Ford Motor Credit Earns $441 Million in the Second Quarter
DEARBORN, Mich., July 20 -- Ford Motor Credit Company reported net income of $441 million in the second quarter of 2006, down $299 million from earnings of $740 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $656 million in the second quarter, compared with $1.2 billion in the previous year. The decrease in earnings primarily reflected higher borrowing costs, the impact of lower average receivable levels, lower credit loss reserve reductions and higher depreciation expense.
"Our sustained focus on strong business fundamentals has generated high- quality assets and solid results," said Mike Bannister, chairman and CEO. "We continue to support Ford Motor Company with profits and dividends."
On June 30, Ford Motor Credit's on-balance sheet net receivables totaled $136 billion, compared with $132 billion on December 31, 2005. Managed receivables were $151 billion, compared with $150 billion on December 31.
Ford Motor Credit paid dividends of $400 million during the quarter. On June 30, managed leverage was 11.5 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. With about 14,000 employees, Ford Motor Credit operates in 36 countries and manages approximately $151 billion in receivables. 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, 2006 and 2005
(in millions)
Second Quarter First Half
----------------- -----------------
2006 2005 2006 2005
------- ------- ------- -------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $1,370 $1,339 $2,700 $2,697
Retail 925 1,012 1,832 2,082
Interest supplements and other
support costs earned from
affiliated companies 806 795 1,582 1,638
Wholesale 642 276 1,241 527
Other 56 55 110 111
------ ------ ------ ------
Total financing revenue 3,799 3,477 7,465 7,055
Depreciation on vehicles subject to
operating leases (1,264) (1,095) (2,445) (2,172)
Interest expense (1,826) (1,386) (3,503) (2,812)
------ ------ ------ ------
Net financing margin 709 996 1,517 2,071
Other revenue
Investment and other income
related to sales of receivables 190 443 400 888
Insurance premiums earned, net 51 52 102 104
Other income 264 143 501 313
------ ------ ------ ------
Total financing margin and
other revenue 1,214 1,634 2,520 3,376
Expenses
Operating expenses 490 522 1,009 1,050
Provision for credit losses 4 (111) (2) 6
Insurance expenses 64 61 106 97
------ ------ ------ ------
Total expenses 558 472 1,113 1,153
------ ------ ------ ------
Income from continuing operations
before income taxes 656 1,162 1,407 2,223
Provision for income taxes 215 426 487 813
------ ------ ------ ------
Income from continuing operations
before minority interests 441 736 920 1,410
Minority interests in net income of
subsidiaries - - - 1
------ ------ ------ ------
Income from continuing operations 441 736 920 1,409
------ ------ ------ ------
Income from discontinued operations - - - 37
Gain on disposal of discontinued
operations - 4 - 4
------ ------ ------ ------
Net income $ 441 $ 740 $ 920 $1,450
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FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2006 2005
-------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 13,010 $ 14,798
Marketable securities 3,712 3,810
Finance receivables, net 110,847 109,876
Net investment in operating leases 25,345 22,213
Retained interest in securitized assets 1,150 1,420
Notes and accounts receivable from affiliated
companies 830 1,235
Derivative financial instruments 1,564 2,547
Other assets 5,808 6,256
-------- --------
Total assets $162,266 $162,155
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves
and other $ 1,869 $ 1,890
Affiliated companies 1,052 794
-------- --------
Total accounts payable 2,921 2,684
Debt 133,717 134,500
Deferred income taxes, net 8,826 8,772
Derivative financial instruments 882 680
Other liabilities and deferred income 4,560 4,781
-------- --------
Total liabilities 150,906 151,417
Minority interests in net assets of subsidiaries 3 3
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 737 385
Retained earnings 5,478 5,208
-------- --------
Total stockholder's equity 11,357 10,735
-------- --------
Total liabilities and stockholder's equity $162,266 $162,155
======== ========
Prior year amounts have been revised to reflect a reclassification between Cash and cash equivalents and Marketable securities as of December 31, 2005.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
OPERATING HIGHLIGHTS*
Second Quarter First Half
---------------- ---------------
Financing Shares 2006 2005 2006 2005
---- ---- ---- ----
United States
Financing share - Ford, Lincoln
and Mercury
Retail installment and lease 45% 40% 44% 41%
Wholesale 79 81 80 81
Europe
Financing share - Ford
Retail installment and lease 25% 29% 25% 28%
Wholesale 95 97 95 97
Contract Volume - New and used
retail/lease (in thousands)
North America segment
United States 443 424 841 834
Canada 56 51 91 82
----- ----- ----- -----
Total North America segment 499 475 932 916
International segment
Europe 182 206 367 392
Other international 56 65 121 138
----- ----- ----- -----
Total International segment 238 271 488 530
----- ----- ----- -----
Total contract volume 737 746 1,420 1,446
===== ===== ===== =====
Borrowing Cost Rate** 5.5% 4.4% 5.2% 4.2%
Charge-offs (in millions)
On-Balance Sheet Receivables
Retail installment & lease $ 64 $140 $175 $307
Wholesale 19 (1) 19 16
Other 0 (2) 0 (5)
---- ---- ---- ----
Total charge-offs - on-balance
sheet receivables $ 83 $137 $194 $318
==== ==== ==== ====
Total loss-to-receivables ratio 0.25% 0.44% 0.29% 0.50%
Managed Receivables***
Retail installment & lease $ 83 $172 $219 $387
Wholesale 19 (1) 19 16
Other 0 (2) 0 (5)
---- ---- ---- ----
Total charge-offs - managed
receivables $102 $169 $238 $398
==== ==== ==== ====
Total loss-to-receivables ratio 0.27% 0.41% 0.32% 0.48%
- - - - -
* Continuing operations
** On-balance sheet debt, 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,
2006 2005
---------- ------------
(in billions)
Total debt $133.7 $134.5
Securitized off-balance sheet receivables
outstanding 14.6 18.0
Retained interest in securitized off-balance sheet
receivables (1.1) (1.4)
Adjustments for cash and cash equivalents, and
marketable securities * (16.0) (17.9)
Fair value hedge accounting adjustments (0.7) (1.6)
------ ------
Total adjusted debt $130.5 $131.6
====== ======
Total stockholder's equity (including minority
interest) $ 11.4 $ 10.7
Fair value hedge accounting adjustments (0.1) (0.0)
------ ------
Total adjusted equity $ 11.3 $ 10.7
====== ======
Managed leverage (to 1) = adjusted debt / adjusted
equity 11.5 12.3
Memo: Financial statement leverage (to 1) = total
debt / stockholder's equity 11.8 12.5
Net Finance Receivables and
Operating Leases Managed Receivables
---------------------------------
On-Balance Off-Balance
Sheet Sheet Total
---------- ----------- -------
June 30, 2006 (in billions)
Retail installment $ 66.5 $ 14.6 $ 81.1
Wholesale 39.9 - 39.9
Other finance receivables 4.5 - 4.5
Net investment in operating leases 25.3 - 25.3
------ ------ ------
Total net finance receivables
and operating leases $136.2 $ 14.6 $150.8
====== ====== ======
December 31, 2005
Retail installment $ 65.7 $ 18.0 $ 83.7
Wholesale 39.6 - 39.6
Other finance receivables 4.6 - 4.6
Net investment in operating leases 22.2 - 22.2
------ ------ ------
Total net finance receivables
and operating leases $132.1 $ 18.0 $150.1
====== ====== ======
- - - - -
* Excluding marketable securities related to insurance activities