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, 1995
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
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-1612444
- -------------------- -----------------------------------
(State of Incorporation) (I.R.S. employer identification no.)
The American Road, Dearborn, Michigan 48121
- --------------------------------------- ---------
(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 July 31, 1995.
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 22.
EXHIBIT INDEX APPEARS AT PAGE 18.
<PAGE 2> FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PART 1. 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, 1994 (the "10-K Report"). Information
relating to earnings a share is not presented because the registrant,
Ford Motor Credit Company ("Ford Credit"), is a wholly owned
subsidiary of Ford Motor Company ("Ford").
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Statement of Income
and of Earnings Retained for Use in the Business
For the Periods Ended June 30, 1995 and 1994
(in millions)
Second Quarter First Half
1995 1994 1995 1994
--------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Financing Revenue
Operating leases $ 1,717.2 $ 1,261.3 $ 3,379.1 $ 2,371.5
Retail 892.8 794.5 1,721.9 1,589.6
Wholesale 401.0 248.9 742.8 435.3
Diversified 36.9 27.4 69.9 52.7
Other 84.7 66.6 165.2 124.0
---------- ---------- ---------- ----------
Total financing revenue 3,132.6 2,398.7 6,078.9 4,573.1
Investment and other income 121.6 194.7 234.2 277.5
---------- ---------- ---------- ----------
Total revenue 3,254.2 2,593.4 6,313.1 4,850.6
Expenses
Depreciation on operating leases 1,255.9 934.9 2,440.4 1,744.4
Interest expense 1,245.1 845.4 2,401.7 1,605.6
Operating expenses 200.1 230.4 470.3 443.4
Provision for credit losses 79.2 61.2 156.5 132.3
---------- ---------- ---------- ----------
Total expenses 2,780.3 2,071.9 5,468.9 3,925.7
---------- ---------- ---------- ----------
Equity in net income of affiliated
companies 48.4 51.2 107.0 104.8
Income before income taxes 522.3 572.7 951.2 1,029.7
Provision for income taxes 177.4 201.2 315.3 357.1
---------- ---------- ---------- ----------
Income before minority interest 344.9 371.5 635.9 672.6
Minority interest in net income of
subsidiaries 3.7 2.9 6.8 5.2
---------- ---------- ---------- ----------
Net income 341.2 368.6 629.1 667.4
Earnings retained for use in
the business
Beginning of period 6,137.1 5,198.7 5,849.2 4,899.9
Dividends 0 0 0 0
---------- ---------- ---------- ----------
End of period $ 6,478.3 $ 5,567.3 $ 6,478.3 $ 5,567.3
========== ========== ========== ==========
<FN>
Certain amounts for Second Quarter and First Half 1994 have been reclassified to conform
with presentations adopted in subsequent periods.
The accompanying notes are part of the financial statements.
/TABLE
<PAGE 3>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
June 30, December 31, June 30,
1995 1994 1994
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
Cash and cash equivalents $ 630.8 $ 292.0 $ 1,094.6
Investments in securities 1,737.1 1,596.3 1,258.9
Finance receivables, net (Note 1) 61,193.2 56,946.5 55,260.8
Accounts and notes receivable from
affiliated companies 399.5 250.3 381.4
Equity in net assets of affiliated companies 1,553.1 1,346.5 1,253.7
Net investment, operating leases 22,637.5 19,993.9 16,567.9
Other assets 2,510.4 2,799.0 2,160.4
----------- ----------- -----------
Total assets $ 90,661.6 $ 83,224.5 $ 77,977.7
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and
dealer reserves $ 1,466.1 $ 1,326.5 $ 1,160.8
Affiliated companies 527.1 496.0 764.1
----------- ----------- -----------
Total accounts payable 1,993.2 1,822.5 1,924.9
Debt (Note 2) 76,215.0 70,440.4 65,656.7
Deferred income taxes 2,799.3 2,405.9 2,210.6
Other liabilities and deferred income 1,685.5 1,495.6 1,421.1
----------- ----------- -----------
Total liabilities 82,693.0 76,164.4 71,213.3
Minority interest in net assets of
subsidiaries 575.1 397.5 400.4
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) 917.3 917.3 917.3
Unrealized (loss)/gain on marketable securities,
net of taxes 29.7 (70.0) (34.9)
Foreign-currency translation adjustments (56.8) (58.3) (110.7)
Earnings retained for use in the business 6,478.3 5,848.6 5,567.3
----------- ----------- -----------
Total stockholder's equity 7,393.5 6,662.6 6,364.0
----------- ----------- -----------
Total liabilities and stockholder's
equity $ 90,661.6 $ 83,224.5 $ 77,977.7
=========== =========== ===========
<FN>
Certain amounts for June 1994 have been reclassified to conform with presentations adopted
in subsequent periods.
