1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 March 31, 1996
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
- -------------------- -----------------------------------
(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 April 30, 1996.
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.
2
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,
1995 (the "10-K Report"). Information relating to earnings a share is not
presented because the registrant, Ford Motor Credit Company ("Ford
Credit"), is an indirect 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 March 31, 1996 and 1995
(in millions)
First Quarter
1996 1995
---------- ----------
(Unaudited)
Financing Revenue
Operating leases $ 1,896.2 $ 1,661.9
Retail 931.0 829.1
Wholesale 314.2 341.8
Diversified 33.1 33.0
Other 92.0 80.5
---------- ----------
Total financing revenue 3,266.5 2,946.3
Investment and other income 137.9 112.6
---------- ----------
Total revenue 3,404.4 3,058.9
Expenses
Depreciation on operating leases 1,303.5 1,184.5
Interest expense 1,269.7 1,156.6
Operating expenses 266.0 270.2
Provision for credit losses 183.8 77.3
---------- ----------
Total expenses 3,023.0 2,688.6
---------- ----------
Equity in net income of affiliated
companies 48.8 58.6
Income before income taxes 430.2 428.9
Provision for income taxes 131.9 137.9
---------- ----------
Income before minority interest 298.3 291.0
Minority interest in net income of
subsidiaries 5.1 3.1
---------- ----------
Net income 293.2 287.9
Earnings retained for use in
the business
Beginning of period 6,643.8 5,848.6
Dividends 0 0
---------- ----------
End of period $ 6,937.0 $ 6,136.5
========== ==========
The accompanying notes are part of the financial statements.
3
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
March 31, December 31, March 31,
1996 1995 1995
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
Cash and cash equivalents $ 966.7 $ 1,355.9 $ 147.6
Investments in securities 2,685.0 1,914.1 1,638.9
Finance receivables, net (Note 1) 61,902.3 61,043.8 59,551.6
Net investment, operating leases 25,724.6 24,810.8 21,680.1
Accounts and notes receivable from
affiliated companies (Note 3) 1,569.7 420.7 386.4
Equity in net assets of affiliated
companies (Note 3) 95.2 1,728.0 1,456.9
Other assets 3,457.1 3,293.4 2,620.8
----------- ----------- -----------
Total assets $ 96,400.6 $ 94,566.7 $ 87,482.3
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and
dealer reserves $ 1,725.1 $ 1,579.4 $ 1,406.3
Affiliated companies 636.3 608.7 448.4
----------- ----------- -----------
Total accounts payable 2,361.4 2,188.1 1,854.7
Debt (Note 2) 79,769.0 79,167.1 74,133.0
Deferred income taxes 3,314.5 3,027.0 2,592.3
Other liabilities and deferred income 1,883.9 1,913.6 1,406.3
Unearned insurance premiums 371.5 0 0
----------- ----------- -----------
Total liabilities 87,700.3 86,295.8 79,986.3
Minority interest in net assets of
subsidiaries 894.6 717.2 496.2
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) (Note 3) 2,719.3 917.3 917.3
Note receivable from affiliated
company (Note 3) (1,859.0) 0 0
Unrealized gain/(loss) on marketable
securities, net of taxes 41.0 30.9 (18.1)
Foreign-currency translation adjustments (57.6) (63.3) (60.9)
Earnings retained for use in the business 6,937.0 6,643.8 6,136.5
----------- ----------- -----------
Total stockholder's equity 7,805.7 7,553.7 6,999.8
----------- ----------- -----------
Total liabilities and stockholder's
equity $ 96,400.6 $ 94,566.7 $ 87,482.3
=========== =========== ===========
The accompanying notes are part of the financial statements.
