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 September 30, 1994
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 October 31, 1994.
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>
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,
1993 (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 September 30, 1994 and 1993
(in millions)
<TABLE>
<CAPTION>
Third Quarter Nine Months
1994 1993 1994 1993
--------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financing Revenue
Operating leases $ 1,405.3 $ 943.5 $ 3,776.8 $ 2,583.4
Retail 830.7 842.4 2,420.3 2,463.4
Wholesale 226.3 166.0 661.6 509.6
Diversified 28.9 40.3 81.6 113.8
Other 69.3 59.8 193.3 168.4
---------- ---------- ---------- ----------
Total financing revenue 2,560.5 2,052.0 7,133.6 5,838.6
Investment and other income 89.4 128.2 366.9 355.3
---------- ---------- ---------- ----------
Total revenue 2,649.9 2,180.2 7,500.5 6,193.9
Expenses
Depreciation on operating leases 1,039.3 721.8 2,783.7 1,904.8
Interest expense 905.0 733.2 2,510.6 2,176.4
Operating expenses 247.2 206.5 690.6 583.2
Provision for credit losses 39.3 87.3 171.6 239.8
---------- ---------- ---------- ----------
Total expenses 2,230.8 1,748.8 6,156.5 4,904.2
---------- ---------- ---------- ----------
Equity in net income of affiliated
companies 61.4 53.0 166.2 140.4
Income before income taxes 480.5 484.4 1,510.2 1,430.1
Provision for income taxes 162.8 207.1 519.9 527.3
---------- ---------- ---------- ----------
Income before minority interest 317.7 277.3 990.3 902.8
Minority interest in net income of
subsidiaries 2.9 3.0 8.1 7.2
---------- ---------- ---------- ----------
Net income 314.8 274.3 982.2 895.6
Earnings retained for use in
the business
Beginning of period 5,567.3 4,577.4 4,899.9 3,956.1
Dividends (250.0) (150.0) (250.0) (150.0)
---------- ---------- ---------- ----------
End of period $ 5,632.1 $ 4,701.7 $ 5,632.1 $ 4,701.7
========== ========== ========== ==========
-2-<PAGE>
<FN>
Certain amounts for Third Quarter and Nine Months 1993 have been reclassified to conform
with presentations adopted in subsequent periods.
The accompanying notes are part of the financial statements.
</TABLE>
-3-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 628.4 $ 992.3 $ 1,870.7
Investments in securities 1,947.5 1,889.3 1,947.1
Finance receivables, net (Note 1) 55,098.8 50,714.1 48,700.0
Accounts and notes receivable from
affiliated companies 260.9 385.0 363.2
Equity in net assets of affiliated companies 1,297.3 1,201.9 1,145.1
Net investment, operating leases 18,566.5 12,600.9 11,310.9
Other assets 1,505.7 1,816.8 1,501.2
----------- ----------- -----------
Total assets $ 79,305.1 $ 69,600.3 $ 66,838.2
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and
dealer reserves $ 1,200.9 $ 953.2 $ 863.2
Affiliated companies 585.8 261.9 388.7
----------- ----------- -----------
Total accounts payable 1,786.7 1,215.1 1,251.9
Debt (Note 2) 67,095.3 58,870.2 56,634.9
Deferred income taxes 2,339.5 2,048.7 1,870.1
Other liabilities and deferred income 1,251.1 1,394.6 1,202.9
----------- ----------- -----------
Total liabilities 72,472.6 63,528.6 60,959.8
Minority interest in net assets of
subsidiaries 398.3 297.0 302.9
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 (53.2) 17.8 19.0
Foreign-currency translation adjustments (87.0) (85.3) (87.5)
Earnings retained for use in the business 5,632.1 4,899.9 4,701.7
----------- ----------- -----------
Total stockholder's equity 6,434.2 5,774.7 5,575.5
----------- ----------- -----------
Total liabilities and stockholder's
equity $ 79,305.1 $ 69,600.3 $ 66,838.2
=========== =========== ===========
<FN>
Certain amounts for December and September 1993 have been reclassified to conform with
presentations adopted in subsequent periods.
The accompanying notes are part of the financial statements.
