SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file numbers 1-6368
FORD MOTOR CREDIT COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 38-1612444
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(State of Incorporation) (I.R.S. employer identification no.)
One American Road, Dearborn, Michigan 48126
- --------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (313) 322-3000
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. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 250,000 shares
of common stock as of June 30, 2000.
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 in reduced disclosure format.
PAGE 1 OF 29
EXHIBIT INDEX APPEARS AT PAGE 25.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements - The interim financial data presented herein are
unaudited, but in the opinion of management reflect all adjustments necessary
for a fair presentation of such information. Results for interim periods should
not be considered indicative of results for a full year. Reference should be
made to the financial statements contained in the registrant's Annual Report on
Form 10-K for the year ended December 31, 1999 (the "10-K Report"). Information
relating to earnings per share is not presented because the registrant, Ford
Motor Credit Company ("Ford Credit"), is an indirect wholly owned subsidiary of
Ford Motor Company ("Ford" or the "Company").
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Income
and of Earnings Retained for Use in the Business
For the Periods Ended June 30, 2000 and 1999
(in millions)
Second Quarter First Half
-------------------------------- ------------------------------
2000 1999 2000 1999
------------- ------------ ------------- -----------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $ 2,654.0 $ 2,469.1 $ 5,221.9 $ 4,923.0
Retail 2,018.7 1,610.7 3,989.6 3,299.4
Wholesale 588.1 406.1 1,128.3 814.7
Other 143.3 98.2 267.7 193.5
------------ ------------ ------------ -----------
Total financing revenue 5,404.1 4,584.1 10,607.5 9,230.6
Depreciation on operating leases (2,018.1) (1,954.1) (3,876.5) (3,795.4)
Interest expense (2,195.2) (1,706.7) (4,264.9) (3,468.2)
------------ ------------ ------------ -----------
Net financing margin 1,190.8 923.3 2,466.1 1,967.0
Other revenue
Insurance premiums earned 60.7 48.0 120.3 102.8
Investment and other income 354.3 386.8 621.0 605.3
------------ ------------ ------------ -----------
Total financing margin and revenue 1,605.8 1,358.1 3,207.4 2,675.1
Expenses
Operating expenses 592.6 472.2 1,179.3 914.9
Provision for credit losses 310.4 281.4 687.9 606.5
Other insurance expenses 70.7 47.9 131.0 98.2
------------ ------------ ------------ -----------
Total expenses 973.7 801.5 1,998.2 1,619.6
------------ ------------ ------------ -----------
Income before income taxes and minority interests 632.1 556.6 1,209.2 1,055.5
Provision for income taxes 234.4 207.4 448.6 393.6
------------ ------------ ------------ -----------
Income before minority interests 397.7 349.2 760.6 661.9
Minority interests in net income of subsidiaries 10.0 13.9 19.8 26.8
------------ ------------ ------------ -----------
Net income 387.7 335.3 740.8 635.1
Earnings retained for use in the business
Beginning of period 7,203.2 8,211.2 6,855.5 7,911.4
Dividends - (100.0) (5.4) (100.0)
------------ ------------ ------------ -----------
End of period $ 7,590.9 $ 8,446.5 $ 7,590.9 $ 8,446.5
============ ============ ============ ===========
The accompanying notes are an integral part of the financial statements.
-2-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(in millions)
June 30, December 31, June 30,
2000 1999 1999
-------------- --------------- --------------
(Unaudited) (Unaudited)
ASSETS
Cash and cash equivalents $ 1,354.0 $ 942.2 $ 867.6
Investments in securities 515.2 524.4 647.4
Finance receivables, net 119,005.8 108,753.8 100,317.7
Net investment, operating leases 36,977.0 32,838.2 34,643.1
Retained interest in securitized assets 3,110.7 3,442.8 2,585.1
Notes and accounts receivable from affiliated companies 2,743.2 6,128.2 5,414.5
Other assets 4,114.8 4,001.1 3,520.4
---------- ----------- -------------
Total assets $ 167,820.7 $ 156,630.7 $ 147,995.8
============ ============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves $ 4,330.1 $ 2,908.3 $ 3,321.6
Affiliated companies 1,470.4 1,235.2 1,313.0
------- ------- -------
Total accounts payable 5,800.5 4,143.5 4,634.6
Debt 140,953.4 133,073.7 124,433.9
Deferred income taxes 4,106.1 3,564.0 3,454.5
Other liabilities and deferred income 4,802.6 4,511.0 4,054.5
------- --------- ---------
Total liabilities $ 155,662.6 $ 145,292.2 $ 136,577.5
Minority interests in net assets of subsidiaries 416.6 414.4 396.3
Stockholder's Equity
Capital stock, par value $100 a share, 250,000 shares
authorized, issued and outstanding 25.0 25.0 25.0
Paid-in surplus (contributions by stockholder) 4,568.0 4,341.6 4,343.4
Note receivable from affiliated company - - (1,517.0)
Accumulated other comprehensive loss (442.4) (298.0) (275.9)
Retained earnings 7,590.9 6,855.5 8,446.5
-------- -------- --------
Total stockholder's equity 11,741.5 10,924.1 11,022.0
--------- --------- --------
Total liabilities and stockholder's equity $ 167,820.7 $ 156,630.7 $ 147,995.8
============ ============ ============
The accompanying notes are an integral part of the financial statements.
-3-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended June 30, 2000 and 1999
(in millions)
First Half
-----------------------------
2000 1999
----------- -------------
(Unaudited)
Cash flows from operating activities
Net income $ 740.8 $ 635.1
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 687.9 606.5
Depreciation and amortization 4,118.4 3,808.4
Loss/(gain) on sales of finance receivables 7.0 (84.9)
Increase in deferred income taxes 383.0 292.8
Decrease/(increase) in other assets 250.9 (2,002.3)
Increase/(decrease) in other liabilities 549.8 (40.2)
Other 95.4 50.4
---------- ---------
Net cash provided by operating activities 6,833.2 3,265.8
---------- ---------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (31,017.7) (25,963.1)
Collection of finance receivables (other than wholesale) 17,716.9 18,755.1
Purchase of operating lease vehicles (13,531.9) (12,543.4)
Liquidation of operating lease vehicles 7,507.7 8,563.3
Increase in wholesale receivables (3,219.5) (2,239.8)
Decrease/(increase) in notes receivable with affiliates 3,558.2 (4,237.1)
Proceeds from sale of receivables 7,694.8 5,005.0
Purchase of investment securities (298.8) (528.6)
Proceeds from sale/maturity of investment securities 308.0 607.1
Other (152.9) (93.6)
----------- -----------
Net cash used in investing activities (11,435.2) (12,675.1)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 21,926.0 12,384.5
Principal payments on long-term debt (9,722.1) (7,564.6)
(Decrease)/increase in short-term debt (7,060.0) 4,959.0
Cash dividends paid (150.0) (100.0)
Other 159.6 (6.1)
--------- ---------
Net cash provided by financing activities 5,153.5 9,672.8
---------- ---------
Effect of exchange rate changes on cash and cash equivalents (139.7) (176.7)
-------- --------
Net change in cash and cash equivalents 411.8 86.8
Cash and cash equivalents, beginning of period 942.2 780.8
---------- ----------
Cash and cash equivalents, end of period $ 1,354.0 $ 867.6
========== ==========
Supplementary cash flow information
Interest paid $ 4,292.7 $ 3,335.0
Taxes paid 86.6 123.6
The accompanying notes are an integral part of the financial statements.