4
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended March 31, 1996 and 1995
(in millions)
First Quarter
1996 1995
---------- ----------
(Unaudited)
Cash flows from operating activities
Net income $ 293.2 $ 287.9
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 183.8 77.3
Depreciation and amortization 1,369.0 1,232.8
Equity in net income of affiliates (48.8) (58.6)
Deferred income taxes 251.8 187.8
Changes in the following items
Other assets 172.5 24.6
Other liabilities (159.3) (52.2)
Other (57.4) 10.7
---------- ----------
Net cash provided by operating activities 2,004.8 1,710.3
---------- ----------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (9,587.1) (5,755.1)
Collection of finance receivables (other than wholesale) 6,973.4 5,339.7
Purchase of operating lease vehicles (4,509.4) (4,300.7)
Liquidation of operating lease vehicles 2,249.9 1,428.9
Proceeds from sale of receivables 1,753.7 0
Cash received from donation of TARIC 181.8 0
Net change in wholesale receivables (264.2) (2,213.5)
Other (30.4) (38.2)
---------- ----------
Net cash used in investing activities (3,232.3) (5,538.9)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 3,748.7 3,756.2
Principal payments on long-term debt (1,340.0) (2,042.1)
Change in short-term debt, net (1,789.7) 1,887.4
Other 218.6 83.8
---------- ----------
Net cash provided by financing activities 837.6 3,685.3
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents 0.7 (1.1)
---------- ----------
Net change in cash and cash equivalents (389.2) (144.4)
Cash and cash equivalents, beginning of period 1,355.9 292.0
---------- ----------
Cash and cash equivalents, end of period $ 966.7 $ 147.6
========== ==========
Supplementary cash flow information
Interest paid $ 1,363.8 $ 1,166.2
Taxes (refunded)/paid (123.2) 81.8
Certain amounts for First Quarter 1995 have been restated to reflect changes
adopted in subsequent periods.
The accompanying notes are part of the financial statements.
5
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables, Net (in millions)
March 31, December 31, March 31,
1996 1995 1995
----------- ----------- -----------
(Unaudited) (Unaudited)
Retail $ 40,382.8 $ 38,350.0 $ 36,028.6
Wholesale 15,034.9 16,506.9 17,466.4
Diversified 2,203.1 2,225.4 2,260.1
Other 4,947.9 4,630.6 4,444.3
----------- ----------- -----------
Total finance receivables 62,568.7 61,712.9 60,199.4
Less allowance for credit losses (666.4) (669.1) (647.8)
----------- ----------- -----------
Finance receivables, net $ 61,902.3 $ 61,043.8 $ 59,551.6
=========== =========== ===========
6
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements (continued)
Note 2. Debt (in millions)
March 31, December 31, March 31,
1996 1995 1995
----------- ----------- -----------
(Unaudited) (Unaudited)
PAYABLE WITHIN ONE YEAR:
Commercial paper $ 33,152.7 $ 34,978.3 $ 35,049.5
Other short-term debt* 1,580.6 1,523.1 1,199.9
----------- ----------- -----------
Total short-term debt 34,733.3 36,501.4 36,249.4
Senior notes payable
within one year 7,052.1 6,626.9 4,014.7
----------- ----------- -----------
Total payable within
one year 41,785.4 43,128.3 40,264.1
----------- ----------- -----------
March 31, 1996
----------------------------
Weighted Average
Interest Rates** Maturities
---------------- ----------
PAYABLE AFTER ONE YEAR:
Unsecured senior notes
Notes*** 6.72% 1997-2048 37,938.3 36,003.6 33,906.3
Debentures 2.81 2001-2005 46.8 29.1 0
Unamortized
(discount)/premium (1.5) 6.1 (37.4)
----------- ----------- -----------
Total payable
after one year 37,983.6 36,038.8 33,868.9
----------- ----------- -----------
Total debt $ 79,769.0 $ 79,167.1 $ 74,133.0
=========== =========== ===========
* Includes $39.4 million, $35.9 million, and $0 with an affiliated company
at March 31, 1996, December 31, 1995, and March 31, 1995, respectively.
** Rates were variable on about 14.8% of the debt payable after one year
including the effects of interest rate swap agreements.
*** Includes $1,185.4 million, $1,174.4 million, and $394.0 million with
affiliated companies at March 31, 1996, December 31, 1995, and March 31,
1995, respectively.