</TABLE>
-4-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended September 30, 1994 and 1993
(in millions)
<TABLE>
<CAPTION>
Nine Months
1994 1993
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 982.2 $ 895.6
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 171.6 239.8
Depreciation and amortization 2,934.4 2,025.3
Gain on sales of finance receivables (6.2) (92.5)
Gain on sale of investment (58.3) 0
Equity in net income of affiliates (166.2) (140.4)
Deferred income taxes 201.4 389.3
Changes in the following items
Other assets 365.5 40.0
Other liabilities 139.8 69.1
Other (46.1) (76.4)
---------- ----------
Net cash provided by operating activities 4,518.1 3,349.8
---------- ----------
Cash flows from investing activities
Purchase of finance receivables (99,639.7) (84,064.2)
Collection of finance receivables 93,128.8 78,526.0
Proceeds from sales of finance receivables 2,009.3 2,521.3
Proceeds from sale of investment 142.1 0
Purchase of operating lease vehicles (11,011.1) (7,280.9)
Liquidation of operating lease vehicles 2,267.4 1,767.4
Other 15.1 42.8
---------- ----------
Net cash used in investing activities (13,088.1) (8,487.6)
---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 7,938.8 10,392.5
Principal payments on long-term debt (6,462.0) (4,960.4)
Change in short-term debt, net 6,687.5 1,548.9
Cash dividends paid 0 (150.0)
Other 44.2 (114.0)
---------- ----------
Net cash provided by financing activities 8,208.5 6,717.0
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (2.4) (3.5)
---------- ----------
Net change in cash and cash equivalents (363.9) 1,575.7
Cash and cash equivalents, beginning of period 992.3 295.0
---------- ----------
Cash and cash equivalents, end of period $ 628.4 $ 1,870.7
========== ==========
Supplementary cash flow information
Interest paid $ 2,672.8 $ 2,139.2
Taxes paid 373.7 146.7
<FN>
Certain amounts for Nine Months 1993 have been reclassified to conform with presentations
adopted in subsequent periods.
The accompanying notes are part of the financial statements.
</TABLE>
-5-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables (in millions)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Retail $ 41,260.1 $ 38,609.3 $ 37,815.8
Wholesale 13,477.5 11,698.5 10,417.3
Diversified 2,564.1 2,636.0 2,732.5
Other 3,855.8 3,625.9 3,555.9
----------- ----------- -----------
Total finance receivables 61,157.5 56,569.7 54,521.5
Add loan origination costs 146.0 125.4 134.3
Less
Unearned income (5,470.2) (5,263.3) (5,184.6)
Allowance for credit losses (734.5) (717.7) (771.2)
----------- ----------- -----------
Finance receivables, net $ 55,098.8 $ 50,714.1 $ 48,700.0
=========== =========== ===========
</TABLE>
-6-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements (continued)
Note 2. Debt (in millions)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
PAYABLE WITHIN ONE YEAR:
Commercial paper $ 31,152.7 $ 24,506.1 $ 23,130.8
Borrowing agreements with
bank trust departments 55.3 0 0
Other short-term debt* 1,000.5 1,001.0 1,348.9
----------- ----------- -----------
Total short-term debt 32,208.5 25,507.1 24,479.7
Senior and subordinated
notes and debentures
payable within one year 4,930.7 7,882.6 7,375.4
----------- ----------- -----------
Total payable within
one year 37,139.2 33,389.7 31,855.1
----------- ----------- -----------
September 30, 1994
----------------------------
Weighted Average
Interest Rates** Maturities
---------------- ----------
PAYABLE AFTER ONE YEAR:
Unsecured senior notes
Notes 6.83% 1995-2048 30,002.9 25,526.8 24,824.0
Unamortized discount (46.8) (46.8) (46.1)
----------- ----------- -----------
Total unsecured
senior notes 29,956.1 25,480.0 24,777.9
----------- ----------- -----------
Unsecured subordinated
convertible debentures 0.0 0.5 1.9
----------- ----------- -----------
Total payable
after one year 29,956.1 25,480.5 24,779.8
----------- ----------- -----------
Total debt $ 67,095.3 $ 58,870.2 $ 56,634.9
=========== =========== ===========
<FN>
* Includes $2.4 million, $150 million, and $500 million with affiliated companies at
September 30, 1994, December 31, 1993, and September 30, 1993, respectively.
** Rates were variable on about 26.5% of the debt payable after one year including the
effects of interest rate swap agreements.
</TABLE>
Note 3. Dividend
On September 30, 1994, Ford Credit declared a $250 million cash dividend to
Ford, payable on October 5, 1994.
