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, 1997
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 April 30, 1997.
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 1 OF 21
<PAGE>
<PAGE 2>
ITEM 5. Other Events.
FORD MOTOR CREDIT COMPANY FINANCIAL STATEMENTS FOR THE PERIOD ENDED
March 31, 1997.
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, 1996 (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" or the "company").
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, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
First Quarter
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Financing revenue
Operating leases $ 2,141.6 $ 1,991.4
Retail 1,257.5 1,163.7
Wholesale 432.2 436.8
Other 98.5 133.8
---------- ----------
Total financing revenue 3,929.8 3,725.7
Interest expense (1,626.6) (1,553.0)
Depreciation on operating leases (1,445.5) (1,377.4)
---------- ----------
Net financing margin 857.7 795.3
Other Revenue
Insurance premiums earned 69.8 -
Investment and other income 310.0 213.1
---------- ----------
Total financing margin and revenue 1,237.5 1,008.4
Expenses
Provision for credit losses 355.7 203.5
Operating expenses 341.8 326.0
Other insurance expenses 66.9 -
---------- ----------
Total expenses 764.4 529.5
---------- ----------
Equity in net income of affiliated
companies 0.7 48.8
Income before income taxes 473.8 527.7
Provision for income taxes 182.8 170.8
---------- ----------
Income before minority interest 291.0 356.9
Minority interest in net income of
subsidiaries 15.1 17.9
---------- ----------
<PAGE>
Net income 275.9 339.0
Earnings retained for use in the business
Beginning of period 6,892.1 6,724.5
Dividends (14.5) (0.5)
---------- ----------
End of period $ 7,153.5 $ 7,063.0
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
-2-<PAGE>
<PAGE 3>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 1,567.3 $ 2,716.0 $ 1,186.8
Investments in securities 1,473.6 1,324.8 2,685.2
Finance receivables, net (Note 2) 78,436.6 80,848.0 77,252.6
Net investment, operating leases 32,660.5 30,645.2 26,601.5
Notes and accounts receivable from
affiliated companies 836.6 1,133.0 1,846.5
Equity in net assets of affiliated
companies 45.4 44.4 25.2
Other assets 4,801.9 4,985.0 3,646.7
----------- ----------- -----------
Total assets $ 119,821.9 $ 121,696.4 $ 113,244.5
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and
dealer reserves $ 3,597.4 $ 3,362.6 $ 1,847.0
Affiliated companies 1,846.1 2,315.2 2,005.4
----------- ----------- -----------
Total accounts payable 5,443.5 5,677.8 3,852.4
Debt (Note 3) 97,955.1 98,024.3 92,914.3
Deferred income taxes 3,550.7 4,260.4 3,393.9
Other liabilities and deferred income 2,927.4 2,929.9 2,688.8
----------- ----------- -----------
Total liabilities 109,876.7 110,892.4 102,849.4
Minority interests in net assets of
subsidiaries 336.2 1,313.8 1,184.1
Preferred stockholder's equity in a
subsidiary company 286.5 286.5 284.5
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) 3,719.5 3,747.6 3,706.6
Note receivable from affiliated
company (1,517.0) (1,517.0) (1,859.0)
Unrealized gain on investments in
securities, net of taxes 46.5 56.9 41.0
Foreign currency translation adjustments (105.0) (0.9) (50.1)
Earnings retained for use in the business 7,153.5 6,892.1 7,063.0
----------- ----------- -----------
Total stockholder's equity 9,322.5 9,203.7 8,926.5
----------- ----------- -----------
Total liabilities and stockholder's
equity $ 119,821.9 $ 121,696.4 $ 113,244.5
=========== =========== ===========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
-3-<PAGE>
<PAGE 4>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended March 31, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
First Quarter
1997 1996
---------- ----------
(Unaudited)
<S> <C> C>
Cash flows from operating activities
Net income $ 275.9 $ 339.0
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 355.7 203.5
Depreciation and amortization 1,544.1 1,445.8
Gain on sale of finance receivables (26.5) -
Equity in net income of affiliates (0.7) (48.8)
Deferred income taxes (205.5) 251.1
Changes in the following items
Other assets (387.2) 2.6
Other liabilities 887.9 (166.4)
Other (191.0) (45.0)