The accompanying notes are part of the financial statements.
<PAGE 4>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended June 30, 1995 and 1994
(in millions)
First Half
1995 1994
---------- ----------
(Unaudited)
Cash flows from operating activities
Net income $ 629.1 $ 667.4
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 156.5 132.3
Depreciation and amortization 2,564.5 1,772.7
Gain on sales of finance receivables 0 (19.3)
Gain on sale of investment 0 (58 3)
Equity in net income of affiliates (107.0) (104.8)
Deferred income taxes 393.7 81.6
Changes in the following items
Other assets 78.5 196.6
Other liabilities 397.6 697.0
Other 110.1 25.1
---------- ----------
Net cash provided by operating activities 4,223.0 3,390.3
---------- ----------
Cash flows from investing activities
Purchase of finance receivables (15,493.3) (13,866.3)
Collection of finance receivables 13,022.8 11,263.8
Net change in wholesale receivables (1,849.9) (3,008.6)
Proceeds from sales of finance receivables 0 1,013.3
Purchase of operating lease vehicles (8,683.7) (6,987.8)
Proceeds from sale of operating leases 634.5 0
Liquidation of operating leases vehicles 2,974.1 1,245.5
Other (136.4) 151.6
---------- ----------
Net cash used in investing activities (9,531.9) (10,188.5)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 6,056.0 6,573.9
Principal payments on long-term debt (2,808.3) (4,345.2)
Change in short-term debt, net 2,300.7 4,579.3
Other 98.2 93.1
---------- ----------
Net cash provided by financing activities 5,646.6 6,901.1
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents 1.1 (0.6)
---------- ----------
Net change in cash and cash equivalents 338.8 102.3
Cash and cash equivalents, beginning of period 292.0 992.3
---------- ----------
Cash and cash equivalents, end of period $ 630.8 $ 1,094.6
========== ==========
Supplementary cash flow information
Interest paid $ 2,250.3 $ 1,560.8
Taxes paid 73.9 223.0
<FN>
Certain amounts for First Half 1994 have been reclassified to conform with presentations
adopted in subsequent periods.
The accompanying notes are part of the financial statements.
<PAGE 5>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables (in millions)
June 30, December 31, June 30,
1995 1994 1994
----------- ----------- -----------
(Unaudited) (Unaudited)
Retail $ 43,116.5 $ 40,566.6 $ 39,799.7
Wholesale 17,123.1 15,252.9 14,684.9
Diversified 2,807.0 2,738.2 2,595.5
Other 4,574.5 4,263.8 4,036.6
----------- ----------- -----------
Total finance receivables 67,621.1 62,821.5 61,116.7
Add loan origination costs 177.2 155.6 141.3
Less
Unearned income (5,964.2) (5,371.0) (5,259.8)
Allowance for credit losses (640.9) (659.6) (737.4)
----------- ----------- -----------
Finance receivables, net $ 61,193.2 $ 56,946.5 $ 55,260.8
=========== =========== ===========
<PAGE 6>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements (continued)
Note 2. Debt (in millions)
June 30, December 31, June 30,
1995 1994 1994
----------- ----------- -----------
(Unaudited) (Unaudited)
PAYABLE WITHIN ONE YEAR:
Commercial paper $ 35,379.8 $ 33,228.9 $ 29,021.5
Other short-term debt* 1,299.5 1,136.0 1,032.0
----------- ----------- -----------
Total short-term debt 36,679.3 34,364.9 30,053.5
Senior and subordinated
notes and debentures
payable within one year 5,435.6 4,712.7 6,292.1
----------- ----------- -----------
Total payable within
one year 42,114.9 39,077.6 36,345.6
----------- ----------- -----------
June 30, 1995
----------------------------
Weighted Average
Interest Rates*** Maturities
----------------- ----------
PAYABLE AFTER ONE YEAR:
Unsecured senior notes
Notes ** 7.14% 1996-2048 34,096.0 31,411.2 29,364.7
Unamortized premium/
(discount) 4.1 (48.4) (53.6)
----------- ----------- -----------
Total unsecured
senior notes 34,100.1 31,362.8 29,311.1
----------- ----------- -----------
Total payable
after one year 34,100.1 31,362.8 29,311.1
----------- ----------- -----------
Total debt $ 76,215.0 $ 70,440.4 $ 65,656.7
=========== =========== ===========
<FN>
* Includes $2.3 million with affiliated companies at June 30, 1994.