-4-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables, Net (in millions)
June 30, December 31, June 30,
2000 1999 1999
-------------- ------------- --------------
(Unaudited) (Unaudited)
Retail $ 81,543.0 $ 76,181.6 $ 69,755.0
Wholesale 30,267.2 26,450.0 24,697.7
Other 8,407.3 7,244.3 7,017.8
------------- ------------ -------------
Total finance receivables, net of unearned income 120,217.5 109,875.9 101,470.5
Less: Allowance for credit losses (1,211.7) (1,122.1) (1,152.8)
------------- ------------ -------------
Finance receivables, net $ 119,005.8 $ 108,753.8 $ 100,317.7
============= ============ =============
Note 2. Debt (in millions)
June 30, 2000
-------------------------------------
Weighted Average June 30, December 31, June 30,
Interest Rates (A) Maturities 2000 1999 1999
--------------------- -------------- -------------- ---------------- --------------
(Unaudited) (Unaudited)
Payable Within One Year:
Commercial paper (B) $ 37,310.2 $ 43,077.9 $ 52,563.0
Other short-term debt (C) 6,636.6 6,769.8 6,150.2
------- ------- -------
Total short-term debt 43,946.8 49,847.7 58,713.2
Long-term indebtedness payable within
one year (D) 19,435.6 19,893.4 10,737.0
-------- ---------- --------
Total payable within one year 63,382.4 69,741.1 69,450.2
Payable After One Year:
Unsecured senior indebtedness
Notes (E) 6.72% 2001-2078 75,806.9 61,271.1 52,990.9
Debentures 2.43% 2001-2006 1,364.7 2,051.4 1,966.1
Unamortized discount (106.3) (84.2) (70.5)
--------- ---------- --------
Total unsecured senior indebtedness 77,065.3 63,238.3 54,886.5
Unsecured long-term subordinated notes 8.49% 2005 505.7 94.3 97.2
----- ---- ----
Total payable after one year 77,571.0 63,332.6 54,983.7
-------- --------- --------
Total debt $ 140,953.4 $ 133,073.7 $ 124,433.9
========= ========= =========
(A) Rates were variable on about 1.3% of the debt payable after one year
including the effects of interest rate swap agreements at June 30, 2000.
The agreements effectively converted all long-term obligations payable
after one year subject to variable interest rates to fixed rates as of
December 31, 1999 and June 30, 1999.
(B) Includes commercial paper of $1,031 million with an affiliated company at
December 31, 1999.
(C) Includes $683.9 million, $717.5 million, and $787.1 million
with affiliated companies at June 30, 2000, December 31, 1999, and
June 30, 1999, respectively.
(D) Includes $992.1 million, $763.6 million, and $413.7 million with affiliated
companies at June 30, 2000, December 31, 1999, and June 30, 1999,
respectively.
(E) Includes $2,220.2 million, $2,693.2 million, and $2,969.0 million with
affiliated companies at June 30, 2000, December 31, 1999, and June 30,
1999, respectively.
-5-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements - Continued
Note 3. Comprehensive Income (in millions)
Second Quarter First Half
------------------------------ --------------------------------
2000 1999 2000 1999
------------ ------------ --------- ------------
(Unaudited) (Unaudited)
Net income $ 387.7 $ 335.3 $ 740.8 $ 635.1
Other comprehensive income (103.4) (109.8) (144.4) (157.8)
------ ------ ------ ------
Total comprehensive income $ 284.3 $ 225.5 $ 596.4 $ 477.3
======== ======== ======== ========
Other comprehensive income includes foreign currency translation adjustments,
net unrealized gains and losses on investments in securities and retained
interests in securitized assets.
-6-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes to Financial Statements - Continued
Note 4. Segment Information (in millions)
Ford Credit manages its operations through two segments, Ford Credit North
America and Ford Credit International. In the Second Quarter of 2000, the
Company merged the Personal Financial Services segment into these segments.
Ford Credit Ford Credit
North Ford Credit Eliminations/ Financial
America International Reclassifications Statements
---------------- --------------- ----------------- ---------------
Second Quarter
- ---------------------------------------------
2000
- ----
Revenue $ 5,215.6 $ 924.9 $ (321.4) $ 5,819.1
Income
Income before income taxes 512.6 112.5 7.0 632.1
Provision for income taxes 189.3 37.4 7.7 234.4
Net income 323.3 75.1 (10.7) 387.7
Other disclosures
Depreciation on operating leases 1,813.1 217.5 (12.5) 2,018.1
Interest expense 2,100.4 385.4 (290.6) 2,195.2
1999
- ----
Revenue $ 4,528.1 $ 876.1 $ (385.3) $ 5,018.9
Income
Income before income taxes 410.8 150.4 (4.6) 556.6
Provision for income taxes 151.4 58.5 (2.5) 207.4
Net income 259.4 91.9 (16.0) 335.3
Other disclosures
Depreciation on operating leases 1,853.0 160.5 (59.4) 1,954.1
Interest expense 1,650.3 375.9 (319.5) 1,706.7
First Half
- ---------------------------------------
2000
- ----
Revenue $ 10,103.0 $ 1,830.7 $ (584.9) $ 11,348.8
Income
Income before income taxes 974.9 233.4 0.9 1,209.2
Provision for income taxes 362.8 80.1 5.7 448.6
Net income 612.1 153.3 (24.6) 740.8
Other disclosures
Depreciation on operating leases 3,480.2 400.6 (4.3) 3,876.5
Interest expense 4,050.9 773.9 (559.9) 4,264.9
Finance receivables (including net
investment operating leases) 149,688.5 29,020.0 (22,725.7) 155,982.8
Total assets 154,503.5 31,158.1 (17,840.9) 167,820.7
1999
- ----
Revenue $ 8,724.1 $ 1,775.7 $ (561.1) $ 9,938.7
Income
Income before income taxes 750.9 297.7 6.9 1,055.5
Provision for income taxes 269.0 121.9 2.7 393.6
Net income 481.9 175.8 (22.6) 635.1
Other disclosures
Depreciation on operating leases 3,513.0 305.0 (22.6) 3,795.4
Interest expense 3,197.6 777.1 (506.5) 3,468.2
Finance receivables (including net
investment operating leases) 130,245.5 27,429.9 (22,714.6) 134,960.8
Total assets 137,747.6 28,917.4 (18,669.2) 147,995.8
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SECOND QUARTER 2000 COMPARED WITH SECOND QUARTER 1999
In the first quarter of 2000, Ford Credit included in its results Volvo
financing operations for North America, Belgium, Britain, the Netherlands,
Norway, and Switzerland. In the second quarter, Volvo financing operations for
Finland and Spain were also included. Unless otherwise indicated, both the
second-quarter and first-half 2000 results and financial condition discussed
below include the results of these operations. Additional Volvo financing
operations will be consolidated into Ford Credit's financial results in 2001.
