Ford Motor Credit Earns $1.3 Billion in 2006*
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Fourth Quarter Earnings of $279 Million Reported
DEARBORN, Mich., Jan. 25 -- Ford Motor Credit Company reported net income of $1,283 million in 2006, down $621 million from earnings of $1,904 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $1,953 million in 2006, down $970 million from 2005. The decrease in full year earnings primarily reflected higher borrowing costs, higher depreciation expense and the impact of lower average receivable levels. These were offset partially by market valuations primarily related to non-designated derivatives and reduced operating costs.
In the fourth quarter of 2006, Ford Motor Credit's net income was $279 million, down $26 million from a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $406 million in the fourth quarter, compared with $482 million in the previous year. The decrease in fourth quarter earnings primarily reflected higher borrowing costs and higher depreciation expense, offset partially by market valuations primarily related to non-designated derivatives.
"Our results for 2006 were in line with our expectations. We made good progress on several fronts this year, notably our solid funding and strong liquidity, our focus on global cost reduction and our plans to restructure our North American operations," said Mike Bannister, chairman and CEO.
"In 2007 we expect lower earnings due to margin and volume pressures and lower credit loss reserve reductions. Our sustained focus will be on operational effectiveness, strong dealer service and profitably supporting Ford vehicle sales worldwide."
On December 31, 2006, Ford Motor Credit's on-balance sheet net receivables totaled $135 billion, compared with $132 billion at year-end 2005. Managed receivables were $148 billion, down from $150 billion a year ago.
Ford Motor Credit paid dividends of $1.4 billion in 2006. On December 31, managed leverage was 11.4 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/.
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* The financial results discussed herein are presented on a preliminary
basis using currently available information. While we believe these
data are meaningful and accurate, they may differ from the formal data
reported in our Annual Report on Form 10-K for the year ended December
31, 2006 ("Form 10-K Report"). We do not intend and assume no
obligation to update these data prior to the filing of our Form 10-K
Report.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF INCOME
(in millions)
Fourth Quarter Full Year
----------------- ------------------
2006 2005 2006 2005
------- ------- ------- -------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $1,465 $1,291 $5,608 $5,286
Retail 879 921 3,649 3,932
Interest supplements and
other support costs earned
from affiliated companies 1,004 825 3,487 3,259
Wholesale 571 437 2,419 1,232
Other 52 57 215 221
------ ------ ------ ------
Total financing revenue 3,971 3,531 15,378 13,930
Depreciation on vehicles
subject to operating leases (1,370) (1,133) (5,189) (4,430)
Interest expense (2,096) (1,732) (7,818) (6,616)
------ ------ ------ ------
Net financing margin 505 666 2,371 2,884
Other revenue
Investment and other income
related to sales
of receivables 126 270 668 1,513
Insurance premiums earned, net 40 40 182 192
Other income 330 178 1,019 845
------ ------ ------ ------
Total financing margin and
other revenue 1,001 1,154 4,240 5,434
Expenses
Operating expenses 547 578 2,038 2,185
Provision for credit losses 31 79 95 166
Insurance expenses 17 15 154 160
------ ------ ------ ------
Total expenses 595 672 2,287 2,511
------ ------ ------ ------
Income from continuing
operations before income taxes 406 482 1,953 2,923
Provision for income taxes 127 177 670 1,059
------ ------ ------ ------
Income from continuing
operations before minority
interests 279 305 1,283 1,864
Minority interests in net
income of subsidiaries - - - 1
------ ------ ------ ------
Income from continuing
operations 279 305 1,283 1,863
------ ------ ------ ------
Income from discontinued
operations - - - 37
Gain on disposal of discontinued
operations - - - 4
------ ------ ------ ------
Net income $ 279 $ 305 $1,283 $1,904
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FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)
December 31, December 31,
2006 2005
------------- --------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 12,331 $ 14,798
Marketable securities 10,161 3,810
Finance receivables, net 109,405 109,876
Net investment in operating leases 25,939 22,213