-7-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Ford Credit Third Quarter 1994 Results of Operations
Ford Credit's consolidated net income for the third quarter of 1994 was
$315 million, up $40 million or 15% compared with $275 million in the third
quarter of 1993. Income from financing operations was $254 million, up $32
million or 14% from the same period a year ago. Equity in net income of
affiliated companies, primarily Ford Holdings, Inc. ("Ford Holdings"), was
$61 million compared with $53 million in the same period a year ago.
Compared with results from a year ago, financing profits in the third
quarter of 1994 primarily reflected a higher level of earning assets, lower
credit losses, and non-recurrence of the effect of the 1993 U.S. tax rate
increase, partially offset by lower net interest margins and the non-
recurrence of a gain from the sale of receivables. The higher level of
earning assets reflected increases in operating leases, retail installment
sale receivables, and wholesale financing. Lower credit losses primarily
reflected the continuing trend of favorable credit loss experience and
lower losses per repossessed unit. The lower net interest margins
primarily reflected the effect of higher borrowing costs as well as lower
interest rates on finance receivables and operating leases.
Total gross finance receivables and net investment in operating leases at
September 30, 1994 were $79.7 billion, up $13.9 billion or 21% from a year
earlier. The increase primarily reflected higher levels of operating
leases, retail installment sale receivables, and wholesale receivables.
Depreciation expense on operating leases in the third quarter of 1994 was
$1,039 million, up $317 million or 44% compared with the third quarter of
1993. 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 third quarter of 1994, Ford Credit financed 36.7% of all new
cars and trucks sold by Ford Motor Company dealers in the United States,
compared with 37.5% in the third quarter of 1993. The decrease primarily
resulted from lower levels of retail installment sale financing. Ford
Credit provided retail financing for 592,000 new and used vehicles in the
United States, up 2% from a year ago. Ford Credit also provided wholesale
financing for 83.4% of Ford Motor Company factory sales to U.S. car and
truck dealers during the quarter, compared with 82.7% in the same period a
year ago.
-8-<PAGE>
FORD CREDIT FIRST NINE MONTHS 1994 RESULTS OF OPERATIONS
For the first nine months of 1994, Ford Credit's consolidated net income
was $982 million, up $86 million or 10% from $896 million in the first nine
months of 1993. Income from financing operations was $816 million, up $60
million or 8% from the same period a year ago. Equity in net income of
affiliated companies was $166 million compared with $140 million in 1993.
The improvement in financing profits primarily resulted from higher levels
of earning assets, lower credit losses, the non-recurrence of the effect of
the 1993 U.S. tax rate increase and a one-time gain from the sale of Ford
Credit's investment in Manheim Auctions, Inc., partially offset by lower
net interest margins, and lower gains from sales of receivables.
Depreciation expense in the first nine months of 1994 was $2,784 million,
up $879 million or 46% compared with the first nine months of 1993. 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 nine months of 1994, Ford Credit provided
retail financing for 37.0% of all new cars and trucks sold by Ford Motor
Company dealers in the United States, compared with 38.1% in the same
period a year ago. Ford Credit provided U.S. retail financing for
1,802,000 new and used vehicles compared with 1,679,000 vehicles in the
first nine months of 1993. Ford Credit also provided wholesale financing
for 81.7% of Ford Motor Company factory sales to U.S. car and truck dealers
during the first nine months of 1994, compared with 81.2% in the same
period last year.
-9-
<PAGE>
Ford Credit Liquidity and Capital Resources
Ford Credit's outstanding debt at September 30, 1994 and at the end of each
of the last five years was as follows:
December 31
Sept. 30, ---------------------------------------
1994 1993 1992 1991 1990 1989
-------- ------- ------- ------- ------- -------
(in millions)
Commercial paper
& STBA's(a) $31,208 $24,506 $21,210 $18,232 $23,371 $18,864
Other short-term
debt(b) 1,000 1,001 1,785 1,642 1,411 1,467
Long-term debt
(including current
portion) 34,887 33,363 26,914 28,160 25,903 26,393
------- ------- ------- ------- ------- -------
Total debt $67,095 $58,870 $49,909 $48,034 $50,685 $46,724
======= ======= ======= ======= ======= =======
1994 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
Memo:
Total support
facilities $22.3 $16.9 $13.9 $13.8 $12.7 $12.7
(billions -- as of
Sept. 30, 1994 and
January 1, 1994-1990,
respectively)
- - - - - -
(a) Short-term borrowing agreements with bank trust departments
(b) Includes $2 million, $150 million, and $800 million with affiliated
companies at September 30, 1994, December 31, 1993, and December 31,
1992, respectively
Support facilities represent additional sources of funds, if required. At
September 30, 1994, Ford Credit had approximately $21.1 billion of
contractually committed facilities for use in the United States, 76% of
which are available through June 1999. These facilities included $18.2
billion of revolving credit agreements with banks (which included $5.9
billion of Ford bank lines that may be used either by Ford or Ford Credit
at Ford's option) and $2.9 billion of agreements to sell retail
receivables. At September 30, 1994, all of these U.S. facilities were
unused. Outside of the United States, an additional $1.2 billion of
facilities support borrowing operations in Canada, Australia, and Puerto
Rico, of which 84% are contractually committed and available through June
1999. Canadian facilities of $752 million included $190 million of Ford
Motor Company of Canada, Limited and Ford Ensite International, Inc. lines
which are available to Ford Credit Canada Limited at the option of these
two companies. Australian facilities of $446 million included $169 million
of Ford Motor Company of Australia Limited lines which are available to
Ford Credit Australia Limited at the option of Ford Motor Company of
Australia Limited. Ford Motor Credit Company of Puerto Rico, Inc. had $25
million in support facilities at September 30, 1994. Substantially all of
these facilities were unused at September 30, 1994.