---------- ----------
Net cash provided by operating activities 2,252.7 1,981.8
---------- ----------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (8,228.2) (11,359.4)
Collection of finance/intercompany
receivables (other than wholesale) 8,213.6 8,577.8
Purchase of operating lease vehicles (6,530.8) (4,775.2)
Liquidation of operating lease vehicles 2,920.7 2,419.4
Net change in wholesale receivables (148.6) (268.4)
Proceeds from sales of finance receivables 801.4 1,753.7
Other (144.3) 148.6
---------- ----------
Net cash used in investing activities (3,116.2) (3,503.5)
Cash flows from financing activities
Proceeds from issuance of long-term debt 2,399.2 4,518.4
Principal payments on long-term debt (2,246.8) (1,620.7)
Change in short-term debt, net (505.2) (1,879.8)
Dividends paid (14.5) (0.5)
Other 105.2 218.5
---------- ----------
Net cash (used in)/provided by financing activities (262.1) 1,235.9
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (23.1) (5.5)
---------- ----------
Net change in cash and cash equivalents (1,148.7) (291.3)
Cash and cash equivalents, beginning of period 2,716.0 1,478.1
---------- ----------
Cash and cash equivalents, end of period $ 1,567.3 $ 1,186.8
========== ==========
Supplementary cash flow information
Interest paid $ 1,601.7 $ 1,592.6
Taxes paid/(received) 36.8 (61.1)
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
-4-<PAGE>
<PAGE 5>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Financial Statements Restatement
During the fourth quarter 1996, Ford, FSG, Inc. contributed ownership of Ford
Credit Europe (approximately 78% ownership) to Ford Credit. Prior years'
quarterly financial statements were restated to include Ford Credit Europe.
Note 2. Finance Receivables, Net (in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Retail $ 51,172.3 $ 53,099.1 $ 49,711.1
Wholesale 22,392.3 22,706.3 20,534.2
Other 5,840.4 5,942.7 7,790.7
----------- ----------- ----------
Total finance receivables net of
unearned income 79,405.0 81,748.1 78,036.0
Less allowance for credit losses (968.4) (900.1) (783.4)
----------- ----------- ----------
Finance receivables, net $ 78,436.6 $ 80,848.0 $ 77,252.6
=========== =========== ==========
</TABLE>
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<PAGE>
<PAGE 6>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements (continued)
Note 3. Debt (in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
PAYABLE WITHIN ONE YEAR:
Commercial paper $ 38,108.7 $ 38,228.3 $ 37,885.7
Other short-term debt* 4,957.6 4,788.7 2,308.6
----------- ----------- ----------
Total short-term debt 43,066.3 43,017.0 40,194.3
Long-term indebtedness payable
within one year** 10,568.5 9,178.0 7,697.3
----------- ----------- ----------
Total payable within
one year 53,634.8 52,195.0 47,891.6
----------- ----------- ----------
<CAPTION>
March 31, 1997
----------------------------
Weighted-Average
Interest Rates*** Maturities
---------------- ----------
<S> <C> <C> <C> <C> <C>
PAYABLE AFTER ONE YEAR:
Secured indebtedness 17.64% 1998 9.8 9.9 -
Unsecured senior indebtedness
Notes**** 6.62% 1998-2048 43,124.6 44,273.6 43,658.9
Debentures 4.53% 1998-2006 1,130.0 1,228.3 1,365.3
Unamortized discount (18.3) (7.5) (1.5)
--------- --------- ---------
Total secured and unsecured
senior indebtedness 44,246.1 45,504.3 45,022.7
Unsecured long-term
subordinated notes 10.10% 2001 74.2 325.0 -
Total payable ----------- ----------- ----------
after one year 44,320.3 45,829.3 45,022.7
----------- ----------- ----------
Total debt $ 97,955.1 $ 98,024.3 $ 92,914.3
=========== =========== ==========
<FN>
* Includes $1,802.6 million, $2,477.7 million, and $104.6 million with affiliated
companies at March 31, 1997, December 31, 1996, and March 31, 1996, respectively.
** Includes $1,030.9 million, $653 million, and $0 million with affiliated companies at
March 31, 1997, December 31, 1996, and March 31, 1996, respectively.
*** Rates were variable on about 22.5% of the debt payable after one year including the
effects of interest rate swap agreements.
**** Includes $3,123.1 million, $3,584.4 million, and $1,510.4 million with affiliated
companies at March 31, 1997, December 31, 1996, and March 31, 1996, respectively.