** Includes $1,059 million with affiliated companies at June 30, 1995.
*** Rates were variable on about 27.3% of the debt payable after one year including the
effects of interest rate swap agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORD CREDIT SECOND QUARTER 1995 RESULTS OF OPERATIONS
Ford Credit's consolidated net income for the second quarter of 1995 was
$341 million, down $27 million or 7% compared with $368 million in the second
quarter of 1994. Income from financing operations was $293 million, down $24
million or 8% from the same period a year ago. Equity in net income of
affiliated companies, primarily Ford Holdings, Inc., was $48 million compared
with $51 million in the same period a year ago.
<PAGE 7>
Compared with results from a year ago, the decrease in financing profits
in the second quarter of 1995 primarily reflected lower net interest margins,
non-recurrence of 1994's one-time gain from the sale of Ford Credit's
minority interest in Manheim Auto Auctions Inc., higher credit losses, and
lower gains from sale of receivables. Higher financing volumes were a
partial offset. The lower net interest margins reflected an increase in U.S.
portfolio borrowing rates from 5.1% to 6.7% offset partially by higher
portfolio yields on finance receivables and operating leases. Interest
margins were adversely affected because interest rates earned on finance
receivables, including operating leases net of depreciation, were limited by
competitive pressure in automotive financing. Credit loss performance
remains strong but losses have increased in the second quarter of 1995
compared with a year earlier. The increase reflected higher losses per
repossessed unit and an increase in repossession rates. The higher level of
earning assets reflected increases in operating leases, wholesale financing,
and retail installment sale receivables.
Total gross finance receivables and net investment in operating leases
at June 30, 1995 were $90.3 billion, up $12.7 billion or 16% from a year
earlier. The increase primarily reflected higher levels of operating leases,
wholesale receivables, and retail installment sale receivables. Depreciation
expense on operating leases in the second quarter of 1995 was $1,256 million,
up $321 million or 34% compared with the second quarter of 1994. The
increase reflected the higher levels of operating leases and was more than
offset by higher revenue earned from the increased volume of lease contracts.
During the second quarter of 1995, Ford Credit financed 36.1% of all new
cars and trucks sold by Ford Motor Company dealers in the United States,
compared with 35.8% in the second quarter of 1994. The increase primarily
reflected higher levels of operating lease and daily rental car financing.
Ford Credit provided retail financing for 663,000 new and used vehicles in
the United States, up 6% from a year ago. Ford Credit also provided
wholesale financing for 80.6% of Ford Motor Company factory sales to U.S. car
and truck dealers during the quarter, compared with 81.5% in the same period
a year ago.
FORD CREDIT FIRST HALF 1995 RESULTS OF OPERATIONS.
For the first half of 1995, Ford Credit's consolidated net income was
$629 million, down $38 million or 6% from $667 million in the first half of
1994. Income from financing operations was $522 million, down $40 million or
7% from the same period a year ago. Equity in net income of affiliated
companies was $107 million compared with $105 million in 1994. The factors
affecting financing profits during the first half of 1995 were the same as
those affecting second quarter results discussed above. Depreciation expense
in the first half of 1995 was $2,440 million, up $696 million or 40% compared
with the first half of 1994. The increase reflected the higher levels of
operating leases and was more than offset by higher revenue earned from the
increased volume of lease contracts.
