 
 
 
Retail financing
$
2.1

 
$
35.4

 
$
0.2

 
$
35.2

 
$
30.6

Wholesale financing
0.3

 
25.5

 

 
25.5

 
11.5

Finance receivables
2.4

 
60.9

 
0.2

 
60.7

 
42.1

Net investment in operating leases
0.6

 
16.0

 

 
16.0

 
10.1

Total VIE
$
3.0

 
$
76.9

 
$
0.2

 
$
76.7

 
$
52.2

 
 
 
 
 
 
 
 
 
 
Non-VIE
 
 
 
 
 
 
 
 
 
Retail financing
$
0.3

 
$
7.8

 
$

 
$
7.8

 
$
6.9

Wholesale financing

 
0.8

 

 
0.8

 
0.6

Finance receivables
0.3

 
8.6

 

 
8.6

 
7.5

Net investment in operating leases

 

 

 

 

Total Non-VIE
$
0.3

 
$
8.6

 
$

 
$
8.6

 
$
7.5

 
 
 
 
 
 
 
 
 
 
Total securitization transactions
 
 
 
 
 
 
 
 
 
Retail financing
$
2.4

 
$
43.2

 
$
0.2

 
$
43.0

 
$
37.5

Wholesale financing
0.3

 
26.3

 

 
26.3

 
12.1

Finance receivables
2.7

 
69.5

 
0.2

 
69.3

 
49.6

Net investment in operating leases
0.6

 
16.0

 

 
16.0

 
10.1

Total securitization transactions
$
3.3

 
$
85.5

 
$
0.2

 
$
85.3

 
$
59.7

__________
(a)
Unearned interest supplements and residual support are excluded from securitization transactions.
(b)
Includes assets to be used to settle the liabilities of the consolidated VIEs.
(c)
Includes unamortized discount and debt issuance cost.


16


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 8. VARIABLE INTEREST ENTITIES

We use special purpose entities to issue asset-backed securities in transactions to public and private investors. We have deemed most of these special purpose entities to be VIEs of which we are the primary beneficiary. The asset-backed securities are backed by finance receivables and interests in net investments in operating leases. The assets continue to be consolidated by us. We retain interests in our securitization VIEs, including subordinated securities issued by the VIEs, rights to cash held for the benefit of the securitization investors, and rights 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.

We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to us or our other assets and have no right to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or additional assets to the VIEs and do not guarantee any asset-backed securities. We may be required to support the performance of certain securitization transactions, however, by increasing cash reserves.

See Note 7 for additional information on the financial position and financial performance of our VIEs and Note 9 for additional information regarding derivatives.

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The gains / (losses), by hedge designation, reported in income for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2018
 
2019
Fair value hedges
 
 
 
Interest rate contracts
 
 
 
Net interest settlements and accruals on hedging instruments
$
26

 
$
(20
)
Fair value changes on hedging instruments
(339
)
 
250

Fair value changes on hedged debt
329

 
(253
)
Derivatives not designated as hedging instruments
 
 
 
Interest rate contracts
(17
)
 
(27
)
Foreign currency exchange contracts (a)
(12
)
 
(6
)
Cross-currency interest rate swap contracts
(58
)
 
(145
)
Total
$
(71
)
 
$
(201
)
__________
(a)
Reflects forward contracts between Ford Credit and an affiliated company.


17


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on the balance sheet at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposure in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts, presented gross, were as follows (in millions):
 
December 31, 2018
 
March 31, 2019
 
Notional
 
Fair Value of Assets
 
Fair Value of Liabilities
 
Notional
 
Fair Value of Assets
 
Fair Value of Liabilities
Fair value hedges
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
22,989

 
$
158

 
$
208

 
$
23,894

 
$
217

 
$
143

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
76,904

 
235

 
274

 
67,726

 
216

 
295

Foreign currency exchange contracts
4,318

 
45

 
24

 
3,893

 
52

 
30

Cross-currency interest rate swap contracts
5,235

 
232

 
157

 
6,331

 
146

 
216

Total derivative financial instruments, gross (a) (b)
$
109,446

 
$
670

 
$
663

 
$
101,844

 
$
631

 
$
684

__________
(a)
At December 31, 2018 and March 31, 2019, we held collateral of $19 million and $26 million, respectively, and we posted collateral of $59 million and $63 million, respectively.
(b)
At December 31, 2018 and March 31, 2019, the fair value of assets and liabilities available for counterparty netting was $233 million and $219 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

18


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 10. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED REVENUE

Other assets and other liabilities and deferred revenue consist of various balance sheet items that are combined for financial statement presentation due to their respective materiality compared with other individual asset and liability items.