-10-
<PAGE>
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 September, 1994 and 1993 (in millions except amounts per
share):
Third Quarter First Nine Months
------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
Sales and revenues $30,622 $24,498 $94,796 $80,680
Total costs and expenses 28,746 24,018 88,307 77,601
Operating income 1,876 480 6,489 3,079
Automotive net interest expense (64) (87) (112) (237)
Automotive equity in net income
of affiliated companies 84 133 193 144
Income before income taxes 1,896 526 6,570 2,986
Provision for income taxes 737 32 2,723 1,070
Minority interests in net income
of subsidiaries 35 31 108 106
Net income $ 1,124 $ 463 $ 3,739 $ 1,810
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Income per share $ 1.04 $ 0.40 $ 3.50 $ 1.62
Income per share
assuming full dilution $ 0.93 $ 0.38 $ 3.13 $ 1.51
Cash Dividends per share $ 0.225 $ 0.20 $ 0.65 $ 0.60
Share data have been adjusted to reflect the 2-for-1 stock split that became
effective June 6, 1994.
-11-
<PAGE>
THIRD QUARTER 1994 RESULTS OF OPERATIONS - FORD
Overview
Ford Motor Company earned $1,124 million, or $1.04 per share of Common and
Class B Stock, in the third quarter of 1994. This compares with $463 million,
or $0.40 per share, in the third quarter of 1993. Fully diluted earnings per
share were $0.93 in the third quarter of 1994, compared with $0.38 a year
ago. Ford's worldwide sales and revenues were $30.6 billion, up $6.1 billion
from a year ago. Worldwide factory unit sales of cars and trucks were
1,526,000, up 220,000 units or 17%. Stockholders' equity was $20 billion at
September 30, 1994.
In August 1993, the Omnibus Budget Reconciliation Act was enacted in the United
States. Ford's results in the third quarter of 1993 were favorably affected by
a reduction of $140 million in the provision for income taxes to reflect
restatement of deferred tax balances.
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. Earnings per
share for prior periods have been restated to reflect the stock split.
Automotive Operations
Ford's worldwide Automotive operations earned $601 million in the third
quarter of 1994 on sales of $24.9 billion, compared with earnings of $72
million on sales of $20.1 billion a year ago.
In the U.S., Ford's automotive operations earned $578 million, compared with
$333 million a year ago. The improvement reflected higher unit volume (as a
result of higher truck sales) and improved margins offset partially by the non-
recurrence of the favorable one-time effect in 1993 of tax legislation in the
U.S. ($171 million).
In the third quarter of 1994, the seasonally-adjusted annual selling rate for
the U.S. car and truck industry was 14.8 million units compared with 13.9
million in the third quarter of 1993. Ford's car market share was 21.0% in the
third quarter of 1994, down 9/10 of a point from a year ago, reflecting
primarily lower shares for Tempo and Topaz. Ford's truck share was 31.2%,
equal to a year ago. Ford's combined car and truck share was 25.2%, down 5/10
of a point from a year ago.
Outside the U.S., Automotive operations earned $23 million in the third
quarter of 1994, compared with a loss of $261 million a year ago.
The improvement reflected primarily higher unit volume in Europe,
where Automotive operations (excluding Jaguar) earned $25 million in
the third quarter of 1994, compared with a loss of $217 million a year ago.