During the first half of 1995, Ford Credit provided retail financing for
36.3% of all new cars and trucks sold by Ford Motor Company dealers in the
United States, compared with 37.1% in the same period a year ago. The
decrease primarily resulted from lower levels of retail installment sale
financing, offset partially by higher levels of operating lease financing.
Ford Credit provided U.S. retail financing for 1,235,000 new and used
vehicles compared with 1,210,000 vehicles in the first half of 1994. Ford
Credit also provided wholesale financing for 79.2% of Ford Motor Company
factory sales to U.S. car and truck dealers during the first half of 1995,
compared with 80.1% in the same period last year.
<PAGE 8>
FORD CREDIT LIQUIDITY AND CAPITAL RESOURCES
Ford Credit's outstanding debt at June 30, 1995 and at the end of each
of the last five years was as follows:
<C
June 30, December 31
---------------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
(in millions)
Commercial paper & STBA's(a) $35,452 $33,300 $24,506 $21,210 $18,232 $23,371
Other short-term debt (b) 1,227 1,065 1,001 1,785 1,642 1,411
Long-term debt (including
current portion) (c) 39,536 36,075 33,292 26,961 28,455 26,209
======= ======= ======= ======= ======= =======
Total debt $76,215 $70,440 $58,799 $49,956 $48,329 $50,991
1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
Memo:
Total support facilities $27.4 $22.3 $16.9 $13.9 $13.8 $12.7
(billions -- as of July 1,
1995 and January 1,
1995-1991, respectively)
- - - - - -
(a) Short-term borrowing agreements with bank trust departments
(b) Includes $2.3 million, $150 million and $800 million with affiliated
companies at June 30, 1995, December 31, 1993 and December 31, 1992,
respectively
(c) Includes $1,059 million with an affiliated company at June 30, 1995
Support facilities represent additional sources of funds, if required. At
June 30, 1995, Ford Credit had approximately $21.1 billion of contractually
committed facilities for use in the United States (which included $5.9 billion
of Ford bank lines that may be used by Ford Credit at Ford's option).
At June 30, 1995, all of these U.S. facilities were unused. Outside of the
United States, an additional $1.3 billion of contractually committed
facilities supported borrowing operations in Canada, Australia, New
Zealand, and Puerto Rico, substantially all of which were unused.
Effective July 1, 1995, the majority of these facilities available to Ford
Credit and its subsidiaries at June 30 were terminated and replaced by new
contractually committed global credit agreements from various banks.
Support facilities available to Ford Credit at July 1, 1995 totaled
$27.4 billion (which includes $7.6 billion of Ford bank lines that may be
used by Ford Credit at Ford's option). These facilities have various
maturity dates through June 2000. The entire $27.4 billion may be used,
at Ford Credit's option, by its subsidiaries in Canada, Australia,
New Zealand, Japan, and Puerto Rico. Any such borrowing by
will be guaranteed by Ford Credit.
<PAGE 9> PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None to Report.
Item 2. Changes in Securities
Not required.
Item 3. Defaults Upon Senior Securities
Not required.
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
Item 5. Other information
INFORMATION CONCERNING FORD
Following is a condensed consolidated statement of income (unaudited) of Ford
for the periods ended June, 1995 and 1994 (in millions except amounts per
share):
Second Quarter First Half
------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
Sales and revenues $36,389 $33,772 $71,172 $64,174
Total costs and expenses 33,766 30,906 66,031 59,561
Operating income 2,623 2,866 5,141 4,613
Automotive net interest income/(expense) 42 0 83 (48)
Automotive equity in net income
of affiliated companies 19 42 39 109
Income before income taxes 2,684 2,908 5,263 4,674
Provision for income taxes 1,053 1,161 2,041 1,986
Minority interests in net income
of subsidiaries 59 36 100 73
Net income $ 1,572 $ 1,711 $ 3,122 $ 2,615
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Income per share $ 1.45 $ 1.63 $ 2.89 $ 2.47
Income per share
assuming full dilution $ 1.30 $ 1.44 $ 2.59 $ 2.20
Cash Dividends per share $ 0.31 $ 0.225 $ 0.57 $ 0.425
<PAGE 10>
FIRST HALF 1995 RESULTS OF OPERATIONS - FORD
Overview
Ford earned $1,572 million, or $1.45 per share of Common and
Class B Stock, in the second quarter of 1995. This compares with
$1,711 million, or $1.63 per share, in the second quarter of 1994. Fully
diluted earnings per share were $1.30 in the second quarter of 1995, compared
with $1.44 a year ago. Ford's worldwide sales and revenues were
$36.4 billion, up $2.6 billion from a year ago. Vehicle unit sales of cars
and trucks were 1,811,000, down 39,000 units, or 2%. Stockholders' equity was
$25.2 billion at June 30, 1995.