</TABLE>
-6-<PAGE>
<PAGE 7>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements (continued)
Note 4. New Accounting Standard
Effective January 1, 1997, Ford Credit adopted Statement of Financial
Accounting Standard No. 125 ("SFAS 125"), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities".
SFAS 125 provides accounting and reporting standards for the subject
matter based on consistent application of the financial components
approach that focuses on control. The adoption of the statement
did not have a material effect on the financial statements.
Note 5. Sale of Ford New Holland Credit Company
On January 24, 1997, Ford Credit sold its 51% majority ownership of Ford New
Holland Credit Company to FiatAllis North America, Inc. and New Holland
(Canada) Credit Holding Ltd. The sale was effective January 1, 1997 and
did not materially impact Ford Credit's financial statements.
-7-<PAGE>
<Page 8>
FORD MOTOR CREDIT COMPANY RESULTS OF OPERATIONS
FIRST QUARTER 1997 COMPARED WITH 1996
Ford Credit's consolidated net income in the first quarter of 1997 was $276
million, down $63 million or 19% from 1996. Ford Credit's first quarter
1997 financial results include a majority ownership (78%) of Ford Credit
Europe plc ("Ford Credit Europe") and results for first quarter 1996
have been restated to reflect this ownership change. Compared with
results from a year ago, the decrease primarily reflects higher credit
losses and loss reserve requirements, the effects of Ford's restructuring
of its Financial Services Group ("FSG") and higher taxes. Higher
levels of earning assets and improved operating cost performance were
partial offsets.
Credit losses as a percent of average net finance receivables including net
investment in operating leases increased to 0.86% in 1997 compared with 0.63%
in 1996 reflecting an increase in repossession rates and higher losses per
repossession. The increased repossession ratio reflects an increased mix of
used vehicle financing and expanded purchase policies to generate financing
volume. The increase in loss per repossession reflects a weaker used vehicle
market resulting in Ford Credit realizing lower prices for repossessed units
sold at auction. Higher loss reserves reflect anticipation of actual losses
continuing above prior years' levels.
The FSG restructuring reflects lower income resulting from the repurchase in the
first quarter of 1996 by Ford Holdings, Inc. ("Ford Holdings") of substantially
all the shares of Ford Holdings' common stock owned by Ford Credit, offset
partially by the addition of The American Road Insurance Company and interest
on a note receivable from Ford Holdings.
Net financing margins remained essentially unchanged; improved yields and lower
borrowing costs (6.64% net borrowing rate in 1997 compared with 6.71% in 1996)
were offset by increased depreciation expense for leased vehicles, primarily
reflecting lower-than-anticipated residual values on off-lease vehicles.
Total net finance receivables and net investment in operating leases at March
31, 1997 were $111.1 billion, up $7.2 billion or 7% from a year earlier.
For the first quarter of 1997, Ford Credit financed 39% of all new cars and
trucks sold by Ford dealers in the U.S., equal to first quarter 1996.
In Europe, Ford Credit financed 25% of all new vehicles sold by Ford
in the first quarter of 1997 compared with 26% in the first quarter of 1996.
Ford Credit provided retail customers with financing for 637,000 new
and used vehicles in the United States and 166,000 in Europe. In the
first quarter of 1997, Ford Credit provided wholesale financing for 77% of
Ford Motor Company U.S. factory sales and 94% of Ford Motor Company Europe
factory sales compared with 77% for the U.S. and 89% for Europe in first quarter
1996.
-8-
<PAGE>
<PAGE 9>
During the first quarter of 1997, Ford Credit completed the sale of its
partnership interest in Ford New Holland Credit Company to affiliates of
Fiat Sp.A. The sale did not have a material impact on Ford Credit's first
quarter results.
Ford Credit Liquidity and Capital Resources
Ford Credit's outstanding debt at March 31, 1997 and at the end of each of the
last three years was as follows:
<TABLE>
<CAPTION>
December 31
Mar 31, -------------------------
1997 1996 1995 1994
------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
Commercial paper & STBAs(a) $39,101 $38,774 $40,419 $38,128
Other short-term debt (b) 3,965 4,243 1,781 1,357
Long-term debt (including
current portion)(c) 54,889 55,007 49,980 41,503
------- ------- ------- -------
Total debt $97,955 $98,024 $92,180 $80,988
======= ======= ======= =======
United States 75,518 $76,635 $73,178 $65,715
Europe 14,492 14,028 13,013 10,548
Other international 7,945 7,361 5,989 4,725
------- ------- ------- -------
Total debt $97,955 $98,024 $92,180 $80,988
======= ======= ======= =======
Memo:
Total support facilities
(billions) as of March 31, 1997
and December 31, 1996-1994,
respectively:
Ford Credit $ 27.2 $ 27.2 $ 27.4 $ 22.3
Ford Credit Europe 5.5 5.7 4.7 6.6
<FN>
- - - - - -
(a) Short-term borrowing agreements with bank trust departments.