7
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 3. Equity Investment in Ford Holdings
On February 28, 1996, Ford Holdings, Inc. (FHI) purchased substantially all
of Ford Credit's common stock interest in FHI for $2,891.0 million. FHI
issued a promissory note to Ford Credit for the purchase amount. On
April 2, 1996, Ford Credit received a cash payment on the note of $1,032.0
million. The excess of the market value of the FHI investment over the
book value ($1,238.2 million) is included in paid in surplus. The unpaid
portion of the promissory note ($1,859.0 million) is reflected as a
reduction to stockholder's equity. Additionally, The American Road
Insurance Company ("TARIC") was contributed to Ford Credit on March 29,
1996. The transaction was recorded by Ford Credit at Taric's book value
and is included in paid in surplus. A reconciliation of paid in surplus is
as follows:
Paid in Surplus
---------------
(in millions)
Balance at December 31, 1995 $ 917.3
Add:
Excess of market value over
book value of FHI common stock 1,238.2
Contribution of TARIC 563.8
----------
Balance at March 31, 1996 $ 2,719.3
==========
8
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FORD CREDIT FIRST QUARTER 1996 RESULTS OF OPERATIONS
Ford Credit's consolidated net income for the first quarter of 1996 was $293
million, up $5 million or 2% compared with $288 million in the first quarter
of 1995. Compared with results from a year ago, the increase in net income
reflects primarily a higher level of earning assets and higher portfolio net
interest margins, offset partially by an increase in credit losses.
The increase in earning assets reflects a higher level of operating leases and
retail installment sale receivables, offset partially by a lower level of
wholesale receivables. Total net finance receivables and net investment in
operating leases at March 31, 1996 were $87.6 billion, up $6.4 billion or 8%
from a year earlier. Depreciation expense on operating leases in the first
quarter of 1996 was $1,304 million, up $119 million or 10% compared with the
first quarter of 1995. The increase in depreciation expense reflects the
higher levels of operating leases and is more than offset by higher revenue
earned from the increased volume of lease contracts.
The higher net interest margins reflects higher portfolio yields on finance
receivables and operating leases offset partially by an increase in U.S.
portfolio borrowing rates from 6.3% to 6.4%. The deterioration in credit
losses reflects an increase in losses per repossession and an increase in
repossession rates. Credit losses as a percent of average net finance
receivables including net investment in operating leases were 0.67% in the
first quarter of 1996 compared with 0.37% in the first quarter of 1995.
During the first quarter of 1996, Ford Credit financed 38.6% of all new cars
and trucks sold by Ford Motor Company dealers in the United States, compared
with 36.0% in the first quarter of 1995. The increase resulted primarily from
higher levels of retail installment sale financing offset partially by lower
levels of operating lease financing. Ford Credit provided retail financing
for 678,000 new and used vehicles in the United States, up 19% from a year
ago. Ford Credit also provided wholesale financing for 77.2% of Ford Motor
Company factory sales to U.S. car and truck dealers during the quarter,
compared with 78.2% in the same period a year ago.
In the first quarter of 1996, equity in net income of affiliated companies
(primarily Ford Holdings, Inc. ("Ford Holdings")) was $49 million compared with
$59 million in the first quarter of 1995. The decrease reflects the
repurchase by Ford Holdings of substantially all of the shares of Ford Holdings
common stock owned by Ford Credit on February 28, 1996. Ford Holdings issued
a promissory note to Ford Credit for the purchase amount. Additionally, The
American Road Insurance Company ("American Road") was contributed to Ford
Credit on March 29, 1996.
9
FORD CREDIT LIQUIDITY AND CAPITAL RESOURCES
Ford Credit's outstanding debt at March 31, 1996 and at the end of each of
the last five years was as follows:
December 31
Mar. 31, ------------------------------------------
1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- -------
(in millions)
Commercial paper & STBA's(a) $33,153 $35,038 $33,300 $24,506 $21,210 $18,232
Other short-term debt(b) 1,581 1,463 1,065 1,001 1,785 1,642
Long-term debt (including
current portion)(c) 45,035 42,666 36,075 33,292 26,961 28,455
------- ------- ------- ------- ------- -------
Total debt $79,769 $79,167 $70,440 $58,799 $49,956 $48,329
======= ======= ======= ======= ======= =======
1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- -------
Memo:
Total support facilities $27.4 $27.4 $22.3 $16.9 $13.9 $13.8
(billions -- as of
March 31, 1996 and
December 31, 1995-1991,
respectively)
- - - - - -
(a) Short-term borrowing agreements with bank trust departments.