Ford Credit's consolidated net income in the second quarter of 2000 was $388
million, up $53 million or 16% from second quarter 1999. Compared with 1999, the
increase in earnings reflects primarily improved net financing margins and a
higher level of receivables, offset partially by higher operating costs.
Improved net financing margins reflect primarily lower depreciation expense
resulting from lower return rates of off-lease vehicles and lower scheduled
termination volumes associated with an increase in lease contracts with longer
terms.
Total net finance receivables and net investment in operating leases at June 30,
2000 were $156 billion, up $21 billion or 16% from a year earlier. The increase
results primarily from Ford Motor Company-sponsored special financing programs
that are available exclusively through Ford Credit, higher installment sales
receivables, higher wholesale receivables, and the inclusion of Volvo financing
receivables.
Higher operating costs reflect primarily the servicing of a higher level of
receivables, operating expenses of recently acquired subsidiaries, and costs
associated with the restructuring of North American operations, including
employee separation programs.
During the second quarter of 2000, Ford Credit financed 50% of all new cars and
trucks sold by Ford, Lincoln, and Mercury dealers in the U.S. compared with 43%
in the same period of 1999. In Europe, Ford Credit financed 33% of all new
vehicles sold by Ford dealers, unchanged from a year ago. Ford Credit's retail
financing for new and used vehicles totaled about 976,000 in the United States
and about 206,000 in Europe during the second quarter of 2000. Ford Credit
provided wholesale financing for 82% of Ford, Lincoln, and Mercury factory sales
in the United States and 95% of Ford factory sales in Europe compared with 83%
for the United States and 96% for Europe in the second quarter of 1999.
FIRST HALF 2000 COMPARED WITH 1999
For the first half of 2000, Ford Credit's consolidated net income was $741
million, up $106 million or 17% from the first half of 1999. Compared with 1999,
the increase in earnings reflects primarily improved net financing margins and a
higher level of receivables, offset partially by higher operating costs,
including employee separation programs.
During the first half of 2000, Ford Credit provided retail financing for 49% of
all new cars and trucks sold by Ford, Lincoln, and Mercury dealers in the U.S.
compared with 44% in the first half of 1999. In Europe, Ford Credit financed 32%
of all new vehicles sold by Ford dealers in the first half of 2000, unchanged
from a year ago. In the first half of 2000, Ford Credit provided retail
financing for about 1,827,000 and about 412,000 new and used vehicles in the
U.S. and Europe, respectively. Ford Credit also provided wholesale financing for
84% of Ford, Lincoln, and Mercury U.S. factory sales and 97% of Ford Europe
factory sales compared with 83% for the U.S. and 95% for Europe in the first
half of 1999.
-8-
Ford Credit Liquidity and Capital Resources
Ford Credit's outstanding debt at June 30, 2000 and at the end of each of the
last four years was as follows (in millions):
June 30, December 31
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- ------------- ------------- ------------
Commercial paper & STBAs(A) $ 38,319 $ 43,078 $ 48,636 $ 42,311 $ 38,774
Other short-term debt (B) 5,628 6,770 4,997 3,897 4,243
Long term debt
(including current portion) (C) 97,007 83,226 61,334 54,517 55,007
-------------- -------------- ------------- ------------- -----------
Total debt $ 140,954 $ 133,074 $ 114,967 $ 100,725 $ 98,024
============== ============= ============== ============== ============
United States $ 110,243 $ 104,186 $ 85,394 $ 78,443 $ 76,635
Europe 14,939 14,510 16,653 12,491 14,028
Other international 15,772 14,378 12,920 9,791 7,361
-------------- ------------- ------------- ------------- -----------
Total debt $ 140,954 $ 133,074 $ 114,967 $ 100,725 $ 98,024
============== ============= ============== ============= ===========
Memo:
Total support facilities (in billions)
as of June 30, 2000 and
December 31, 1999 - 1996,
respectively:
Ford Credit U.S. 26.3 26.0 26.9 26.6 27.2
FCE Bank 5.2 5.2 5.3 5.2 5.7
- - - - -
(A) Short-term borrowing agreements with bank trust departments
(B) Includes $684 million, $718 million, $989 million, $831 million, and
$2,478 million with affiliated companies at June 30, 2000, December 31,
1999, December 31, 1998, December 31, 1997, and December 31, 1996,
respectively.
(C) Includes $3,212 million, $3,457 million, $2,878 million, $3,547 million,
and $4,237 million with affiliated companies at June 30, 2000,
December 31, 1999, December 31, 1998, December 31, 1997, and December 31,
1996, respectively.
---------
Support facilities represent additional sources of funds, if required. At July
1, 2000, Ford Credit had approximately $19.1 billion of contractually committed
facilities. In addition, approximately $7.5 billion of Ford lines of credit may
be used by Ford Credit at Ford's option. These credit lines have various
maturity dates through June 30, 2005 and may be used, at Ford Credit's option,
by any of its direct or indirect majority-owned subsidiaries. Any such
borrowings will be guaranteed by Ford Credit. Banks also provide $1.4 billion of
contractually committed liquidity facilities to support Ford Credit's asset
backed commercial paper program.
Additionally, at July 1, 2000, there were approximately $4.6 billion of
contractually committed facilities available for FCE Bank plc's ("FCE Bank")
use. In addition, $598 million of Ford credit lines may be used by FCE Bank at
Ford's option. The lines have various maturity dates through June 30, 2005 and
may be used, at FCE Bank's option, by any of its direct or indirect
majority-owned subsidiaries. Any such borrowings will be guaranteed by FCE Bank.
-9-
New Accounting Standards
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued by
the Financial Accounting Standards Board in June 1998. This Statement
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either assets
or liabilities on the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be designated
specifically as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment referred to as
a fair value hedge, (b) a hedge of the exposure to variability in cash flows of
a forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a forecasted transaction.
Ford Credit anticipates having each of these types of hedges, and will
comply with the requirements of SFAS 133 when adopted by Ford Credit. Ford
Credit expects to adopt SFAS 133 beginning January 1, 2001. Ford Credit has not
yet determined the effect of adopting SFAS 133.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of purported class actions and other proceedings
affecting Ford Credit, see Item 5, "Other Information - Information
Concerning Ford - Legal Proceedings - Ford - Class Actions - Late
Charges Class Action and Bankruptcy Discharge Class Actions" and
"Other Matters - Red Carpet Lease Terminations."