On June 6, 1994, a 2-for-1 stock split in the form of a 100% stock dividend on
Ford's outstanding Common and Class B Stock became effective.
Automotive Operations
Net income from Ford's worldwide Automotive operations was $1,100 million in
the second quarter of 1995 on sales of $29.9 billion, compared with
$1,202 million in the second quarter of 1994 on sales of $28.4 billion.
In the U.S., Ford's Automotive operations earned $663 million in the second
quarter of 1995 on sales of $19.4 billion, compared with $888 million a year
ago on sales of $19.1 billion. The decline in earnings was more than
explained by lower unit volume, reflecting lower industry volume and
unfavorable dealer inventory changes that more than offset improved market
share. Changes in exchange rates (primarily the German Mark and Japanese Yen)
also reduced earnings compared with a year ago. U.S. Automotive after-tax
return on sales was 3.4% in the second quarter of 1995, down 1.2 points from a
year ago. The decline also reflected primarily the effects of lower unit
volume and unfavorable exchange rate changes.
In the second quarter of 1995, the seasonally-adjusted annual selling rate for
the U.S. car and truck industry was 14.7 million units, compared with
15.3 million units in the second quarter of 1994. Ford's car market share was
21.3% in the second quarter of 1995, down 2/10 of a point from a year ago.
Ford's truck share was 32.8%, up 2.8 points from a year ago. Ford's combined
car and truck share was 26.2%, up 1.2 points from a year ago. The improvement
in share reflected primarily strong sales of the Explorer, Windstar, F-Series
trucks and Contour/Mystique.
Outside the U.S., Automotive operations earned $437 million in the second
quarter of 1995 on sales of $10.5 billion, compared with $314 million a year
ago on sales of $9.3 billion. The improvement reflected primarily improved
margins in Europe and higher unit volume in the Asia-Pacific region. In
Europe, Automotive operations earned $319 million, compared with $167 million
a year ago.
In the second quarter of 1995, the seasonally-adjusted annual selling rate for
the European car and truck industry was 13.7 million units, up 480,000 units
from year ago levels. Ford's car share was 11.9% in the second quarter of
1995, up 4/10 of a point from a year ago. Ford's truck share was 14.5%, down
5/10 of a point from a year ago, reflecting primarily lower fleet sales.
Ford's combined car and truck share was 12.2%, up 3/10 of a point from a year
ago.
It is expected that after-tax returns for the remainder of 1995 will be lower
than the year ago period. Production volume in the second half of 1995 is
expected to be down compared with a year ago as a result of the uncertain
outlook for U.S. industry sales. This factor, combined with the timing and
cost of major new product introductions in 1995 and early 1996 and the
continued unfavorable effect of exchange rate changes, are expected to dampen
results in the upcoming quarters.
<PAGE 11>
Ford and Volkswagen AG have agreed on a separation process leading toward
dissolution of their Autolatina joint venture in Brazil and Argentina by year-
end 1995. Historically, earnings in Brazil and Argentina have represented a
significant portion of Ford's Automotive earnings outside the U.S. and Europe.
It is believed the effect, if any, of the dissolution of Autolatina on Ford's
future earnings is not likely to be material. Business conditions in these
markets, however, have been and are expected to continue to be volatile and
subject to rapid change, which can affect future earnings.
Financial Services Operations
Ford's Financial Services operations earned $472 million in the second quarter
of 1995, compared with $509 million in the second quarter of 1994. The
decrease resulted primarily from the nonrecurrence of a gain on sale in 1994
of Ford Credit's interest in Manheim Auctions ($31 million).