Other assets were as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Accrued interest and other non-finance receivables
$
1,080

 
$
1,116

Collateral held for resale, at net realizable value, and other inventory
877

 
737

Prepaid reinsurance premiums and other reinsurance recoverables
658

 
663

Deferred charges – income taxes
216

 
200

Property and equipment, net of accumulated depreciation (a)
192

 
200

Investment in non-consolidated affiliates
123

 
127

Restricted cash
140

 
121

Operating lease assets

 
92

Deferred charges
96

 
89

Other
74

 
97

Total other assets
$
3,456

 
$
3,442

__________
(a)
Accumulated depreciation was $367 million and $375 million at December 31, 2018 and March 31, 2019, respectively.

Other liabilities and deferred revenue were as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Unearned insurance premiums and fees
$
775

 
$
779

Interest payable
752

 
637

Income tax and related interest (a)
369

 
329

Deferred revenue
113

 
126

Operating lease liabilities

 
94

Payroll and employee benefits
70

 
45

Other
228

 
208

Total other liabilities and deferred revenue
$
2,307

 
$
2,218

__________
(a)
Includes tax and interest payable to affiliated companies of $193 million and $182 million at December 31, 2018 and March 31, 2019, respectively.

We have investments in entities for which we do not have the ability to exercise significant influence and fair values are not readily available. We have elected to record these investments at cost (less impairment, if any), adjusted for changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in our consolidated balance sheet. These investments were $9 million at both December 31, 2018 and March 31, 2019. There were no material adjustments to the fair values of these investments during the period ending March 31, 2019.

Deferred revenue balances presented above include amounts from contracts with customers primarily related to admission fee revenue on group financing products available in Argentina and were $87 million and $76 million at December 31, 2018 and March 31, 2019, respectively. Admission fee revenue on group financing products is generally recognized evenly over the term of the agreement, which is up to 84 months. Increases in the admission fee deferred revenue balance are the result of payments due during the current period in advance of satisfying our performance under the contract and decreases are a result of revenue recognized during the current period that was previously deferred.





19


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 11. DEBT
Debt outstanding and interest rates were as follows (in millions):
 
 
 
 
 
Interest Rates
 
Debt
 
Average Contractual
 
Average Effective
 
December 31,
2018
 
March 31,
2019
 
2018
 
2019
 
2018
 
2019
Short-term debt
 
 
 
 
 
 
 
 
 
 
 
Unsecured debt
 
 
 
 
 
 
 
 
 
 
 
Floating rate demand notes
$
5,880

 
$
6,170

 
 
 
 
 
 
 
 
Commercial paper
3,749

 
3,713

 
 
 
 
 
 
 
 
Other short-term debt
4,213

 
3,760

 
 
 
 
 
 
 
 
Asset-backed debt
943

 
983

 
 
 
 
 
 
 
 
Total short-term debt
14,785

 
14,626

 
3.5
%
 
3.4
%
 
3.5
%
 
3.4
%
Long-term debt
 
 
 
 
 
 
 
 
 
 
 
Unsecured debt
 
 
 
 
 
 
 
 
 
 
 
Notes payable within one year
14,373

 
13,814

 
 
 
 
 
 
 
 
Notes payable after one year
52,409

 
55,849

 
 
 
 
 
 
 
 
Asset-backed debt (a)
 
 
 
 
 
 
 
 
 
 
 
Notes payable within one year
22,130

 
23,502

 
 
 
 
 
 
 
 
Notes payable after one year
36,844

 
35,306

 
 
 
 
 
 
 
 
Unamortized discount
2

 
1

 
 
 
 
