Ford Motor Credit Earns $740 Million in the Second Quarter
DEARBORN, Mich., July 19 -- Ford Motor Credit Company reported net income of $740 million in the second quarter of 2005, down $157 million from earnings of $897 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $1.2 billion in the second quarter, compared with $1.4 billion in the previous year. The decrease in earnings primarily reflected higher borrowing costs and the impact of lower receivable levels, offset partially by improved credit loss performance.
"This quarter's solid results reflect our ongoing efforts to strengthen our operations," said Mike Bannister, chairman and CEO. "Despite the challenging business environment, Ford Motor Credit continues to generate strong profits."
On June 30, 2005, Ford Motor Credit's on-balance sheet net receivables totaled $121 billion, compared with $133 billion on December 31, 2004. Managed receivables were $160 billion on June 30, down from $168 billion on December 31. The lower managed receivables primarily reflected lower retail placement volumes.
Ford Motor Credit paid dividends of $1 billion during the quarter. On June 30, managed leverage was 12.8 to 1.
Ford Motor Credit Company is one of the world's largest automotive finance companies and has supported the sale of Ford products since 1959. Ford Motor Credit is an indirect, wholly owned subsidiary of Ford Motor Company . It provides automotive financing for Ford, Lincoln, Mercury, Aston Martin, Jaguar, Land Rover, Mazda and Volvo dealers and customers. More information can be found at http://www.fordcredit.com/ and at Ford Motor Credit's investor center, http://www.fordcredit.com/investorcenter/.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended June 30, 2005 and 2004
(in millions)
Second Quarter First Half
------------------ ------------------
2005 2004 2005 2004
------ ------ ------ ------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $1,339 $1,477 $2,697 $3,051
Retail 1,012 1,081 2,082 2,152
Interest supplements
and other support costs
earned from affiliated
companies 795 881 1,638 1,737
Wholesale 276 193 527 382
Other 55 60 111 109
------ ------ ------ ------
Total financing
revenue 3,477 3,692 7,055 7,431
Depreciation on vehicles
subject to operating leases (1,095) (1,242) (2,172) (2,549)
Interest expense (1,386) (1,295) (2,812) (2,624)
------ ------ ------ ------
Net financing margin 996 1,155 2,071 2,258
Other revenue
Investment and other
income related to sales
of receivables 443 542 888 1,034
Insurance premiums
earned, net 52 61 104 121
Other income 143 291 313 519
------ ------ ------ ------
Total financing
margin and
other revenue 1,634 2,049 3,376 3,932
Expenses
Operating expenses 522 516 1,050 1,033
Provision for
credit losses (111) 68 6 350
Insurance expenses 61 74 97 111
------ ------ ------ ------
Total expenses 472 658 1,153 1,494
------ ------ ------ ------
Income from continuing
operations before
income taxes 1,162 1,391 2,223 2,438
Provision for income taxes 426 508 813 891
------ ------ ------ ------
Income from continuing
operations before
minority interests 736 883 1,410 1,547
Minority interests in
net income of subsidiaries - 1 1 1
------ ------ ------ ------
Income from
continuing operations 736 882 1,409 1,546
------ ------ ------ ------
Income from discontinued
operations - 15 37 39
Gain on disposal of
discontinued operations 4 - 4 -
------ ------ ------ ------
Net income $740 $897 $1,450 $1,585
====== ====== ====== ======
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2005 2004
-------- --------
(Unaudited)
ASSETS
Cash and cash equivalents $18,518 $12,668
Investments in securities 706 653
Finance receivables, net 98,599 110,851
Net investment in operating leases 21,932 21,866
Retained interest in securitized assets 5,287 9,166
Notes and accounts receivable
from affiliated companies 1,478 1,780
Derivative financial instruments 4,060 6,930
Assets of discontinued operations - 2,186
Other assets 6,087 6,521
-------- --------
Total assets $156,667 $172,621
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits,
dealer reserves and other $1,604 $1,645
Affiliated companies 1,070 819
-------- --------
Total accounts payable 2,674 2,464
Debt 128,935 144,274
Deferred income taxes, net 8,315 7,593
Derivative financial instruments 711 911
Liabilities of discontinued operations - 93
Other liabilities and deferred income 4,908 5,802
-------- --------
Total liabilities 145,543 161,137
Minority interests in net assets
of subsidiaries 14 13
Stockholder's equity
Capital stock, par value $100 a share,
250,000 shares authorized,
issued and outstanding 25 25
Paid-in surplus
(contributions by stockholder) 5,117 5,117
Accumulated other comprehensive income 502 855
Retained earnings 5,466 5,474
-------- --------
Total stockholder's equity 11,110 11,471
-------- --------
Total liabilities and
stockholder's equity $156,667 $172,621
======== ========
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
