Company Quick10K Filing
Quick10K
Ford Motor Credit
10-Q 2019-06-30 Quarter: 2019-06-30
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 2019-10-02 Other Events, Exhibits
8-K 2019-09-26 Other Events, Exhibits
8-K 2019-08-01 Other Events, Exhibits
8-K 2019-07-24 Earnings, Regulation FD, Exhibits
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 2019-03-06 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
TEP Tucson Electric Power 1,446
PKD Parker Drilling 252
WMIH WMIH 125
DWOG Deep Well Oil & Gas 14
VCSY Vertical Computer Systems 12
SPYR SPYR 10
AXREF Amarc Resources 8
FTXP Foothills Exploration 2
RNVA Rennova Health 0
RPXC RPX 0
FMCC 2019-06-30
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 5. Other Information.
Item 6. Exhibits.
EX-31.1 fmcc06302019ex311.htm
EX-31.2 fmcc06302019ex312.htm
EX-32.1 fmcc06302019ex321.htm
EX-32.2 fmcc06302019ex322.htm

Ford Motor Credit Earnings 2019-06-30

FMCC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2019
or
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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
3.588% Notes due June 2, 2020
 
F/20S
 
New York Stock Exchange
0.623% Notes due June 28, 2023*
 
F/23E
 
New York Stock Exchange
1.355% Notes due February 7, 2025*
 
F/25I
 
New York Stock Exchange
4.125% Notes due on June 20, 2024
 
F/24O
 
New York Stock Exchange
3.021% Notes due March 6, 2024
 
F/24M
 
New York Stock Exchange
4.535% Notes due March 6, 2025*
 
F/25K
 
New York Stock Exchange
3.350% Notes due Nine Months or More from the Date of Issue due August 20, 2026
 
F/26N
 
New York Stock Exchange
1.514% Notes due February 17, 2023
 
F/23G
 
New York Stock Exchange
2.386% Notes due February 17, 2026
 
F/26AB
 
New York Stock Exchange
Floating Rate Notes due December 12, 2019*
 
F/19A
 
New York Stock Exchange
Floating Rate Notes due December 16, 2019*
 
F/19C
 
New York Stock Exchange
Floating Rate Notes due May 14, 2021*
 
F/21C
 
New York Stock Exchange
Floating Rate Notes due December 1, 2021*
 
F/21AQ
 
New York Stock Exchange
Floating Rate Notes due December 7, 2022*
 
F/22T
 
New York Stock Exchange
Floating Rate Notes due November 15, 2023*
 
F/23D
 
New York Stock Exchange
Floating Rate Notes due December 1, 2024*
 
F/24L
 
New York Stock Exchange
     *Issued under Euro Medium Term Notes due Nine Months or More from The Date of Issue Program

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).
Yes
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 50 





FORD MOTOR CREDIT COMPANY LLC
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 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 June 30,
 
2018
 
2019
 
2018
 
2019
 
Second Quarter
 
First Half
 
(unaudited)
Financing revenue
 
 
 
 
 
 
 
Operating leases
$
1,443

 
$
1,472

 
$
2,858

 
$
2,949

Retail financing
959

 
987

 
1,907

 
1,971

Dealer financing
569

 
596

 
1,105

 
1,204

Other financing
20

 
26

 
42

 
50

Total financing revenue
2,991

 
3,081

 
5,912

 
6,174

Depreciation on vehicles subject to operating leases
(986
)
 
(894
)
 
(2,039
)
 
(1,818
)
Interest expense
(997
)
 
(1,114
)
 
(1,909
)
 
(2,235
)
Net financing margin
1,008

 
1,073

 
1,964

 
2,121

Other revenue
 

 
 
 
 
 
 
Insurance premiums earned
43

 
46

 
84

 
93

Fee based revenue and other
65

 
61

 
123

 
115

Total financing margin and other revenue
1,116

 
1,180

 
2,171

 
2,329

Expenses
 

 
 
 
 
 
 
Operating expenses
357

 
350

 
702

 
714

Provision for credit losses (Note 6)
69

 
63

 
163

 
96

Insurance expenses
46

 
60

 
58

 
70

Total expenses
472

 
473

 
923

 
880

 
 
 
 
 
 
 
 
Other income, net (Note 13)
1

 
124

 
38

 
183

 
 
 


 
 
 
 
Income before income taxes
645

 
831

 
1,286

 
1,632

Provision for / (Benefit from) income taxes
166

 
218

 
106

 
416

Net income
$
479

 
$
613

 
$
1,180

 
$
1,216



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended June 30,
 
2018
 
2019
 
2018
 
2019
 
Second Quarter
 
First Half
 
(unaudited)
Net income
$
479

 
$
613

 
$
1,180

 
$
1,216

Other comprehensive income / (loss), net of tax (Note 12)
 
 
 
 
 
 
 
Foreign currency translation
(364
)
 
8

 
(251
)
 
28

Comprehensive income / (loss)
$
115

 
$
621

 
$
929

 
$
1,244


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
 
June 30,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents (Note 3)
$
9,607