For a discussion of Ford Credit's operations in the second quarter of 1995,
see Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Ford Credit Second Quarter 1995 Results of
Operations." In addition, the international operations managed by Ford
Credit, but not included in its consolidated results, earned $66 million in
the second quarter of 1995, compared with $50 million a year ago.
Associates First Capital Corporation ("The Associates") earned a record
$141 million in the U.S. in the second quarter of 1995, compared with
$121 million a year ago. The increase reflected higher levels of earning
assets and improved net interest margins. The international operations
managed by The Associates, but not included in its consolidated results,
earned $27 million in the second quarter of 1995, compared with $21 million a
year ago.
USL Capital Corporation ("USL Capital") earned a record $30 million in the
second quarter of 1995, compared with $27 million a year ago. The increase
reflected higher levels of earning assets and higher gains on asset sales.
The Hertz Corporation ("Hertz") earned $19 million in the second quarter of
1995, compared with $26 million in the second quarter of 1994. The decrease
reflected primarily increased depreciation and borrowing costs, partially
offset by higher volume in construction equipment rentals and sales. The
American Road Insurance Company ("American Road") incurred a loss of $9
million in the second quarter of 1995, compared with a net income of
$13 million a year ago. The decrease reflected lower underwriting results in
floor plan products and the dissolution of an operating subsidiary.
FIRST HALF 1995 RESULTS OF OPERATIONS - FORD
Overview
Ford earned $3,122 million, or $2.89 per share of Common and Class B Stock, in
the first half of 1995. This compares with $2,615 million, or $2.47 per
share, in the first half of 1994. Ford's results a year ago included a charge
of $440 million related to the disposition of First Nationwide Bank. Fully
diluted earnings per share were $2.59 in the first half of 1995, compared with
$2.20 a year ago. Ford's worldwide sales and revenues were $71.2 billion, up
$7 billion from a year ago. Vehicle unit sales of cars and trucks were
3,581,000, up 11,000 units.
<PAGE 12>
Automotive Operations
Net income from Ford's worldwide Automotive operations was $2,241 million in
the first half of 1995 on sales of $58.5 billion, compared with $2,175 million
in the first half of 1994 on sales of $54.4 billion.
In the U.S., Ford's Automotive operations earned $1,488 million in the first
half of 1995 on sales of $38.9 billion, compared with $1,704 million a year
ago on sales of $37.1 billion. U.S. Automotive after-tax return on sales was
3.8%, down 8/10 of a point from a year ago. The decline in earnings reflected
primarily the same factors as those described in the discussion of second
quarter results of operations.
In the first half of 1995, the seasonally-adjusted annual selling rate for the
U.S. car and truck industry was 14.9 million units, compared with 15.5 million
units a year ago. Ford expects U.S. car and truck industry sales to
total 15.1 million units for the full year, compared with 15.4 million units
in 1994. Ford's car share was 21.6% in the first half of 1995, up 3/10 of a
point from a year ago. Ford's truck share was 32.6%, up 2.9 points from a
year ago. Ford's combined car and truck share was 26.3%, up 1.4 points from a
year ago.
Outside the U.S., Automotive operations earned $753 million in the first half
of 1995 on sales of $19.6 billion, compared with $471 million a year ago
on sales of $17.3 billion. The improvement reflected primarily higher unit
volume and improved margins in Europe. Ford's European Automotive operations
earned $484 million in the first half of 1995, compared with $220 million a
year ago.
In the first half of 1995, the seasonally-adjusted annual selling rate for the
European car and truck industry was 13.6 million units, compared with
13.2 million units a year ago. Ford expects European car and truck
industry sales to total 13.4 million units for the full year, compared with
13.3 million units in 1994. Ford's car share was 12% in the first half of
1995, up 2/10 of a point from a year ago. Ford's truck share was 15.1%, up
4/10 of a point from a year ago. Ford's combined car and truck share was
12.3%, up 2/10 of a point from the first half of 1994.
Financial Services Operations
Ford's Financial Services operations earned $881 million in the first half of
1995, compared with $440 million in the first half of 1994. The improvement
was explained by the nonrecurrence of the $440 million charge to net income in
the first quarter of 1994 for disposition of First Nationwide Bank.