Item 2. Changes in Securities
Not required
Item 3. Defaults Under Senior Securities
Not required
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
-10-
Item 5. Other Information
INFORMATION CONCERNING FORD
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended June 30, 2000 and 1999
(in millions)
Second Quarter First Half
-------------------------- --------------------------
2000 1999 2000 1999
---------- ----------- ----------- ----------
(unaudited) (unaudited)
AUTOMOTIVE
Sales $37,366 $35,546 $73,541 $67,143
Costs and expenses
Costs of sales 33,515 30,796 65,093 58,533
Selling, administrative and other expenses 2,458 2,296 4,723 4,073
------- ------- ------- -------
Total costs and expenses 35,973 33,092 69,816 62,606
Operating income 1,393 2,454 3,725 4,537
Interest income 389 346 757 685
Interest expense 327 337 645 622
------- ------- ------- -------
Net interest income 62 9 112 63
Equity in net income (loss) of affiliated companies 29 (12) (3) 22
Net revenue (expense) from transactions with
Financial Services 20 (17) 10 (45)
------- ------- ------- -------
Income before income taxes - Automotive 1,504 2,434 3,844 4,577
FINANCIAL SERVICES
Revenues 7,153 6,361 13,872 12,313
Costs and expenses
Interest expense 2,311 1,825 4,524 3,713
Depreciation 2,398 2,391 4,606 4,548
Operating and other expenses 1,249 1,101 2,460 2,098
Provision for credit and insurance losses 411 372 865 763
------- ------- ------- -------
Total costs and expenses 6,369 5,689 12,455 11,122
Net revenue (expense) from transactions with
Automotive (20) 17 (10) 45
------- ------- ------- -------
Income before income taxes - Financial Services 764 689 1,407 1,236
------- ------- ------- -------
TOTAL COMPANY
Income before income taxes 2,268 3,123 5,251 5,813
Provision for income taxes 728 1,034 1,750 1,927
------- ------- ------- -------
Income before minority interests 1,540 2,089 3,501 3,886
Minority interests in net income of subsidiaries 27 31 56 54
------- ------- ------- -------
Net income from continuing operations 1,513 2,058 3,445 3,832
Net income from discontinued operation 162 280 309 485
Loss on spin-off of discontinued operation 2,252 - 2,252 -
------- ------- ------- -------
Net income (loss) $ (577) $ 2,338 $ 1,502 $ 4,317
======= ======= ======= =======
Income (loss) attributable to Common and Class B
Stock after preferred stock dividends $ (580) $ 2,335 $1,495 $ 4,310
Average number of shares of Common and Class B
Stock outstanding 1,205 1,211 1,206 1,211
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic Income
Net income (loss) from continuing operations $ 1.26 $ 1.70 $ 2.87 $ 3.17
Net income (loss) (0.48) 1.93 1.25 3.57
Diluted Income
Net income (loss) from continuing operations $ 1.24 $ 1.66 $ 2.81 $ 3.09
Net income (loss) (0.47) 1.89 1.22 3.48
Cash dividends $ 0.50 $ 0.46 $ 1.00 $ 0.92
-11-
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Ford
- -------------------------------------------------------------------------
In addition to specific explanations discussed below, comparisons between
Ford's 2000 and 1999 second quarter and first half results are influenced by two
important events:
o On June 28, 2000, Ford distributed 130 million shares of Visteon, which
represented its 100% ownership interest, by means of a tax-free spin-off in
the form of a dividend on Ford Common and Class B Stock. Throughout this
discussion, Visteon is reflected as a discontinued operation. Visteon's
results and financial condition have been excluded from all amounts except
total net income and total earnings per share.
o On March 31, 1999, Ford purchased AB Volvo's worldwide passenger car
business ("Volvo Car"). Volvo Car's results and financial condition
have been included in Ford's financial statements on a consolidated
basis since the second quarter of 1999.
SECOND QUARTER RESULTS OF OPERATIONS
Ford's worldwide results were a net loss of $577 million in the second
quarter of 2000, or $(0.47) per diluted share of Common and Class B Stock. This
compares with second quarter earnings in 1999 of $2,338 million, or $1.89 per
diluted share (second quarter 1999 earnings included a one-time inventory-
related profit reduction of $146 million for Volvo Car). Second quarter 2000
earnings include a one-time, non-cash charge of $2,252 million resulting from
the spin-off of Visteon and charges of $1,019 million for asset impairment
and restructuring costs related to Ford brand operations in Europe.
As supplemental information, excluding these one-time charges, Ford's
earnings in the second quarter would have been $2,694 million, or $2.20 per
diluted share. Worldwide sales revenue was $44.5 billion in the second quarter
of 2000, up $2.6 billion from a year ago. Unit sales of cars and trucks were
1,991,000, up 63,000 units.
Results by business sector for the second quarter of 2000 and 1999 are
shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
Automotive Sector $1,052 $1,651 $ (599)
Financial Services Sector 461 407 54
------ ------ --------
Total continuing operations 1,513 2,058 (545)
Net income from discontinued operation 162 280 (118)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------ ------ -------
Total Ford $ (577) $2,338 $(2,915)
====== ====== =======
-12-
Automotive Sector
- -----------------
Worldwide earnings for Ford's Automotive sector were $1,052 million in
the second quarter of 2000, on sales of $37.4 billion. Earnings in the
second quarter of 1999 were $1,651 million, on sales of $35.5 billion.
Details of second quarter Automotive sector earnings from continuing
operations are shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
North American Automotive $1,843 $1,698 $ 145
Automotive outside North America
- Europe (863) 81 (944)
- South America (63) (117) 54
- Rest of World 135 (11) 146
------ ------ ------
Total Automotive outside North America (791) (47) (744)
------ ------ ------
Total Automotive Sector $1,052 $1,651 $ (599)
====== ====== ======
Automotive sector earnings in North America were $1,843 million in the
second quarter of 2000, on sales of $27.7 billion. In the second quarter of
1999, earnings were $1,698 million, on sales of $25.5 billion. The increase in
earnings reflects primarily increased volume and higher net revenue. The
after-tax return on sales for Ford's Automotive sector in North America was 6.7%
in the second quarter of 2000, unchanged from a year ago.
In the second quarter of 2000, 4.9 million new cars and trucks were sold in
the United States, up from 4.7 million units a year ago. Ford's share of those
unit sales was 24.9% in the second quarter of 2000, up 2/10 of a percentage
point from a year ago. The improvement in market share reflects primarily
strong market acceptance of Ford brands.