In the third quarter of 1994, the seasonally-adjusted annual selling rate for
the European car and truck industry was 13.1 million units, compared with 12.7
million a year ago. Ford's car share was 12.6% in the third quarter of 1994,
up 2/10 of a point from a year ago. Ford's truck share was 14.3%, equal to a
year ago.
Ford and Volkswagen are conducting a joint study of their Autolatina joint
venture, which has operations in Brazil and Argentina. Since it was formed in
1987, the joint venture has been a successful and profitable participant in
these volatile markets. Recent industry volume growth in Brazil and Argentina,
however, has resulted in somewhat lower Autolatina market shares -- primarily
because of capacity limitations and increased competitive actions. The joint
study is to determine how best to respond to protect the interests of both Ford
and Volkswagen, but no agreement has been reached on a course of action.
It is not known at this time what effect, if any, actions that may result from
the joint study will have on Ford's future earnings. Historically, Autolatina
has represented a significant portion of Ford's automotive earnings outside
the U.S. and Europe.
-12-
<PAGE>
Financial Services Operations
Ford's Financial Services operations earned $523 million in the third quarter of
1994, compared with $391 million in the third quarter of 1993. The increase
resulted primarily from improved results at Ford Credit, Associates First
Capital Corporation ("The Associates"), and USL Capital Corporation ("USL
Capital"), consolidation of results for The Hertz Corporation ("Hertz"), non-
recurrence of losses at Granite Management Corporation (formerly First
Nationwide Financial Corporation) ("Granite") and non-recurrence of the one-
time unfavorable effect in 1993 of tax legislation in the U.S. ($31 million).
For a discussion of Ford Credit's results of operations in the third quarter of
1994, see Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Ford Credit Third Quarter 1994 Results of
Operations." In addition, international operations managed by Ford Credit
earned $62 million in the third quarter of 1994, compared with $57 million a
year ago.
The Associates earned $151 million in the U.S. in the third quarter of 1994,
compared with $121 million a year ago. The increase reflected higher levels of
earning assets and improved net interest margins. In addition, international
operations managed by The Associates earned $17 million in the third quarter
of 1994, compared with $2 million a year ago.
USL Capital earned $27 million in the third quarter of 1994, compared with
$16 million a year ago. The increase reflected higher earning assets and lower
operating costs. The American Road Insurance Company ("American Road") earned
$14 million in the third quarter of 1994, compared with $27 million in the same
period in 1993. The decrease resulted primarily from reduced investment income.
In the first half of 1994, Ford acquired the remaining common stock of Hertz,
and Hertz became a wholly-owned subsidiary of Ford. Financial Services results
included Hertz earnings of $61 million in the third quarter of 1994. Automotive
results included Hertz earnings of $19 million a year ago (reflecting Ford's
prior equity interest in Hertz).
On April 14, 1994, an agreement was entered into for the sale of substantially
all of the assets of Granite Savings Bank (formerly First Nationwide Bank) to
First Madison Bank, referred to in the second through fourth paragraphs on page
11 of Ford Credit's Quarterly Report on Form 10-Q for the period ended March
31, 1994 (the "First Quarter 10-Q Report"). The transaction was completed on
September 30, 1994. In the third quarter of 1993, Granite incurred a loss of
$7 million.
FIRST NINE MONTHS 1994 RESULTS OF OPERATIONS - FORD
Overview
Ford earned $3,739 million, or $3.50 per share of Common and Class B Stock, in
the first nine months of 1994. Results included a charge to net income of $440
million related to the sale of Granite Savings Bank to First Madison Bank
(discussed above). In the first nine months of 1993, Ford earned $1,810
million, or $1.62 per share, including the favorable one-time effect ($140
million) of tax legislation in the U.S. Fully diluted earnings per share were
$3.13, compared with $1.51 a year ago. Ford's worldwide sales and revenues were
$94.8 billion in the first nine months of 1994, up $14.1 billion from a year
ago. Worldwide factory unit sales of cars and trucks were 5,001,000, up
488,000 or 11%.
-13-
<PAGE>
Automotive Operations
Ford's worldwide Automotive operations earned $2,739 million in the first nine
months of 1994, compared with $643 million in first nine months of 1993. In the
U.S., Ford's Automotive operations earned $2,320 million, compared with
$813 million a year ago. The improvement reflected higher unit volume (as a
result of higher industry sales) and improved margins.