For a discussion of Ford Credit's results of operations in the first half of
1995, see Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Ford Credit First Half 1995 Results of
Operations." In addition, the international operations managed by Ford
Credit, but not included in its consolidated results, earned $131 million in
the first half of 1995, compared with $113 million a year ago.
The Associates earned a record $293 million in the U.S. in the first half of
1995, compared with $249 million a year ago. The increase reflected higher
levels of earning assets and improved net interest margins. The international
operations managed by The Associates, but not included in its consolidated
results, earned $49 million in the first half of 1995, compared with
$39 million a year ago.
USL Capital earned a record $56 million in the first half of 1995, compared
with $48 million a year ago. Hertz earned $19 million in the first half of
1995, compared with $25 million a year ago. American Road incurred a loss of
$4 million in the first half of 1995, compared with earnings of $30 million in
the same period in 1994. These changes reflected primarily the same factors
as those described in the discussion of second quarter results of operations.
<PAGE 13>
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
Cash, cash equivalents and marketable securities of Ford's Automotive
operations were $14 billion at June 30, 1995, up $1.9 billion from December
31, 1994. The amount of cash, cash equivalents and marketable securities is
expected to decline during the second half of the year because of lower
production volume and higher capital spending. Ford paid $729 million in cash
dividends on its Common Stock, Class B Stock and Preferred Stock during the
first six months of 1995.
Automotive capital expenditures were $4 billion in the first six months of
1995, up $470 million from the same period a year ago. Automotive capital
spending is projected to increase further during the second half of the year
as a result of increases in both product and nonproduct spending. The higher
product spending reflects a record pace of new-model introductions and
increased capacity for selected components and vehicles, while the higher
nonproduct spending reflects continuing efforts to improve efficiency and
quality.
Automotive debt at June 30, 1995 totaled $6.9 billion, which was 21% of total
capitalization (stockholders' equity and Automotive debt), compared with
$7.3 billion, or 25% of total capitalization, at December 31, 1994.
At June 30, 1995, Ford (parent company only) had long-term contractually
committed credit agreements in the U.S. under which $5.9 billion were
available from various banks. These facilities were unused at June 30, 1995.
Outside the U.S., Ford had additional long-term contractually committed
credit-line agreements of $2.6 billion at June 30, 1995; none of these were in
use.
Effective July 1, 1995, most of the credit facilities discussed above were
replaced with long-term contractually committed global credit agreements under
which $8.4 billion is available from various banks at least through June 30,
2000. The entire $8.4 billion may be used, at Ford's option, by any affiliate
of Ford; however, any borrowing by an affiliate will be guaranteed by Ford.
In addition, Ford has the ability to transfer on a nonguaranteed basis the
entire $8.4 billion in varying portions to Ford Credit and Ford Credit Europe.
Financial Services Operations
Financial Services' cash, cash equivalents and investments in securities
totaled $9.2 billion at June 30, 1995, up $1.4 billion from December 31, 1994.
Net receivables and lease investments were $143.5 billion at June 30, 1995, up
$13.2 billion from December 31, 1994. The increase reflected continued growth
in earning assets at Ford Credit and The Associates.
Total debt was $136.5 billion at June 30, 1995, up $12.8 billion from December
31, 1994. The increase resulted from higher debt levels required to finance
growth in earning assets at Ford Credit and The Associates.
<PAGE 14>
At June 30, 1995, Financial Services had $34.8 billion of contractually
committed support facilities (including the $5.9 billion of the Ford Credit
agreements) for use in the U.S.; less than 2% of these facilities, excluding
the Ford Credit agreements, were in use. An additional $9 billion of
contractually committed support facilities were available outside the U.S. at
June 30, 1995; $1.5 billion of these were in use. The majority of these
facilities that were available for use by Ford Credit and Ford Credit Europe
and their subsidiaries ($21.3 billion, excluding the $5.9 billion of the Ford
Credit agreements) have been terminated effective July 1, 1995, and have been
replaced by contractually committed global credit agreements under which
$19.8 billion and $4.1 billion are available to Ford Credit and Ford Credit
Europe, respectively, from various banks; 62% and 75%, respectively, of such
facilities are available through June 30, 2000. The entire $19.8 billion may
be used, at Ford Credit's option, by any subsidiary of Ford Credit, and the
entire $4.1 billion may be used, at Ford Credit Europe's option, by any
subsidiary of Ford Credit Europe. Any borrowings by such subsidiaries will be
guaranteed by Ford Credit or Ford Credit Europe, as the case may be.