(b) Includes $1,803 million, $2,478 million, $176 million, and $25 million with affiliated
companies at March 31, 1997, December 31, 1996, December 31, 1995 and
December 31, 1994, respectively.
(c) Includes $4,154 million, $4,237 million, $1,174 million, and $75 million with
affiliated companies at March 31, 1997, December 31, 1996, December 31, 1995 and
December 31, 1994, respectively.
</TABLE>
Support facilities represent additional sources of funds, if required. At
March 31, 1997, Ford Credit had approximately $19.6 billion of contractually
committed facilities. In addition, $7.6 billion of Ford Bank lines may be
used by Ford Credit at Ford's option. The lines have various maturity dates
through June 30, 2001 and may be used, at Ford Credit's option, by any of
its direct or indirect majority-owned subsidiaries. Any such borrowing
will be guaranteed by Ford Credit. Banks also provide $1.6 billion of
contractually committed liquidity facilities to support Ford Credit's
asset backed commercial paper program.
-9-
<PAGE>
<PAGE 10>
Additionally, at March 31, 1997, there was approximately $4.7 billion of
contractually committed facilities available for Ford Credit Europe's use.
In addition, $775 million of Ford bank lines may be used by Ford Credit
Europe at Ford's option. The lines have various maturity dates through
June 30, 2001 and may be used, at Ford Credit Europe's option, by any of
its direct or indirect majority-owned subsidiaries. Any such borrowing
will be guaranteed by Ford Credit Europe.
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, 1997 and 1996 (in millions except amounts per
share):
First Quarter
-------------
1997 1996
---- ----
Sales and revenues $36,202 $35,225
Total costs and expenses 33,687 34,098
Operating income 2,515 1,127
Automotive net interest income 55 12
Automotive equity in net (loss)
of affiliated companies (144) (52)
Income before income taxes 2,426 1,087
Provision for income taxes 898 413
Minority interests in net income
of subsidiaries 59 21
Net income $ 1,469 $ 653
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Income per share $ 1.22 $ 0.54
Income per share
assuming full dilution $ 1.20 $ 0.53
Cash dividends per share $ 0.385 $ 0.35
-10-
<PAGE>
<PAGE 11>
FIRST QUARTER 1997 RESULTS OF OPERATIONS - FORD
OVERVIEW
The company's worldwide net income was $1,469 million in first quarter
1997, or $1.20 per share of Common and Class B Stock (fully diluted),
compared with $653 million, or $0.53 per share (fully diluted) in first
quarter 1996. The company's worldwide sales and revenues were
$36.2 billion, up $1 billion from a year ago. Vehicle unit sales of cars
and trucks were 1,681,000, up 43,000 units. Stockholders' equity was $27.3
billion at March 31, 1997, up $490 million compared with December 31, 1996.
During first quarter 1997, the company announced several adjustments to
capacity: eliminating a shift at its Halewood plant in Britain; idling the
passenger car system at its Lorain, Ohio assembly plant; and, in Brazil,
closing two foundries and an engine plant and downsizing the Ipiranga Truck
Plant. Ford also announced steps to improve product mix by discontinuing
Ford Aspire, Probe, Thunderbird and Aerostar, and Mercury Cougar. A one-
time charge relating to most of these actions will be reflected in second
quarter results.
Although first quarter results were favorable, there are a number of
cautionary factors going forward -- rising U.S. interest rates, the value
of the yen, overall European market conditions, and increasing competition
worldwide could affect results unfavorably in the balance of the year.
RESULTS OF OPERATIONS
The company's net income for worldwide Automotive operations in the first
quarter 1997 and 1996 was as follows (in millions):
<TABLE>
<CAPTION>
Net Income/(Loss)
1997 1996
---- ----
<S> <C> <C>
U.S. Automotive $ 836 $ 48
Automotive Outside U.S.