In the first nine months of 1994, the seasonally-adjusted annual selling rate
for the U.S. car and truck industry was 15.2 million units, compared with 14
million a year ago. Ford's car share was 21.4% in the first nine months of
1994, down 8/10 of a point from a year ago. The decline from a year ago
reflected lower shares for Tempo and Topaz. Ford's truck share was 30.2%, equal
to a year ago. Ford's combined car and truck share was 25%, down 3/10 of a
point. For the full year, Ford projects U.S. industry sales of about 15.5
million cars and trucks in 1994, compared with 14.2 million units in 1993.
Outside the U.S., Automotive operations earned $419 million in the first nine
months of 1994, compared with a loss of $170 million a year ago. The
improvement reflected primarily higher unit volume, lower manufacturing costs,
and improved margins in Europe. Ford's European Automotive operations
(excluding Jaguar) earned $377 million in the first nine months of 1994,
compared with a loss of $264 million a year ago.
In the first nine months of 1994, the seasonally-adjusted annual selling rate
for the European car and truck industry was 13.2 million units, compared with
12.5 million units a year ago. Ford's car share was 12.0%, up 2/10 of a point
from a year ago. Ford's truck share was 14.6%, equal to a year ago. For the
full year, Ford projects European industry sales of about 13.3 million units in
1994, compared with 12.5 million units in 1993.
Financial Services Operations
Ford's Financial Services operations earned $1,000 million in the first nine
months of 1994, compared with $1,167 million in the first nine months of 1993.
The decline was more than explained by the charge to net income of $440 million
related to the sale of Granite Savings Bank. Higher earnings at Ford Credit,
The Associates, USL Capital, and the consolidation of results for Hertz were
partial offsets.
For a discussion of Ford Credit's results of operations in the first nine
months of 1994, see Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Ford Credit First Nine Months 1994
Results of Operations." International operations managed by Ford Credit
earned $175 million in the first nine months of 1994, compared with $154
million a year ago.
The Associates earned $400 million in the U.S. in the first nine months of 1994
compared with $343 million a year ago. The increase reflected higher levels of
earning assets and improved net interest margins. In addition, international
operations managed by The Associates earned $56 million in the first nine
months of 1994, compared with $22 million a year ago.
USL Capital's net income in the first nine months of 1994 was $75 million,
compared with $53 million a year ago. The increase reflected higher earning
assets and lower operating costs. American Road earned $44 million in the
first nine months of 1994, compared with $67 million a year ago. The decrease
resulted primarily from reduced investment income, partially offset by improved
underwriting experience in extended service plans.
Hertz earnings of $88 million in the first nine months of 1994 were included in
Financial Services results. Earnings of $22 million a year ago were included in
Automotive results (reflecting Ford's prior equity interest).
Granite incurred a loss of $484 million in the first nine months of 1994,
including a charge of $440 million related to the sale of Granite Savings Bank.
Granite incurred a loss of $42 million in the first nine months of 1993.
-14-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
Cash and marketable securities of Ford's Automotive operations were $13.9
billion at September 30, 1994, up $4.1 billion from December 31, 1993. The
amount of cash and marketable securities is expected to decline during the
fourth quarter because of normal new-model changeover and launch and higher
capital spending (discussed below). Ford paid $869 million in cash dividends
on its Common Stock, Class B Stock, and Preferred Stock during the first nine
months of 1994.
Automotive capital expenditures were $5.9 billion in the first nine months of
1994, compared with $4.7 billion a year ago. The rate of automotive capital
spending is projected to increase during the fourth quarter as a result of
increases in both product and non-product spending. The higher product spending
reflects a record pace of new-model introductions, while non-product spending
reflects efforts to improve efficiency and quality and increase capacity for
selected components and vehicles.
Automotive debt at September 30, 1994 totaled $7.2 billion, which was 26% of
total capitalization (stockholders' equity and Automotive debt), compared with
$7.9 billion, or 33% of total capitalization, at year-end 1993. The decrease in
total debt is primarily the result of lower levels of short-term borrowings.
At September 30, 1994, Ford had long-term contractually committed credit
agreements in the U.S. under which $5.9 billion is available from various
banks at least through June 30, 1999. The entire $5.9 billion may be used, at
Ford's option, by either Ford or Ford Credit. As of September 30, 1994, these
facilities were unused.
Outside the U.S., Ford has additional long-term contractually committed credit-
line facilities of approximately $2.5 billion. These facilities are available
in varying amounts from 1994 through 1999; less than 1% was used at September
30, 1994.
Financial Services Operations
Financial Services' cash and investments in securities totaled $8.4 billion at
September 30, 1994, down $2.4 billion from December 31, 1993. The decline
reflected primarily the reclassification of Granite's net assets to "other
assets" as a result of the sale.