Ford's Automotive sector losses in Europe were $863 million in the
second quarter of 2000, compared with earnings of $81 million a year ago
(second quarter 1999 European earnings included a one-time inventory-related
profit reduction of $125 million for Volvo Car). As an additional step toward
Ford's goal to improve results outside the U.S., Ford performed an extensive
business review of the Ford brand operations in Europe in the second quarter of
2000. The review was performed to address the Company's performance in the
competitive and regulatory environment in Europe and its concern regarding
overcapacity. The review included an assessment of operating costs and Ford
brand manufacturing requirements in Europe. As a result of this review, Ford
recorded an after-tax charge of $1,019 million in the second quarter of 2000.
This charge included $715 million for asset impairments and $304 million for
restructuring costs. The restructuring charge included employee separation
costs of $277 million and other exit-related costs of $27 million. Employee
separation includes a workforce reduction of about 3,300 employees (2,900
hourly and 400 salaried) related to the planned cessation of vehicle production
at the Dagenham (U.K.) Body and Assembly Plant, which will occur in two phases
(in the third quarter 2000 and by first quarter 2002). Excluding this charge,
Ford's European results, as a whole, would have been a profit of $156 million.
In the second quarter of 2000, 4.8 million new cars and trucks were sold in
Ford's nineteen primary European markets, down 25,000 units from a year ago.
Ford's share of those unit sales was 9.6% in the second quarter of 2000,
down 1.4 percentage points from a year ago, reflecting a decrease in demand
for Ford branded vehicles.
Ford's Automotive sector results in South America were a loss of $63
million in the second quarter of 2000, compared with a loss of $117 million a
year ago. The improvement reflects primarily improved vehicle margins resulting
from cost reductions, product mix, and improved pricing.
-13-
In the second quarter of 2000, approximately 350,000 new cars and trucks
were sold in Brazil, compared with 336,000 a year ago. Ford's share of those
unit sales was 9.3% in the second quarter of 2000, down 1.1 percentage points
from a year ago. The decline in market share reflects primarily aggressive
marketing actions by competitors.
Automotive sector earnings outside North America, Europe and South America
("Rest of World") were $135 million in the second quarter of 2000, compared with
losses of $11 million in the second quarter of 1999. The improvement in earnings
reflects primarily improved results at Mazda and other Asia Pacific operations.
Financial Services Sector
- -------------------------
Earnings of Ford's Financial Services sector consist primarily of two
segments, Ford Credit and Hertz. Details of second quarter Financial Services
sector earnings are shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- -----------
Ford Credit $388 $335 $53
Hertz 104 88 16
Minority Interests, Eliminations,
and Other (31) (16) (15)
---- ---- ---
Total Financial Services Sector $461 $407 $54
==== ==== ===
Memo: Ford's share of earnings in Hertz $ 84 $ 71 $13
For a discussion of Ford Credit's results of operations in the second
quarter of 2000, see Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Second Quarter 2000 Compared with Second
Quarter 1999."
Earnings at Hertz in the second quarter of 2000 were $104 million (of which
$84 million was Ford's share), compared with earnings of $88 million (of which
$71 million was Ford's share) a year ago. The increase in earnings reflects
primarily strong volume performance in the worldwide car rental market.
Discontinued Operation - Visteon
- --------------------------------
Visteon's second quarter 2000 earnings were $162 million, compared with
$280 million in the same period a year ago. The decrease in earnings reflects
primarily a one-time price realignment of 5 percent with respect to products
sold to Ford that resulted from a joint Ford-Visteon competitive pricing study.
-14-
FIRST HALF RESULTS OF OPERATIONS - FORD
Results of Ford's operations by major business sector for the first half of
2000 and 1999 are shown below (in millions).
First Half
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ------------ ------------
Automotive Sector $ 2,604 $ 3,097 $ (493)
Financial Services Sector 841 735 106
------- ------- --------
Total continuing operations $ 3,445 $ 3,832 $ (387)
Net income from discontinued operation 309 485 (176)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------- ------- --------
Total Ford $ 1,502 $ 4,317 $ (2,815)
======= ======= ========
Ford's worldwide net income in the first half of 2000 was $1,502 million,
compared with first half 1999 net income of $4,317 million. First half 2000
earnings include the one-time charges of $3.3 billion included in Ford's
second quarter discussion.
Worldwide sales and revenues in the first half of 2000 were $87.4 billion,
up $8.0 billion from a year ago. Vehicle unit sales of cars and trucks were
3,902,000, up 199,000 units.
Automotive Sector
- -----------------
Worldwide earnings for Ford's Automotive sector were $2,604 million in the
first half of 2000 on sales of $73.5 billion. Earnings in the first half of 1999
were $3,097 million on sales of $67.1 billion. First half 2000 results include
the one-time European charges of $1,019 million included in Ford's second
quarter discussion. Adjusted for constant volume and mix, total automotive
costs were down $100 million compared with the first half of 1999.
Automotive sector earnings in the first half of 2000 and 1999 are shown
below (in millions).
First Half
Net Income/(Loss)
----------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
North American Automotive $3,510 $3,077 $ 433
Automotive Outside North America
- Europe (866) 236 (1,102)
- South America (145) (258) 113
- Rest of World 105 42 63
------ ------ ------
Total Automotive Outside
North America (906) 20 (926)
------ ------ ------
Total Automotive Sector $2,604 $3,097 $ (493)
====== ====== ======
Automotive sector earnings in North America were $3,510 million in the
first half of 2000, up $433 million from the first half of 1999. The increase
reflects primarily higher net revenue and increased volume. The North American
Automotive after-tax return on sales was 6.4% in the first half of 2000, up 2/10
of a percentage point from a year ago.
-15-
In the first half of 2000, 9.4 million new cars and trucks were sold in the
United States, up from 8.8 million units a year ago. Ford's share of those
unit sales was 24.4% in the first half of 2000, down 3/10 of a percentage point
from a year ago. The decline in market share reflects primarily strong
industry demand and capacity limitations.
Automotive sector losses in Europe in the first half of 2000 were $866
million, compared to earnings of $236 million in the first half of 1999. The
deterioration reflects primarily the one-time after-tax charges of $1,019
million after tax in the second quarter of 2000, which is included in Ford's
second quarter discussion.
In the first half of 2000, 9.9 million new cars and trucks were sold in
Ford's nineteen primary European markets, up 177,000 units from a year ago.
Ford's share of those unit sales was 9.6% in the first half of 2000,
down 6/10 of a percentage point from a year ago. Ford's market share decrease
reflects increasing competitive activity impacting Fiesta and Mondeo models
and limited Transit availability after the new model introduction at the end
of March.
Automotive sector results in South America were a loss of $145 million in
the first half of 2000, compared with a loss of $258 million in the first half a
year ago. The improvement reflects primarily improved vehicle margins resulting
from cost reductions, product mix, and improved pricing. In the first half of
2000, 660,000 new cars and trucks were sold in Brazil, compared with 612,000 a
year ago. Ford's share of those unit sales was 9.4% in the first half of 2000,
down 3/10 of a percentage point from a year ago.