OPERATING HIGHLIGHTS*
Second Quarter First Half
---------------- ----------------
Financing Shares 2005 2004 2005 2004
------- ------- ------- -------
United States
Financing share - Ford, Lincoln
and Mercury
Retail installment and lease 40% 39% 41% 38%
Wholesale 81 84 81 84
Europe
Financing share - Ford
Retail installment and lease 29% 29% 28% 28%
Wholesale 97 97 97 97
Contract Volume - New and used
retail/lease (in thousands)
North America segment
United States 424 440 834 838
Canada 51 52 82 88
----- ----- ----- -----
Total North America segment 475 492 916 926
International segment
Europe 206 208 392 410
Other international 65 62 138 136
----- ----- ----- -----
Total International segment 271 270 530 546
----- ----- ----- -----
Total contract volume 746 762 1,446 1,472
===== ===== ===== =====
Borrowing Cost Rate** 4.4% 3.7% 4.2% 3.7%
Charge-offs (in millions)
On-Balance Sheet
Retail installment & lease $140 $285 $307 $598
Wholesale (1) 6 16 9
Other (2) 0 (5) (1)
----- ----- ----- -----
Total on-balance sheet
charge-offs $137 $291 $318 $606
===== ===== ===== =====
Total loss-to-receivables ratio 0.44% 0.91% 0.50% 0.94%
Managed***
Retail installment & lease $172 $362 $387 $789
Wholesale (1) 6 16 9
Other (2) 0 (5) (1)
----- ----- ----- -----
Total managed charge-offs $169 $368 $398 $797
===== ===== ===== =====
Total loss-to-receivables ratio 0.41% 0.85% 0.48% 0.91%
- - - - -
* Continuing operations
** Includes the effect of interest rate swap agreements
*** See appendix for additional information
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
APPENDIX
In evaluating Ford Motor Credit's financial performance, Ford Motor Credit management uses financial statements and other financial measures in accordance with Generally Accepted Accounting Principles (GAAP). Included below are brief definitions of key terms, information about the impact of on- balance sheet securitization and a reconciliation of other measures.
KEY TERMS:
* Managed receivables: receivables reported on Ford Motor Credit's
balance sheet and receivables Ford Motor Credit sold in off-balance
sheet securitizations and continues to service.
* Charge-offs on managed receivables: charge-offs associated with
receivables reported on Ford Motor Credit's balance sheet and charge-
offs associated with receivables that Ford Motor Credit sold in off-
balance sheet securitizations and continues to service.
IMPACT OF ON-BALANCE SHEET SECURITIZATION: finance receivables (retail and wholesale) and investments in operating leases reported on Ford Motor Credit's balance sheet include assets transferred in securitizations that do not qualify for accounting sale treatment. These assets have been legally transferred to Ford Motor Credit sponsored special purpose entities and are available only to pay the obligations of the special purpose entities and are not available to pay the other obligations of Ford Motor Credit or the claims of Ford Motor Credit's other creditors. Debt reported on Ford Motor Credit's balance sheet includes debt issued by these special purpose entities to securitization investors which is payable out of collections on the assets supporting the securitizations and is not the legal obligation of Ford Motor Credit or its other subsidiaries.
RECONCILIATION OF MEASURES:
Managed Leverage Calculation June 30, December 31,
2005 2004
------------ ------------
(in billions)
Total debt $128.9 $144.3
Securitized off-balance sheet
receivables outstanding 39.2 37.7*
Retained interest in securitized
off-balance sheet receivables (5.3) (9.5)**
Adjustments for cash and cash equivalents (18.5) (12.7)
Adjustments for SFAS No. 133 (2.6) (3.2)
------ ------
Total adjusted debt $141.7 $156.6
====== ======
Total stockholder's equity
(including minority interest) $11.1 $11.5
Adjustments for SFAS No. 133 (0.0) (0.1)
------ ------
Total adjusted equity $11.1 $11.4
====== ======
Managed leverage (to 1) =
adjusted debt / adjusted equity 12.8 13.7
Memo: Financial statement leverage
(to 1) = total debt / stockholder's equity 11.6 12.6
Net Finance Receivables and Operating Leases
Managed Receivables
---------------------------------------
On-Balance Off-Balance
Sheet Sheet Total
---------- ---------- ----------
June 30, 2005 (in billions)
-------------
Retail installment $69.9 $20.4 $90.3
Wholesale 23.5 18.8 42.3
Other finance receivables 5.2 0.0 5.2
Net investment in operating leases 21.9 0.0 21.9
------ ------ ------
Total net finance receivables
and operating leases $120.5 $39.2 $159.7
====== ====== ======
December 31, 2004
-----------------
Retail installment $81.7 $16.7 $98.4
Wholesale 23.8 18.9 42.7
Other finance receivables 5.3 0.0 5.3
Net investment in operating leases 21.9 0.0 21.9
------ ------ ------
Total net finance receivables
and operating leases $132.7 $35.6 $168.3
====== ====== ======
- - - - -
* Includes securitized funding from discontinued operations
** Includes retained interest in securitized receivables from
discontinued operations