Net receivables and lease investments were $124.8 billion at September 30, 1994,
up $5.3 billion from December 31, 1993. The increase reflected continued growth
in earning assets at Ford Credit and The Associates, offset partially by the
reclassification of Granite's net assets.
Total debt was $119.1 billion at September 30, 1994, up $15.1 billion from
December 31, 1993. The increase resulted from higher debt levels required to
finance growth in earning assets at Ford Credit and The Associates, as well as
the consolidation of Hertz; the reclassification of Granite's net assets was a
partial offset.
At September 30, 1994, Financial Services had approximately $33.3 billion of
support facilities available for use in the U.S. (including $5.9 billion of Ford
bank lines that may be used by Ford Credit at Ford's option), 98% of which were
contractually committed; less than 1% of these facilities were in use at that
date. An additional $20.5 billion of support facilities were available outside
the U.S., 46% of which were contractually committed; approximately $6.1
billion of these support facilities were in use at September 30, 1994.
-15-
<PAGE>
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 fourth paragraph on page 24 of the 10-K
Report, on page 14 of the First Quarter 10-Q Report and on page 15 of Ford
Credit's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
(the "Second Quarter 10-Q Report"), the damages specified by the plaintiffs in
these actions, including both actual and punitive damages, aggregated
approximately $929 million at September 30, 1994.
With respect to the lawsuits for damages involving the alleged propensity of
Bronco II utility vehicles to roll over, referred to in the fifth paragraph on
page 24 of the 10-K Report, on page 14 of the First Quarter 10-Q Report and
on page 15 of the Second Quarter 10-Q Report, the damages specified by the
plaintiffs in these actions, including both actual and punitive damages,
aggregated approximately $1.1 billion at September 30, 1994.
Other Matters
With respect to the private purported class action lawsuits seeking economic
damages on behalf of Bronco II owners relating to the alleged propensity of such
vehicles to roll over, referred to in the last paragraph on page 25 of the 10-K
Report, a settlement has been reached, subject to final court approval.
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 September 30, 1994:
FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- --------------------- ----------------
August 22, 1994 Item 5 - Other Events 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
November 3, 1994 --------------------------
Terrence F. Marrs, Controller
(Chief Accounting Officer)
-16-
<PAGE>
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 September 30, 1994 and 1993, 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 September 30, 1994. 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, 1993 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 February 1, 1994, 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, 1993 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
October 26, 1994
-17-
<PAGE>
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.
November 3, 1994,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule. Filed with this
Report.
-18-
<PAGE>
Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(dollar amounts in millions)
<TABLE>
<CAPTION>
Nine Months For the Years Ended December 31
-------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense $ 2,522.0 $ 2,195.3 $ 2,943.5 $ 3,108.3 $ 3,840.6 $ 4,307.4 $ 4,647.4
Rents 9.9 7.9 11.0 10.8 8.9 7.5 6.4
--------- --------- --------- --------- --------- --------- ---------
Total fixed
charges 2,531.9 2,203.2 2,954.5 3,119.1 3,849.5 4,314.9 4,653.8
Earnings
Income before income
taxes and cumulative
effects of changes in
accounting principles 1,510.2 1,430.1 1,875.0 1,323.2 1,075.1 763.2 630.0
Less equity in net income
of affiliated companies 166.2 140.4 198.3 155.2 191.0 145.0 30.8
Less minority interest
in net income of
subsidiaries 8.1 7.2 7.9 6.1 2.3 0 0
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed
charges $ 3,867.8 $ 3,485.7 $ 4,623.3 $ 4,281.0 $ 4,731.3 $ 4,933.1 $ 5,253.0
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to
fixed charges 1.53 1.58 1.56 1.37 1.23 1.14 1.13
========= ========= ========= ========= ========= ========= =========
<FN>
For purposes of the Ford Credit ratio, earnings consist of income before taxes and cumulative effects of
changes in accounting principles and fixed charges. Income before income taxes and cumulative effects of
changes in accounting principles of Ford Credit excludes the equity in net income of all unconsolidated
affiliates and minority interest in net income of subsidiaries. Fixed charges consist of interest on
borrowed funds, amortization of debt discount, premium, and issuance expense, and one-third of all rental
expense (the proportion deemed representative of the interest factor).