(b) Includes $39 million, $36 million, $150 million, and $800 million with
affiliated companies at March 31, 1996, December 31, 1995, December 31,
1993, and December 31, 1992, respectively.
(c) Includes $1,185 million and $1,174 million with affiliated companies at
March 31, 1996 and December 31, 1995, respectively.
Support facilities represent additional sources of funds, if required. At
March 31, 1996, Ford Credit had approximately $27.4 billion of
contractually committed facilities for use (which included $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, Mexico, Japan, and Puerto Rico. Any such borrowing will
be guaranteed by Ford Credit.
10
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 March 31, 1996 and 1995 (in millions except amounts per
share):
First Quarter
-------------
1996 1995
---- ----
Sales and revenues $36,261 $34,783
Total costs and expenses 35,134 32,265
Operating income 1,127 2,518
Automotive net interest income 12 41
Automotive equity in net (loss)income
of affiliated companies (52) 20
Income before income taxes 1,087 2,579
Provision for income taxes 413 988
Minority interests in net income
of subsidiaries 21 41
Net income $ 653 $ 1,550
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Income per share $ 0.54 $ 1.44
Income per share
assuming full dilution $ 0.53 $ 1.28
Cash dividends per share $ 0.35 $ 0.26
11
FIRST QUARTER 1995 RESULTS OF OPERATIONS - FORD
Overview
Ford earned $653 million, or $0.54 per share of Common and Class B Stock, in
the first quarter of 1996. This compares with $1,550 million, or $1.44 per
share, in the first quarter of 1995. Fully diluted earnings per share were
$0.53 in the first quarter of 1996, compared with $1.28 a year ago.
Ford's worldwide sales and revenues were $36.3 billion, up $1.5 billion
from a year ago. Vehicle unit sales of cars and trucks were 1,638,000, down
132,000 units or 7%. Stockholders' equity was $24.5 billion at March 31,
1996, about equal to December 31, 1995.
Automotive Operations
Ford's worldwide Automotive operations earned $142 million in the first
quarter of 1996 on sales of $29.3 billion, compared with $1,141 million in the
first quarter of 1995 on sales of $28.6 billion. Overall, the decline
reflected lower unit volume from dealer inventory rebalancing, costs
associated with introducing high volume new products in North America and
Europe, and lower results in Brazil.
In the U.S., Automotive operations earned $48 million in the first quarter of
1996 on sales of $18.7 billion, compared with $825 million a year ago on sales
of $19.6 billion. The decline in earnings was explained by lower unit volume
(reflecting dealer inventory rebalancing) and costs associated with
introducing high volume new products (the F-150 pickup truck, Taurus and
Sable); cost efficiencies were a partial offset. U.S. Automotive after-tax
return on sales was 0.3% in the first quarter of 1996, down 3.9 points from a
year ago.
In the first quarter of 1996, the seasonally-adjusted annual selling rate for
the U.S. car and truck industry was 15.7 million units, compared with
15.2 million units in the first quarter of 1995. Ford expects U.S. car
and truck industry sales to total 15.4 million units in the full year,
compared with 15.1 million units in 1995. Ford's car share was 21.4% in the
first quarter of 1996, down 9/10 of a point from the first quarter a year ago,
but up half a point from full year 1995. Ford's truck share was 31.4%, down
9/10 of a point from a year ago, and down half a point from full year 1995.
Ford's combined car and truck market share was 25.8%, down 8/10 of a point
from a year ago, but up 2/10 of a point from full year 1995.
Outside the U.S., Automotive operations earned $94 million in the first
quarter of 1996 on sales of $10.6 billion, compared with $316 million a year
ago on sales of $9 billion. The decline reflected primarily lower results in
Brazil and Europe.
European Automotive operations earned $73 million in the first quarter of
1996, compared with $165 million in the first quarter of 1995. The decline
reflected primarily costs associated with introducing the all-new Fiesta.