ACCOUNTING POLICIES
With respect to the accounting issue under consideration by the Emerging
Issues Task Force (the "EITF") of the Financial Accounting Standards Board,
referred to in the last paragraph on page 34 of the 10-K Report, the
consensus reached by the EITF on Issue 95-4, "Revenue Recognition on Equipment
Sold and Subsequently Repurchased Subject to an Operating Lease", at its July
21, 1995 meeting reaffirmed Ford's present accounting practice.
<PAGE 15>
LEGAL PROCEEDINGS - FORD
Product Matters
With respect to the lawsuits for damages arising out of automobile accidents
where plaintiffs claim that the injuries resulted from (or were aggravated by)
alleged defects in the occupant restraint systems in vehicle lines of various
model years, referred to in the second paragraph on page 26 of the 10-K Report
and on page 12 of Ford Motor Credit Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1995 (the "First Quarter 10-Q Report"), the
damages specified by the plaintiffs in these actions, including both actual
and punitive damages, aggregated approximately $748 million at June 30, 1995.
With respect to the lawsuits for damages involving the alleged propensity of
Bronco II utility vehicles to roll over, referred to in the third paragraph on
page 26 of the 10-K Report and on page 12 of the First Quarter 10-Q Report,
the damages specified in these actions, including both actual and punitive
damages, aggregated approximately $1.1 billion at June 30, 1995.
With respect to the lawsuits for damages involving asbestos, referred to in
the fifth paragraph on page 26 of the 10-K Report and on page 12 of the First
Quarter 10-Q Report, the damages specified by plaintiffs in these actions,
including both actual and punitive damages, aggregated approximately $235
million at June 30, 1995.
In most of the actions described in the foregoing paragraphs, no dollar amount
of damages is specified or the specific amount referred to is only the
jurisdictional minimum. It has been Ford's experience that in cases that
allege a specific amount of damages in excess of the jurisdictional minimum,
such amounts, on average, bear little relation to the actual amounts of
damages paid by Ford in such cases, which generally are, on average,
substantially less than the amounts originally claimed.
Other Matters
With respect to the lawsuit in federal court in Nevada seeking damages and an
injunction for alleged infringement of U.S. patents characterized as covering
machine vision inspection technologies and other technologies, referred to in
the second full paragraph on page 27 of the 10-K Report, the magistrate judge
handling the case recommended to the district court judge that he enter
judgment for Ford holding that the patents alleged to be infringed pertaining
to machine vision inspection technologies are unenforceable. The magistrate
judge found that the patent owner engaged in "undue delay" by taking 35 years
to prosecute the numerous patent applications for these patents and found that
the patent owner claimed the work of others as he saw the technologies
develop. After a period of time for the filing of objections to the
recommendation and replies to those objections, the case will be submitted to
the district judge for review.
<PAGE 16>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Please refer to the Exhibit Index on page 18.
(b) Reports on Form 8-K during the quarter ended June 30, 1995:
None
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)
/s/ Terrence F. Marrs
July 31, 1995 --------------------------
Terrence F. Marrs, Controller
(Chief Accounting Officer)
<PAGE 17>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Ford Motor Credit Company:
We have reviewed the condensed consolidated balance sheet of Ford Motor
Credit Company and Subsidiaries at June 30, 1995 and 1994, and the
related condensed consolidated statements of income and of earnings
retained for use in the business and cash flows for the periods set forth
in this Form 10-Q for the quarter ended June 30, 1995. 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 financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1994 and the
related consolidated statements of income and of earnings retained for use
in the business and cash flows for the year then ended (not presented
herein); and in our report dated January 27, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet at December 31, 1994 is fairly stated in all
material respects in relation to the consolidated balance sheet from which
it has been derived.
/s/ Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
July 19, 1995
<PAGE 18>
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 Coopers & Filed with this
Lybrand L.L.P. dated Report.
July 19, 1995,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule. Filed with this
Report.