Automotive sector earnings outside North America, Europe and South America
("Rest of World") were $105 million in the first half of 2000, compared with
$42 million in the first half of 1999.
Financial Services Sector
- -------------------------
Higher earnings at Ford Credit and Hertz in the first half of 2000,
compared with the first half of 1999, reflect primarily the same factors as
those described in the discussion of second quarter results of operations.
Details of Financial Services sector earnings in the first half of 2000 and 1999
are shown below (in millions). For a discussion of Ford Credit's results of
operations in the first half of 2000, see Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations - First Half 2000
Compared with 1999."
First Half
Net Income/(Loss)
----------------------------------------
2000
O/(U)
2000 1999 1999
------------ ------------ ------------
Ford Credit $741 $635 $106
Hertz 160 137 23
Minority interests, Eliminations,
and Other (60) (37) (23)
---- ---- ----
Total Financial Services Sector $841 $735 $106
==== ==== ====
Memo: Ford's share of earnings in Hertz $130 $111 $ 19
Discontinued Operation - Visteon
- --------------------------------
Visteon's first half 2000 earnings were $309 million, compared with
$485 million in the same period a year ago. The decrease in earnings reflects
primarily the one-time price realignment of 5 percent with respect to products
sold to Ford that resulted from a joint Ford-Visteon competitive pricing study.
-16-
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
- -----------------
At June 30, 2000, Ford's Automotive sector had $25.6 billion of cash and
marketable securities, up $3.8 billion from December 31, 1999. The increase in
cash reflects primarily cash flow from operations. Automotive capital
expenditures totaled $3.0 billion in the first half of 2000, up $243 million
from the same period a year ago. During the first half of 2000, the Company paid
quarterly cash dividends on its Common Stock, Class B Stock, and Preferred Stock
totaling $1,213 million. In addition, the Company paid $365 million in cash
dividends related to the Visteon spin-off.
At June 30, 2000, Ford's Automotive sector had total debt of $10.8 billion,
compared with $11.7 billion at December 31, 1999. Automotive debt at June 30,
2000 was 31% of total capital (the sum of Ford stockholders' equity and
Automotive debt), up one percentage point from December 31, 1999.
At July 1, 2000, Ford had long-term contractually committed global credit
agreements under which $8.4 billion is available from various banks; 87% are
available through June 30, 2005. The entire $8.4 billion may be used, at Ford's
option, by any affiliate of Ford; however, any borrowing by an affiliate under
these agreements will be guaranteed by Ford. Ford also has the ability to
transfer on a non-guaranteed basis $8.1 billion of such credit lines in varying
portions to Ford Credit and FCE Bank plc. In addition, at July 1, 2000, $226
million of contractually committed credit facilities were available to various
Automotive sector affiliates outside the U.S. Approximately $61 million of these
facilities were in use at July 1, 2000.
Financial Services Sector
- -------------------------
At June 30, 2000, Ford's Financial Services sector had cash and cash
equivalents of $1.7 billion, up $87 million from December 31, 1999. Finance
receivables and net investments in operating leases were $167.6 billion at June
30, 2000, up from $155.8 billion at December 31, 1999.
Total debt was $149.1 billion at June 30, 2000, up $9.1 billion from
December 31, 1999. This includes outstanding commercial paper at June 30, 2000
of $37.3 billion at Ford Credit, and $2.3 billion at Hertz, with an average
remaining maturity of 27 days and 15 days, respectively.
At July 1, 2000, Financial Services sector had a total of $27.3 billion of
contractually committed support facilities (excluding the $8.1 billion available
under Ford's global credit agreements). Of these facilities, $23.7 billion are
contractually committed global credit agreements under which $19.1 billion and
$4.6 billion are available to Ford Credit and FCE Bank plc, respectively, from
various banks; 55% and 65%, respectively, of such facilities are available
through June 30, 2005. The entire $19.1 billion may be used, at Ford Credit's
option, by any subsidiary of Ford Credit, and the entire $4.6 billion may be
used, at FCE Bank plc's option, by any subsidiary of FCE Bank plc. Any
borrowings of such subsidiaries under these agreements will be guaranteed by
Ford Credit or FCE Bank plc, as the case may be. At July 1, 2000, $237 million
of the Ford Credit global facilities were in use and $279 million of the FCE
Bank plc global facilities were in use. Other than the global credit agreements,
the remaining portion of the Financial Services sector support facilities at
July 1, 2000 consisted of $2.7 billion of contractually committed support
facilities available to Hertz in the U.S. and $800 million of contractually
committed support facilities available to various affiliates outside the U.S.;
at July 1, 2000, approximately $600 million of these facilities were in use.
Furthermore, banks provide $1,425 million of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
-17-
VALUE ENHANCEMENT PLAN
In April, 2000, Ford's Board of Directors approved in principle a
recapitalization of the Company, known as the Value Enhancement Plan. The
recapitalization will be effected through the merger of Ford Value Corporation,
a wholly owned subsidiary of the Company, with and into the Company pursuant to
a Recapitalization Agreement and Plan of Merger, dated as of June 27, 2000 (the
"Agreement"). On June 27, 2000, Ford's Board of Directors approved the
Agreement. The recapitalization is subject to shareholder approval;
shareholders of record on June 27, 2000 are eligible to vote on the
recapitalization at a special meeting of shareholders scheduled for August 2,
2000.
In the recapitalization, holders of the Company's Common and Class B stock
will exchange each share of Common or Class B stock for one share of a new class
of Common or Class B stock (depending on the class owned before the
recapitalization) and, at the holders' option, one of the following: (1) $20 in
cash, subject to adjustment, (2) approximately 0.748 shares of a new class of
common stock with a value of $20, calculated as provided in the Agreement, or
(3) a combination of cash and a new class of common stock, with an aggregate
value of $20, also calculated as provided in the Agreement, with the relative
cash and stock portions determined pursuant to a formula intended to result in a
shareholder maintaining approximately 99% of his or her percentage ownership
interest in the Company. The total cash distributed in the recapitalization will
be limited to $10 billion.
LAND ROVER
On June 30, 2000, Ford purchased the Land Rover business from the BMW Group
for a purchase price of approximately three billion euros. Approximately
two-thirds of the purchase price (equivalent to $1.9 billion at June 30, 2000)
was paid at the time of closing. The remainder will be paid in 2005. The
acquisition involves the entire Land Rover line of products, and related
assembly and engineering facilities. It does not include Rover's passenger car
business or financial services business.
The acquisition will be accounted for as a purchase. The assets purchased,
liabilities assumed and the results of operations of Land Rover will be included
in Ford's financial statements on a consolidated basis beginning in the third
quarter of 2000. Ford expects the Land Rover acquisition to be accretive
to earnings in 2002, but have a negative impact on earnings in the near-term.