Retained interest in securitized assets 990 1,420
Notes and accounts receivable from
affiliated companies 950 1,235
Derivative financial instruments 1,804 2,547
Other assets 5,752 6,363
------------ -----------
Total assets $ 167,332 $ 162,262
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LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and
other $ 1,509 $ 1,904
Affiliated companies 3,648 794
------------ -----------
Total accounts payable 5,157 2,698
Debt 139,740 133,446
Deferred income taxes, net 6,783 9,276
Derivative financial instruments 296 680
Other liabilities and deferred income 3,588 4,755
------------ -----------
Total liabilities 155,564 150,855
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) 5,124 5,117
Accumulated other comprehensive income 825 391
Retained earnings 5,791 5,871
------------ -----------
Total stockholder's equity 11,765 11,404
------------ -----------
Total liabilities and stockholder's
equity $ 167,332 $ 162,262
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FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
OPERATING HIGHLIGHTS*
Fourth Quarter Full Year
----------------- ----------------
Financing Shares 2006 2005 2006 2005
------- ------- ------- -------
United States
Financing share - Ford,
Lincoln and Mercury
Retail installment and lease 33% 37% 44% 37%
Wholesale 80 80 80 81
Europe
Financing share - Ford
Retail installment and lease 30% 29% 27% 28%
Wholesale 95 95 95 96
Contract Volume - New and used
retail/lease (in thousands)
North America segment
United States 262 329 1,574 1,498
Canada 43 35 189 169
------ ------ ------ ------
Total North America segment 305 364 1,763 1,667
International segment
Europe 171 163 711 734
Other international 52 64 233 276
------ ------ ------ ------
Total International segment 223 227 944 1,010
------ ------ ------ ------
Total contract volume 528 591 2,707 2,677
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Borrowing Cost Rate** 5.9% 5.1% 5.5% 4.5%
Charge-offs (in millions)
On-Balance Sheet Receivables
Retail installment & lease $ 158 $ 193 $ 465 $ 681
Wholesale 19 13 44 23
Other 12 7 14 2
------ ------ ------ ------
Total charge-offs -
on-balance sheet
receivables $ 189 $ 213 $ 523 $ 706
====== ====== ====== ======
Total loss-to-receivables
ratio 0.56% 0.68% 0.39% 0.57%
Managed Receivables***
Retail installment & lease $ 179 $ 226 $ 551 $ 830
Wholesale 19 13 44 23
Other 12 7 14 2
------ ------ ------ ------
Total charge-offs -
managed receivables $ 210 $ 246 $ 609 $ 855
====== ====== ====== ======
Total loss-to-receivables
ratio 0.56% 0.65% 0.41% 0.54%
- - - - -
* 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 to GAAP.
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 sold or transferred for legal purposes and are
available only for repayment of the debt or other obligations issued or
arising in the securitization transactions and to pay other transaction
participants; they 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 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 TO GAAP:
Managed Leverage Calculation December 31, December 31,
2006 2005
-------------- -------------
(in billions)
Total debt $ 139.7 $ 133.4
Securitized off-balance sheet receivables
outstanding 12.2 18.0
Retained interest in securitized off-balance
sheet receivables (1.0) (1.4)
Adjustments for cash and cash equivalents,
and marketable securities * (21.8) (17.9)
Fair value hedge accounting adjustments (0.1) (0.5)
------------ -----------
Total adjusted debt $ 129.0 $ 131.6
============ ===========
Total stockholder's equity (including
minority interest) $11.8 $ 11.4
Fair value hedge accounting adjustments (0.5) (0.7)
------------ -----------
Total adjusted equity $ 11.3 $ 10.7
============ ===========
Managed leverage (to 1) = adjusted debt /
adjusted equity 11.4 12.3
Memo: Financial statement leverage (to 1)
= total debt / stockholder's equity 11.9 11.7
Net Finance Receivables and
Operating Leases Managed Receivables
-------------------------------------------
On-Balance Off-Balance
Sheet Sheet Total
------------- --------------- -------------
December 31, 2006 (in billions)
-----------------
Retail installment $ 70.4 $ 12.2 $ 82.6
Wholesale 35.2 - 35.2
Other finance receivables 3.8 - 3.8
Net investment in
operating leases 25.9 - 25.9
------------ ------------ -----------
Total net finance
receivables and
operating leases $ 135.3 $ 12.2 $ 147.5
============ ============ ===========
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
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* Excluding marketable securities related to insurance activities