 
$
12,618

Marketable securities (Note 3)
1,308

 
2,247

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

 
107,119

Finance leases
8,426

 
8,622

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

 
115,741

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

 
27,738

Notes and accounts receivable from affiliated companies
905

 
935

Derivative financial instruments (Note 9)
670

 
1,186

Other assets (Note 10)
3,456

 
3,553

Total assets
$
162,209

 
$
164,018

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

 
$
1,067

Affiliated companies
426

 
885

Total accounts payable
1,523

 
1,952

Debt (Note 11)
140,146

 
141,470

Deferred income taxes
2,595

 
2,669

Derivative financial instruments (Note 9)
663

 
477

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

 
2,556

Total liabilities
147,234

 
149,124

 
 
 
 
SHAREHOLDER’S INTEREST
 
 
 
Shareholder’s interest
5,227

 
5,227

Accumulated other comprehensive income / (loss) (Note 12)
(829
)
 
(801
)
Retained earnings
10,577

 
10,468

Total shareholder’s interest
14,975

 
14,894

Total liabilities and shareholder’s interest
$
162,209

 
$
164,018


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
 
June 30,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,728

 
$
3,719

Finance receivables, net
58,662

 
58,118

Net investment in operating leases
16,332

 
13,986

Derivative financial instruments
27

 
8

 
 
 
 
LIABILITIES
 
 
 
Debt
$
53,269

 
$
51,791

Derivative financial instruments
24

 
62


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

 
 
 
 
 
 
 
 
 
Net income
 

 

 
479

 
479

Other comprehensive income / (loss), net of tax
 

 
(364
)
 

 
(364
)
Distributions declared
 

 

 
(450
)
 
(450
)
Balance at June 30, 2018
 
$
5,227

 
$
(670
)
 
$
10,793

 
$
15,350

 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
Net income
 

 

 
613

 
613

Other comprehensive income / (loss), net of tax
 

 
8

 

 
8

Distributions declared
 

 

 
(650
)
 
(650
)
Balance at June 30, 2019
 
$
5,227

 
$
(801
)
 
$
10,468

 
$
14,894


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 June 30,
 
2018
 
2019
 
First Half
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by / (used in) operating activities
$
2,986

 
$
2,909

 
 
 
 
Cash flows from investing activities
 
 
 
Purchases of finance receivables
(22,494
)
 
(17,770
)
Principal collections of finance receivables
21,659

 
20,888

Purchases of operating lease vehicles
(7,537
)
 
(6,500
)
Proceeds from termination of operating lease vehicles
4,816

 
4,734

Net change in wholesale receivables and other short-duration receivables
(130
)
 
896

Purchases of marketable securities
(2,821
)
 
(2,099
)
Proceeds from sales and maturities of marketable securities
3,368

 
1,183

Settlements of derivatives
156

 
23

All other investing activities
131

 
(24
)
Net cash provided by / (used in) investing activities
(2,852
)
 
1,331

 
 
 
 
Cash flows from financing activities
 
 
 
Proceeds from issuances of long-term debt
27,959

 
24,983

Principal payments on long-term debt
(24,792
)
 
(24,298
)
Change in short-term debt, net
(2,093
)
 
(565
)
Cash distributions to parent
(1,463
)
 
(1,325
)
All other financing activities
(50
)
 
(64
)
Net cash provided by / (used in) financing activities
(439
)
 
(1,269
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(152
)
 
24

 
 
 
 
Net increase / (decrease) in cash, cash equivalents and restricted cash
$
(457
)
 
$
2,995

 
 
 
 
Cash, cash equivalents and restricted cash at beginning of period (Note 3)
$
9,682

 
$
9,747

Net increase / (decrease) in cash, cash equivalents and restricted cash
(457
)
 
2,995

Cash, cash equivalents and restricted cash at end of period (Note 3)
$
9,225

 
$
12,742


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

During the first six months of 2019, we continued to execute 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 amendments 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
 
June 30, 2019
Cash and cash equivalents
 
 
 
 
 
U.S. government
1
 
$
139

 
$
575

U.S. government and agencies
2
 
25

 
849

Non-U.S. government and agencies
2
 
114

 
875

Corporate debt
2
 
884

 
907

Total marketable securities classified as cash equivalents
 
 
1,162

 
3,206

Cash, time deposits and money market funds
 
 
8,445

 
9,412

Total cash and cash equivalents
 
 
$
9,607

 
$
12,618

 
 
 
 
 
 
Marketable securities
 
 
 
 
 
U.S. government
1
 
$
289

 
$
338

U.S. government and agencies
2
 
65

 
135

Non-U.S. government and agencies
2
 
610

 
1,349

Corporate debt
2
 
198

 
200

Other marketable securities
2
 
146

 
225

Total marketable securities
 
 
$
1,308

 
$
2,247



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
 
June 30, 2019
Cash and cash equivalents
$
9,607

 
$
12,618

Restricted cash included in other assets (a)
140

 
124

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

 
$
12,742


__________
(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
 
June 30, 2019
Consumer
 
 
 