Ford expects the impact of the Land Rover acquisition on earnings to be
adverse by approximately 10-15 cents per share in the second half of 2000, plus
there is the potential for an inventory-related profit reduction in the third
quarter of 2000.
-18-
NEW ACCOUNTING STANDARD - FORD
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued by
the Financial Accounting Standards Board in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either assets
or liabilities on the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be designated
specifically as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment referred to as
a fair value hedge, (b) a hedge of the exposure to variability in cash flows of
a forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a forecasted transaction.
Ford anticipates having each of these types of hedges, and will comply with
the requirements of SFAS 133 when adopted. Ford expects to adopt SFAS 133
beginning January 1, 2001. Ford has not yet determined the effect of adopting
SFAS 133.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
Ford is required to adopt SAB 101 in the fourth quarter of 2000
(retroactive to January 1, 2000) and is awaiting interpretive guidance, not yet
issued by the SEC, to complete its assessment of the impact SAB 101 may have on
Ford's financial statements.
-19-
Legal Proceedings - Ford
- --------------------------
Class Actions
- -------------
Paint Class Actions. (Previously discussed on page 23 of Ford Credit's
Annual Report on Form 10-K for year ended December 31, 1999 (the "10-K
Report").) On May 11, 2000, the Texas Supreme Court in the Sheldon case
reversed the trial court, decertified the class, and remanded the case to
the trial court for further proceedings.
Ignition Switch Class Action. (Previously discussed on page 23 of the 10-K
Report.) The renewed motion for class certification in Snodgrass has been
denied. Plaintiffs' motion for reconsideration is pending.
Flat Glass Class Action. (Previously discussed on pages 24 and 25 of
the 10-K Report.) In connection with the spin-off by Ford to its stockholders
of Ford's ownership interest in Visteon Corporation ("Visteon"), as between
Ford and Visteon, Visteon has agreed to assume responsibility for the defense
of, and any prospective liability that may result from, these lawsuits.
Seat Back Class Actions. (Previously discussed on page 26 of the 10-K
Report and on page 18 of Ford Credit's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 (the "First Quarter 10-Q Report").) The New Jersey
Supreme Court has refused to review the denial of Ford's motion to dismiss in
that state. However, the trial courts in Maryland and New York have each
granted Ford's motions to dismiss. Plaintiffs have filed appeals in both cases.
Head Gasket Class Action. (Previously discussed on pages 26 and 27 of
the 10-K Report) The Illinois case has been remanded to state court. A third
purported class action has been filed in Indiana. Plaintiffs in the Indiana
case allege that the 3.8 liter engine in the 1996 Windstar was identical to the
engines used in vehicles covered by the Owner Notification Program ("ONP")
that extended warranty coverage on 1994-1995 vehicles with the 3.8 liter engine
to 5 years or 60,000 miles. The action essentially challenges Ford's failure to
include 1996 Windstars in the ONP.
Late Charges Class Action. (Previously discussed on page 27 of the 10-K
Report) As previously reported, a California trial court certified a nationwide
class action on behalf of persons alleging that Ford Credit lease contract late
fees are excessive. The California Supreme Court recently declined to review the
trial court's certification order, and trial is expected to commence in 2001.
Wartime Labor. (Previously discussed on page 27 of the 10-K Report and on
page 18 the First Quarter 10-Q Report.) On July 17, 2000, the U.S., Germany and
other countries signed agreements establishing a DM10 billion Foundation to
provide humanitarian assistance to victims of the WWII Nazi forced labor program
and other wrongdoing. Separately, the U.S. and Germany signed an Executive
Agreement pursuant to which the U.S. will seek the dismissal of any lawsuits
against German companies and their affiliates for wrongs arising out of WWII and
the Nazi era. It is anticipated that the Agreement will result in the dismissal
of all class action litigation against Ford and Ford Germany, relating to the
use of civilian forced labor at the Cologne plant during WWII.
5.4 Liter Engine Class Action. A purported class action was filed in April
2000 in New Jersey alleging that Ford fraudulently sold F-Series trucks with
defective 5.4 liter engines. Plaintiffs allege that the engines "knocked," and
that customers who complained were offered remanufactured engines instead of new
engines. The complaint also contains an allegation of odor emitting from the
defroster or air conditioner. The complaint seeks treble damages, rescission,
refund, attorney fees and other relief. Ford recently removed the case to
federal court and filed a motion to dismiss.
-20-
Throttle Body Assemblies Class Action. A purported nationwide class action
has been filed in Ohio on behalf of all persons who own or lease 1999 Mercury
Villagers. The complaint alleges that the vehicle has a defective throttle body
assembly that causes the gas pedal to intermittently lock. The complaint alleges
breach of warranty, negligence, and violation of consumer protection statutes.
Plaintiffs seek an order requiring Ford to recall the vehicles. They also seek
unspecified compensatory damages, treble damages, attorneys fees, and costs.
Ford recently removed the case to federal court.
Bankruptcy Discharge Class Actions. Three class actions have been filed
against Ford Credit and PRIMUS Automotive Financial Services, Inc.
("PRIMUS") alleging violations of the discharge provisions of the bankruptcy
laws. In Pertuso v. Ford Credit, Plaintiffs allege that Ford Credit's policies
and practices for obtaining reaffirmation agreements violate Federal law and
constitute an unfair collection practice. Specifically, they allege that
debtors sign and return reaffirmation agreements to Ford Credit that
are never filed with the court. The case was dismissed at the trial court level
and is now on appeal before the United States Sixth Circuit Court of Appeals.
Molloy v. PRIMUS and DuBois v. Ford Credit are nationwide class action lawsuits.
Both lawsuits allege attempts to collect on discharged,
non-reaffirmed debts. Such practices violate both the Bankruptcy Code and the
Fair Debt Collections Practices Act. In the Molloy case, our motion
to dismiss was denied and we are proceeding with discovery. The DuBois case
was recently filed and we are preparing an answer.
Other Matters
- -------------
Red Carpet Lease Terminations. (Previously discussed on page 28 of the 10-K
Report) As previously reported, numerous states have been investigating Ford
Credit's early lease termination charges, and the alleged improper failure to
itemize those charges. Ford Credit has reached a settlement with the State of
California at an estimated cost of approximately $200,000. In order to
preclude future private claims of this nature, Ford Credit has agreed that the
State of California will file a class action complaint relating to this matter.
Ford Credit will then agree to the entry of a judgment in that case that
incorporates the settlement terms. With respect to the 39 other states that
are investigating similar issues, the Florida Attorney General's Office
continues to coordinate negotiations, and Ford Credit is optimistic that a
similar favorable resolution will soon be reached.