In the first quarter of 1996, the seasonally-adjusted annual selling rate for
the European car and truck industry was 14.2 million units, compared with
13.4 million units in the first quarter of 1995. Ford expects European
car and truck industry sales to total 13.8 million units in the full year,
compared with 13.4 million units in 1995. Ford's car share was 12% in the
first quarter of 1996, down 1/10 of a point from the first quarter a year ago,
but up 1/10 of a point from full year 1995. Ford's truck share was 13.2%,
down 2.4 points from a year ago, and down 1.6 points from full year 1995.
Ford's combined car and truck market share was 12.2%, down 3/10 of a point
from a year ago, and down 1/10 of a point from full year 1995.
Outside the U.S. and Europe, Automotive operations earned $21 million in the
first quarter of 1996, compared with $151 million a year ago. The decrease
reflected primarily unfavorable results for operations in Brazil, which
continue to be affected by the lack of a domestically produced small car.
Ford has reestablished manufacturing capacity in Brazil for small cars and
plans to introduce a version of the Ford Fiesta in the second quarter of 1996,
which should assist in improving Ford's performance in Brazil in the second
half of 1996.
12
Financial Services Operations
Ford's Financial Services operations earned a record $511 million in
the first quarter of 1996, compared with $409 million in the first quarter of
1995. The improvement reflected record earnings at Associates First Capital
Corporation ("The Associates") and USL Capital Corporation ("USL Capital"),
higher earnings at Ford Credit, and the elimination of dividend payments to
holders of Ford Holdings' voting preferred stock (see below).
For a discussion of Ford Credit's operations in the first quarter of 1996, see
Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Ford Credit First Quarter 1996 Results of Operations".
In addition, International operations managed by Ford Credit, but not included
in its consolidated results, earned $68 million in the first quarter of 1996,
compared with $65 million a year ago.
The Associates, including its international affiliates, earned a record $192
million in the first quarter of 1996, compared with $168 million a year ago.
The increase reflected higher levels of earning assets, improved net interest
margins and improved operating cost performance, offset partially by higher
credit losses.
USL Capital earned a record $40 million in the first quarter of 1996, compared
with $26 million a year ago. The increase reflected higher gains on asset
sales and higher levels of earning assets. The Hertz Corporation ("Hertz")
earned $9 million, up $9 million from a year ago. American Road earned $5
million, equal to a year ago.
Financial Services Reorganization - Recent Developments
In late 1995, Ford began a reorganization of its Financial Services group in
order to align more closely under a single subsidiary legal ownership of the
Financial Services affiliates with management responsibility for such
affiliates. As part of the reorganization, Ford Holdings formed Ford FSG,
Inc. ("FFSGI") to own primarily all of the Financial Services affiliates. In
December 1995, Ford Holdings merged with Ford Holdings Capital Corporation, a
wholly owned subsidiary of Ford Holdings, which resulted in the cancellation
of all of the voting preferred stock of Ford Holdings. At the time, 55% of
the common stock of Ford Holdings was owned by Ford and 45% was owned by Ford
Credit.
After the formation of FFSGI, Ford Holdings contributed its interest in The
Associates to FFSGI in exchange for 100% of the common stock of FFSGI and the
assumption by FFSGI of certain debt of Ford Holdings. Thereafter, Ford
contributed to FFSGI all of its interest in Ford Credit Europe plc ("Ford Credit
Europe"). In exchange for this contribution, Ford received a class of common
stock of FFSGI that has controlling voting power of FFSGI but otherwise is
equal to all other common stock of FFSGI as to the payment of dividends, etc.
(the "Class F Stock").
13
In February 1996, substantially all of the shares of Ford Holdings' common
stock owned by Ford Credit were repurchased by Ford Holdings in exchange for
the issuance of a promissory note by Ford Holdings. Accordingly, Ford
Credit's results in the first quarter of 1996 included the equity in the net
income of Ford Holdings through February 1996. Thereafter, in February 1996,
Ford contributed to FFSGI all of its interest in Ford Credit in exchange for
additional shares of Class F Stock of FFSGI. Also, in March 1996, Ford
Holdings contributed American Road to FFSGI, which in turn contributed it to
Ford Credit. Accordingly, the assets and liabilities of American Road were
included in Ford Credit's consolidated balance sheet at
March 31, 1996; beginning April 1, 1996, the results of operations and cash
flows of American Road will be included in Ford Credit's consolidated
statements of income and cash flows. In addition, in May 1996, Ford
contributed to FFSGI certain of its international Financial Services
affiliates managed by Ford Credit in exchange for additional stock of FFSGI.