Retail installment contracts, gross
$
70,999

 
$
68,846

Finance leases, gross
8,748

 
8,984

Retail financing, gross
79,747

 
77,830

Unearned interest supplements from Ford and affiliated companies
(3,508
)
 
(3,512
)
Consumer finance receivables
76,239

 
74,318

 
 
 
 
Non-Consumer
 
 
 
Dealer financing
40,996

 
40,144

Other financing
2,168

 
1,792

Non-Consumer finance receivables
43,164

 
41,936

Total recorded investment
$
119,403

 
$
116,254

 
 
 
 
Recorded investment in finance receivables
$
119,403

 
$
116,254

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

 
$
115,741

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

 
$
107,119

Fair value (b)
109,794

 
107,251

__________
(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 June 30, 2019, accrued uncollected interest was $264 million and $263 million, respectively, which we report in Other assets on our balance sheet.

Included in recorded investment in finance receivables at December 31, 2018 and June 30, 2019 were consumer receivables of $40.7 billion and $39.3 billion, respectively, and non-consumer receivables of $25.7 billion and $25.1 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

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 finance lease receivables were as follows (in millions):
 
June 30,
2019
Within one year
$
2,075

After one year and within two years
2,006

After two years and within three years
1,599

After three years and within four years
708

After four years and within five years
120

After five years
2

   Total future cash payments
6,510

Less: Present value discount
(313
)
   Finance lease receivables
$
6,197



The reconciliation from finance lease receivables to finance leases, gross and finance leases, net is as follows (in millions):
 
June 30,
2019
Finance lease receivables
$
6,197

Unguaranteed residual assets
2,661

Initial direct costs
126

   Finance leases, gross
8,984

Unearned interest supplements from Ford and affiliated companies
(345
)
Allowance for credit losses
(17
)
   Finance leases, net
$
8,622



Financing revenue from finance leases for the second quarter of 2018 and 2019 was $95 million and $97 million, respectively, and for the first half of 2018 and 2019 was $190 million and $189 million, respectively. Financing revenue from finance leases 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 June 30, 2019, there were no balances greater than 90 days past due for which we are still accruing interest.
 
The aging analysis of our finance receivables balances was as follows (in millions):
 
December 31, 2018
 
June 30,
2019
Consumer
 
 
 
31-60 days past due
$
859

 
$
662

61-90 days past due
123

 
103

91-120 days past due
39

 
31

Greater than 120 days past due
39

 
39

Total past due
1,060

 
835

Current
75,179

 
73,483

Consumer finance receivables
76,239

 
74,318

 
 
 
 
Non-Consumer
 
 
 
Total past due
76

 
70

Current
43,088

 
41,866

Non-Consumer finance receivables
43,164

 
41,936

  Total recorded investment
$
119,403

 
$
116,254



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 dealer financing receivables was as follows (in millions):
 
December 31, 2018
 
June 30,
2019
Dealer financing
 
 
 
Group I
$
33,656

 
$
32,541

Group II
5,635

 
6,020

Group III
1,576

 
1,468

Group IV
129

 
115

Total recorded investment
$
40,996

 
$
40,144




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 June 30, 2019 was $370 million and $337 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 June 30, 2019 was $129 million and $115 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 consists 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, with the associated depreciation expense recognized on a straight-line basis over the term 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 is 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 $23 million and $48 million, for the second quarter of 2018 and first half of 2018, respectively.
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
 
June 30,
2019
Vehicles, at cost (a)
$
33,593

 
$
33,632

Accumulated depreciation
(6,144
)
 
(5,894
)
Net investment in operating leases
$
27,449

 
$
27,738

__________
(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 June 30, 2019, Net investment in operating leases includes $16.3 billion and $14.0 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 June 30, 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
$
4,746

 
$
2,940

 
$
1,029

 
$
73

 
$
5

 
$
8,793


Operating leases are generally pre-payable without penalty and may cause actual paid 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 June 30 was as follows (in millions):
 
Second Quarter 2018
 
Consumer
 
Non-Consumer
 
Total Allowance
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
584

 
$
16

 
$
600

Charge-offs
(123
)
 
(1
)
 
(124
)
Recoveries
47

 
1

 
48

Provision for credit losses
72

 
(2
)
 
70

Other
(7
)
 

 
(7
)
Ending balance
$
573

 
$
14

 
$
587

 
 
 
 
 
 
 
First Half 2018
 
Consumer
 
Non-Consumer
 
Total Allowance
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
582

 
$
15

 
$
597

Charge-offs
(254
)
 
(3
)
 
(257
)
Recoveries
86

 
2

 
88

Provision for credit losses
164

 

 
164

Other
(5
)
 

 
(5
)
Ending balance
$
573

 
$
14

 
$
587

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
 
 
 
 
 
Collective impairment allowance
$
552

 
$
13

 
$
565

Specific impairment allowance
21

 
1

 
22

Ending balance
573

 
14

 
587

 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
Collectively evaluated for impairment
$
75,338

 
$
40,668

 
$
116,006

Specifically evaluated for impairment
378

 
96

 
474

Recorded investment
75,716


40,764

 
116,480

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
75,143

 
$
40,750

 
$
115,893




14