</TABLE>
-19-
<TABLE>
Exhibit 12-B
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
------------------------------------------------------------------------------------------
(in millions)
<CAPTION>
Nine
Months For the Years Ended December 31
---------------------------------------------------
1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income/(loss) before income taxes and
cumulative effects of changes in accounting
principles $ 6,570 $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030
Equity in net (income)/loss of affiliates
plus dividends from affiliates (102) (98) 26 69 171 (137)
Adjusted fixed charges a/ 5,853 7,648 8,113 9,360 9,690 9,032
------- ------- ------- ------- ------- -------
Earnings $12,321 $11,553 $ 8,012 $ 6,842 $11,356 $14,925
======= ======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
- --------------------------
Interest expense b/ $ 5,605 $ 7,351 $ 7,987 $ 9,326 $ 9,647 $ 8,624
Interest portion of rental expense c/ 195 266 185 124 105 103
Preferred stock dividend requirements of
majority-owned subsidiaries d/ 122 115 77 56 83 16
------- ------- ------- ------- ------- -------
Fixed charges 5,922 7,732 8,249 9,506 9,835 8,743
Ford preferred stock dividend requirements e/ 377 442 317 26 0 0
------- ------- ------- ------- ------- -------
Total combined fixed charges and
preferred stock dividends $ 6,299 $ 8,174 $ 8,566 $ 9,532 $ 9,835 $ 8,743
======= ======= ======= ======= ======= =======
Ratios
- ------
Ratio of earnings to fixed charges 2.08 1.5 f/ g/ 1.2 1.7
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.96 1.4 h/ i/ 1.2 1.7
- - - - - -
a/ Fixed charges, as shown below, have been adjusted to exclude the
amount of interest capitalized during the period and preferred
stock dividend requirements of majority-owned subsidiaries.
b/ Includes interest, whether expensed or capitalized, and
amortization of debt expense and discount or premium relating to
any indebtedness.
c/ One-third of all rental expense is deemed to be interest.
d/ Preferred stock dividend requirements of Ford Holdings, Inc.,
have been increased to an amount representing the pre-tax
earnings which would be required to cover such dividend
requirements based on Ford's effective income tax rates for all
periods except 1992. The U.S. statutory rate of 34% was used for
1992.
<PAGE>
e/ Preferred stock dividend requirements of Ford Motor Company have
been increased to an amount representing the pre-tax earnings
which would be required to cover such dividend requirements based
on Ford's effective income tax rates for all periods except 1992.
The U.S. statutory rate of 34% was used for 1992.
f/ Earnings were inadequate to cover fixed charges by $237 million.
g/ Earnings were inadequate to cover fixed charges by
$2,664 million.
h/ Earnings were inadequate to cover combined fixed charges and
preferred stock dividends by $554 million.
i/ Earnings were inadequate to cover combined fixed charges and
preferred stock dividends by $2,690 million.
</TABLE>
-20-
EXHIBIT 15
Ford Motor Credit Company
The American Road
Dearborn, Michigan
Re: Ford Motor Credit Company Registration Statement No. 33-30875 on Form
S-8 and Registration Statements Nos. 33-24928, 33-55237, 33-53101 and
33-55945 on Form S-3
We are aware that our report dated October 26, 1994 accompanying the
unaudited interim financial information of Ford Motor Credit Company and
subsidiaries for the periods ended September 30, 1994 and 1993 and included
in the Ford Motor Credit Company Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 will be incorporated by reference in the above
Registration Statements. Pursuant to Rule 436(c) under the Securities Act
of 1933, this report should not be considered a part of the Registration
Statements prepared or certified by us within the meaning of Sections 7
and 11 of the Act.
/x/ Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
November 3, 1994
-21-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Ford Credit's Condensed Consolidated Balance Sheet is unclassified. Therefore,
the following Tags listed below are not applicable to Ford Credit: Current
Assets and Current Liabilities. Information relating to earnings a share is not
presented because Ford Credit is a wholly owned subsidiary of Ford Motor
Company.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 628
<SECURITIES> 1,947
<RECEIVABLES> 55,099
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,305
<CURRENT-LIABILITIES> 0
<BONDS> 67,095
<COMMON> 25
0
0
<OTHER-SE> 6,409
<TOTAL-LIABILITY-AND-EQUITY> 79,305
<SALES> 0
<TOTAL-REVENUES> 7,500
<CGS> 0
<TOTAL-COSTS> 6,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 172
<INTEREST-EXPENSE> 2,511
<INCOME-PRETAX> 1,510
<INCOME-TAX> 520
<INCOME-CONTINUING> 982
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 982
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