The percentage of economic interests of FFSGI held by Ford and Ford Holdings
are based upon the relative value of the entities contributed to FFSGI by Ford
and Ford Holdings. Currently, those percentages are approximately 80% for
Ford and 20% for Ford Holdings.
In early May 1996, The Associates completed an initial public offering of its
common stock representing a 19.3% economic interest in The Associates (the
"IPO"). Substantially all of the net proceeds from the IPO were used to repay
indebtedness of The Associates, which was incurred to repay an intercompany
debt owed to FFSGI in the amount of $1.75 billion. Prior to the completion of
the IPO, Ford contributed to The Associates certain international affiliates
owned by Ford but managed by The Associates. Ford expects to recognize
a gain in the second quarter from the IPO.
As announced by Ford in the fourth quarter of 1995, Ford is investigating the
sale of all or part of USL Capital.
LIQUIDITY AND CAPITAL RESOURCES - FORD
Automotive Operations
Automotive cash and marketable securities were $12.9 billion at March 31,
1996, up $531 million from December 31, 1995. Ford paid $428 million
in cash dividends on its Common Stock, Class B Stock and Preferred Stock
during the first three months of 1996.
Automotive capital expenditures were $1.8 billion in the first three months of
1996, down $342 million from the same period a year ago. For the full year
1996, Ford's spending for product change is projected to be about the same
compared with 1995; however, as a percent of sales, such spending is expected
to be at lower levels.
Automotive debt at March 31, 1996 totaled $7.2 billion, which was 22% of total
capitalization (stockholders' equity and Automotive debt), compared with
$7.3 billion, also 22% of total capitalization, at December 31, 1995.
At March 31, 1996, Ford had 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. These facilities were unused at March 31, 1996.
In addition, at March 31, 1996, Ford Brasil Ltda. had $198 million of
contractually committed credit facilities with various banks ranging in
maturity from June 1996 to December 1996. None of these facilities were in
use at March 31, 1996.
14
Financial Services Operations
Financial Services cash and investments in securities totaled $6.5 billion at
March 31, 1996, down $707 million from December 31, 1995.
Net receivables and lease investments were $153.5 billion at March 31, 1996,
up $3.8 billion from December 31, 1995. The increase reflected continued
growth in earning assets at Ford Credit and The Associates.
Total debt was $145.6 billion at March 31, 1996, up $4.3 billion from December
31, 1995. The increase resulted from higher debt levels required to finance
growth in earning assets at The Associates and Ford Credit, and to fund the
payment to holders of Ford Holdings' voting preferred stock; the preferred
stock was cancelled in December 1995.
At March 31, 1996, Financial Services had a total of $49.3 billion of
contractually committed support facilities. Of these facilities,
$23.8 billion (excluding the $8.4 billion of Ford credit facilities) are
contractually committed global credit agreements under which $19.8 billion and
$4 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 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. At March 31, 1996,
none of the Ford Credit global facilities were in use; $709 million of the
Ford Credit Europe global facilities were in use. Other than the global
credit agreements, the remaining portion of the Financial Services support
facilities at March 31, 1996 consisted of $22.8 billion of contractually
committed support facilities available to various affiliates in the U.S. and
$2.7 billion of contractually committed support facilities available to
various affiliates outside the U.S.; at March 31, 1996, approximately $1.2
billion of these facilities were in use.
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 25 of the 10-K
Report, the damages specified by the plaintiffs in these actions, including
both actual and punitive damages, aggregated approximately $658 million at
March 31, 1996.
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 25 of the 10-K Report, the damages specified in these actions, including
both actual and punitive damages, aggregated approximately $1.1 billion at
March 31, 1996.