 
 
 
 
Unamortized issuance costs
(211
)
 
(221
)
 
 
 
 
 
 
 
 
Fair value adjustments (b)
(186
)
 
73

 
 
 
 
 
 
 
 
Total long-term debt
125,361

 
128,324

 
2.8
%
 
3.0
%
 
2.8
%
 
3.0
%
Total debt
$
140,146

 
$
142,950

 
2.8
%
 
3.0
%
 
2.9
%
 
3.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of debt (c)
$
138,888

 
$
142,595

 
 
 
 
 
 
 
 
__________
(a)
Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.
(b)
These adjustments relate to designated fair value hedges. The carrying value of hedged debt was $38.0 billion and $38.1 billion at December 31, 2018 and March 31, 2019, respectively.
(c)
The fair value of debt includes $13.8 billion and $13.6 billion of short-term debt at December 31, 2018 and March 31, 2019, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME / (LOSS)

The changes in the balance of Accumulated Other Comprehensive Income / (Loss) (“AOCI”) attributable to Ford Credit for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2018
 
2019
Beginning AOCI balance
$
(419
)
 
$
(829
)
Net gain / (loss) on foreign currency translation
113

 
20

Ending AOCI balance
$
(306
)
 
$
(809
)



20


Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


NOTE 13. OTHER INCOME, NET

Other income consists of various line items that are combined on the income statement due to their respective materiality compared with other individual income and expense items.

The amounts included in Other income, net for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2018
 
2019
Gains / (Losses) on derivatives
$
(87
)
 
$
(178
)
Currency revaluation gains / (losses)
62

 
131

Interest and investment income
42

 
79

Other
20

 
27

Total other income, net
$
37

 
$
59



NOTE 14. SEGMENT INFORMATION

We conduct our financing operations directly and indirectly through our subsidiaries and affiliates. We offer substantially similar products and services throughout many different regions, subject to local legal restrictions and market conditions. We segment our business based on geographic regions: the Americas, Europe, and Asia Pacific. 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, are reflected in Unallocated Other. The following is a brief description of our segments:

Americas Segment – United States, Canada, Mexico, Brazil, and Argentina
Europe Segment – European region and South Africa
Asia Pacific Segment – China and India

Key financial information for our business segments for the periods ended or at March 31 were as follows (in millions):
 
Americas
 
Europe
 
Asia Pacific
 
Total
Segments
 
Unallocated Other (a)
 
Total
First Quarter 2018
 
 
 
 
 
 
 
 
 
 
 
Total revenue
$
2,581

 
$
295

 
$
144

 
$
3,020

 
$

 
$
3,020

Income before income taxes
515

 
111

 
46

 
672

 
(31
)
 
641

Other disclosures:
 
 
 
 
 
 
 
 
 
 
 
Depreciation on vehicles subject to operating leases
1,048

 
5

 

 
1,053

 

 
1,053

Interest expense
752

 
72

 
91

 
915

 
(3
)
 
912

Provision for credit losses
86

 
5

 
3

 
94

 

 
94

Net finance receivables and net investment in operating leases
120,392

 
27,702

 
7,574

 
155,668

 
(8,017
)
 
147,651

Total assets
127,013

 
30,109

 
7,961

 
165,083

 

 
165,083

 
 
 
 
 
 
 
 
 
 
 
 
First Quarter 2019
 
 
 
 
 
 
 
 
 
 
 
Total revenue
$
2,793

 
$
303

 
$
98

 
$
3,194

 
$

 
$
3,194

Income before income taxes
644

 
116

 
34

 
794

 
7

 
801

Other disclosures:
 
 
 
 
 
 
 
 
 
 
 
Depreciation on vehicles subject to operating leases
912

 
12

 

 
924

 

 
924

Interest expense
972

 
80

 
61

 
1,113

 
8

 
1,121

Provision for credit losses
38

 
5

 
(10
)
 
33

 

 
33

Net finance receivables and net investment in operating leases
123,323

 
27,066

 
4,885

 
155,274

 
(8,418
)
 
146,856

Total assets
130,603

 
29,459

 
5,353

 
165,415

 

 
165,415