Rouge Powerhouse Insurance Litigation. (Previously discussed on page 18 of
the First Quarter 10-Q Report.) In early June 2000, Ford filed an action in
state court against Factory Mutual Insurance Company and a number of other Ford
property insurance carriers for breach of contract under property insurance
policies for failure to pay claims in respect of losses incurred by Ford related
to the February 1, 1999 Rouge Powerhouse explosion. As reported earlier,
insurers of Rouge Steel Company (including Factory Mutual) had previously filed
two subrogation actions against the Company. One of these subrogation actions is
still pending in state court. The other subrogation action, which Factory Mutual
filed in federal court and dismissed without prejudice, has been re-filed as a
counterclaim in the Company's coverage action against Factory Mutual in state
court. Factory Mutual's subrogation counterclaim seeks recovery in excess of
$134 million. Additionally, several insurers of a supplier to Rouge Steel
Company (Cleveland Cliffs, Inc.) have filed a subrogation action against Ford
seeking recovery of an undisclosed amount.
-21-
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Please refer to Exhibit Index
(b) Reports on Form 8-K during the quarter ended June 30, 2000:
FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- -------------- -----------------
April 19, 2000 Item 5 - Other Events News release dated
April 17, 2000 of Ford
Motor Credit Company
and subsidiaries
for the quarter
ended March 31, 2000 and
news releases dated
April 14, 2000 and
April 17, 2000 of Ford
Motor Company and
subsidiaries
for the quarter
ended March 31, 2000 with
attachments.
June 5, 2000 Item 5 - Other Events None
June 14, 2000 Item 5 - Other Events None
-22-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORD MOTOR CREDIT COMPANY
(Registrant)
July 31, 2000 /s/ E. S. Acton
---------------------
E. S. Acton
Executive Vice President -
Chief Financial Officer
and Treasurer
-23-
Report of Independent Accountants
To the Board of Directors and Stockholder
of Ford Motor Credit Company:
We have reviewed the accompanying condensed consolidated balance sheets of Ford
Motor Credit Company and Subsidiaries as of June 30, 2000 and 1999, and the
related condensed consolidated statements of income and of earnings retained for
use in the business for each of the three-month and six-month periods ended June
30, 2000 and 1999 and the condensed consolidated statement of cash flows for the
six-month periods ended June 30, 2000 and 1999. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1999, and the related
consolidated statements of income, stockholder's equity, and of cash flows for
the year then ended (not presented herein), and in our report dated January 24,
2000 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
July 14, 2000
-24-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Sequential
Designation Description Method of Filing
- ----------- ------------ -----------------
12-A Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford Credit
12-B Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford.
15 Letter from Filed with this
PricewaterhouseCoopers LLP Report.
dated July 31, 2000,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule Filed with this
Report.
-25-
Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Calculation of Ratio of Earnings to Fixed Charges
(in millions)
First Half For the Years Ended December 31
------------------------ -------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------------------ -------------------------------------------------------------------
Earnings
Income before income taxes $ 1,209.2 $ 1,055.5 $ 2,103.8 $ 1,812.2 $ 1,806.0 $ 2,240.2 $ 2,327.8
Less equity in net income of
affiliated companies 20.9 0.3 24.9 2.3 1.0 55.3 255.4
Fixed charges 4,285.6 3,480.0 7,219.3 6,936.8 6,294.4 6,257.9 6,007.3
------- ------- ------- ------- ------- ------- -------
Earnings before fixed
charges $ 5,473.9 $ 4,535.2 $ 9,298.2 $ 8,746.7 $ 8,099.4 $ 8,442.8 $ 8,079.7
========== ========== ========== ========== ========== ========== ==========
Fixed Charges
Interest expense $ 4,264.9 $ 3,468.2 $ 7,193.4 $ 6,910.4 $ 6,268.2 $ 6,235.7 $ 5,987.8
Rents 20.7 12.6 25.9 26.4 26.2 22.2 19.5
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 4,285.6 $ 3,480.8 $ 7,219.3 $ 6,936.8 $ 6,294.4 $ 6,257.9 $ 6,007.3
========== ========== ========== ========== ========== ========== ==========
Ratio of earnings to fixed
charges 1.3 1.3 1.3 1.3 1.3 1.3 1.3
=========== ========== ========== ========== ========== ========== ==========
For purposes of the Ford Credit ratio, earnings consist of the sum of pre-tax
income from continuing operations before adjustment for minority interests in
consolidated subsidiaries, plus fixed charges. Fixed charges consist of interest
on borrowed funds, amortization of debt discount, premium, and issuance expense,
and one-third of all rental expense (the proportion deemed representative of the
interest factor).
EXHIBIT 12-B
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
First
Half For the Years Ended December 31
--------------- ------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
Earnings
- --------
Income before income taxes $ 5,251 $ 9,854 $24,280 $10,124 $ 6,189 $ 6,335
Equity in net (income)/loss of affiliates
plus dividends from affiliates 23 (12) 87 141 75 205
Adjusted fixed charges a/ 5,353 9,381 9,161 10,896 10,785 10,520
------- ------- ------- ------- ------- -------
Earnings $10,627 $19,223 $33,528 $21,161 $17,049 $17,060
======= ======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
-------------------------
Interest expense b/ $ 5,188 $ 9,065 $ 8,881 $10,559 $10,450 $10,088
Interest portion of rental expense c/ 136 258 228 297 292 365
Preferred stock dividend requirements of
majority owned subsidiaries and trusts d/ 27 55 55 55 55 204
------- ------- ------- ------- ------- -------
Fixed charges 5,351 9,378 9,164 10,911 10,797 10,657
Ford preferred stock dividend requirements e/ 11 22 121 85 100 472
------- ------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $ 5,362 $ 9,400 $ 9,285 $10,996 $10,897 $11,129
======= ======= ======= ======= ======= =======
Ratios
- ------
Ratio of earnings to fixed charges 2.0 2.0 3.7 f/ 1.9 1.6 1.6
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.0 2.0 3.6 f/ 1.9 1.6 1.5
Visteon is excluded from all amounts.
- -------
a/ Fixed charges, as shown above, adjusted to exclude the amount of interest
capitalized during the period and preferred stock dividend requirements of
majority owned subsidiaries and trusts.
b/ Includes interest, whether expensed or capitalized, and amortization of debt
expense and discount or premium relating to any indebtedness.
c/ One-third of all rental expense is deemed to be interest.
d/ Preferred stock dividend requirements of Ford Holdings, Inc. (1995) increased
to an amount representing the pre-tax earnings which would be required to
cover such dividend requirements based on Ford's effective income tax rates.
Beginning in Fourth Quarter 1995, includes requirements related to
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust.
e/ Preferred stock dividend requirements of Ford increased to an
amount representing the pre-tax earnings which would be required to cover
such dividend requirements based on Ford's effective income tax
rates.
f/ Earnings used in calculation of this ratio include the $15,955 million gain
on the spin-off of The Associates. Excluding this gain, the ratio is 1.9.