With respect to the lawsuits for damages involving asbestos, referred to in
the fifth paragraph on page 25 of the 10-K Report, the damages specified by
plaintiffs in these actions, including both actual and punitive damages,
aggregated approximately $1.7 billion at March 31, 1996.
15
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 patent infringement lawsuit in federal court in Nevada in
which an individual patent owner is seeking damages and an injunction for
alleged infringement of four U.S. patents characterized as covering machine
vision inspection technologies, including bar code reading, referred to in the
second full paragraph on page 26 of the 10-K Report, on April 11, 1996, the
district court judge issued an order adopting the magistrate judge's
recommendation and granting Ford's motion to dismiss the case. The judge
indicated that he will issue a separate opinion supporting the order and issue
a judgment "in due course."
With respect to the seven purported nationwide class action lawsuits involving
an alleged defective ignition switch equipped on numerous Ford vehicle lines,
referred to in the fifth paragraph on page 26 of the 10-K Report, an eighth
such suit has been filed.
With respect to the investigations by the Safety Administration and Transport
Canada of ignition switch fires in certain Ford vehicles, referred to in the
first full paragraph on page 26 of the 10-K Report, Ford has agreed to notify
owners of approximately 8.7 million 1988-1993 model year vehicles (including
248,000 vehicles previously recalled in Canada )of a safety recall to replace
the ignition switch equipped on such vehicles. Ford does not expect the
aggregate cost of the recall to have a significant effect on 1996 results.
GOVERNMENTAL STANDARDS - FORD
Mobile Source Emissions Control -- With respect to the discussion of
California vehicle emission control standards on page 19 of the 10-K Report,
the California Air Resources Board took action at its March 1996 board meeting
approving the elimination of the "zero-emission vehicles" mandate until the
2003 model year. This will become final after submission and review by
California's Office of Administrative Law.
Motor Vehicle Fuel Economy -- With respect to the discussion of light truck
corporate average fuel economy ("CAFE") on page 22 of the 10-K Report, the
Safety Administration has established the referenced
20.7 miles per gallon CAFE standard for model years 1996 through 1998.
Other Matters
Mazda Motor Corporation -- As announced on April 12, 1996, Ford has agreed to
increase its investment in Mazda Motor Corporation ("Mazda") from its existing
24.5% ownership interest to a 33.4% ownership interest by purchasing from
Mazda newly-issued shares of common stock of Mazda for an aggregate purchase
price of approximately $500 million. In connection with this agreement, which
is subject to governmental approvals, Mazda has agreed to coordinate more
closely with Ford its strategies and plans, particularly in the areas of
product development, manufacturing and distribution of vehicles, so as to
improve the competitiveness and economies of scale of both companies. Henry
Wallace, a former Ford executive and currently an executive vice president of
Mazda, has been elected as Mazda's president effective in late June 1996.
Ford and Mazda will remain separate companies with separate identities.
Ford will not be responsible for any of Mazda's liabilities, debts or other
obligations, and Mazda's operating results and financial position will not be
consolidated with those of Ford; Mazda will continue to be reflected in Ford's
consolidated financial statements on an equity basis.
16
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Please refer to the Exhibit Index.
(b) Reports on Form 8-K during the quarter ended March 31, 1996:
FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- --------------------- ----------------
January 5, 1996 Item 5 - Other Events None
January 24, 1996 Item 5 - Other Events None
February 6, 1996 Item 5 - Other Events Consolidated Financial
Statements of Ford Motor
Credit Company and Sub-
sidiaries together with
the Report of Independent
Accountants of Coopers & Lybrand
L.L.P., independent certified
public accountants and News
release dated January 31, 1996
of Ford Motor Company and
Subsidiaries for the year
ended December 31, 1995 with
attachments and Pro Forma
Financial Information of
Ford Motor Credit Company.
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/ Kenneth J. Coates
May 13, 1996 --------------------------
Kenneth J. Coates
Executive Vice President - Finance
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 March 31, 1996 and 1995, 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 March 31, 1996. 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, 1995 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 26, 1996, 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, 1995 is fairly stated in all
material respects in relation to the consolidated balance sheet from which
it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
April 17, 1996
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.
May 13, 1996,
regarding unaudited
interim financial infor-
mation.