- Europe 105 73
- South America (47) (60)
- Other 110 81
------ ----
Total Automotive Outside U.S. 168 94
------ ----
Total Automotive $1,004 $142
====== ====
</TABLE>
The company's net income for worldwide Financial Services operations in first
quarter 1997 and 1996 was as follows (in millions):
<TABLE>
<CAPTION>
Net Income/(Loss)
1997 1996
---- ----
<S> <C> <C>
Ford Credit $276 $339
The Associates 238* 192
USL Capital - 40
Hertz 20 9
Minority Interests, Eliminations and Other (69) (69)
---- ----
Total Financial Services $465 $511
==== ====
- - - - -
*Ford's share was $192 million
-11-
/TABLE
<PAGE>
<PAGE 12>
FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
Automotive Operations
Ford's worldwide Automotive operations earned $1,004 million in first
quarter 1997 on sales of $28.9 billion, compared with $142 million in
first quarter 1996 on sales of $28.3 billion. Overall, the increase
reflected primarily improved earnings in all regions.
Earnings for Automotive operations in the U.S. were up $788 million
in first quarter 1997 compared with a year ago. The increase
reflected primarily higher margins resulting from cost reductions and
vehicle mix improvements. U.S. Automotive after-tax return on sales
was 4.5% in first quarter 1997, up 4.2 points from a year ago.
The U.S. economy continued to grow at a moderate rate in first
quarter 1997, with interest rates and inflation at comparatively low
levels. The seasonally-adjusted annual selling rate for the U.S. car
and truck industry was 15.9 million units in the first quarter, up from
15.7 million units in first quarter 1996. The company expects car and
truck industry sales in 1997 to be about equal to 1996. Ford's
combined U.S. car and truck share was 25.1%, down 7/10 of a point
from a year ago, reflecting lower sales of models that will be
discontinued later this year, and about equal to full year 1996.
The improvement for Automotive operations in Europe, compared with
a year ago, reflected primarily cost reductions and lower taxes. The
European automotive industry continues to be extremely competitive
as a result of excess capacity; this trend is expected to continue in
1997 and beyond.
The seasonally-adjusted annual selling rate for the European car and
truck industry was 14.5 million units in first quarter 1997, about equal
to first quarter 1996. Ford's combined European car and truck market
share was 11.4%, down 7/10 of a point from a year ago, reflecting the
highly competitive market, and down 4/10 of a point from full year
1996.
The loss in first quarter 1997 incurred by Automotive operations in
South America was lower than the loss a year ago. The improvement
reflected primarily higher volume. Losses in South America are
expected to continue in 1997, as modernization of the product line in
Brazil and Argentina is completed. Ford will have several new
products (the Ka, Fiesta, Escort and Ranger) available for sale
throughout most of 1997.
Financial Services Operations
Earnings for Financial Services operations were down $46 million in
first quarter 1997, compared with record earnings a year ago. The
reduction reflects the absence of earnings from USL Capital,
substantially all of the assets of which were sold last year, and a
decline in earnings at Ford Credit.
For a discussion of Ford Credit's operations in first quarter 1997,
see Item 1. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Ford Credit First Quarter 1997
Results of Operations."
Record earnings at Associates First Capital Corporation ("The
Associates") reflected primarily higher levels of earning
assets, lower operating costs and improved net interest
margins, offset partially by higher credit losses. Credit losses as a
percent of average net finance receivables were 2.31% in the first
quarter, compared with 1.74% a year ago. The Associates believes
the higher levels of credit losses may continue.
Record earnings at The Hertz Corporation ("Hertz") reflected
primarily higher revenues in U.S. car rental operations.
-12-
<PAGE>
<PAGE 13>
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
Automotive cash and marketable securities were $16 billion at March
31, 1997, up $553 million from December 31, 1996. The company
paid $472 million in cash dividends on its Common Stock,
Class B Stock and Preferred Stock during the first three months of
1997.
Automotive capital expenditures were $1.6 billion in the first three
months of 1997, down $176 million from the same period a year ago.
For full year 1997, Ford's capital spending is expected to be at
essentially similar levels compared with 1996; however, as a
percentage of sales, spending is expected to be at similar or lower
levels.
Automotive debt at March 31, 1997 totaled $8.2 billion, which was
23% of total capitalization (stockholders' equity and Automotive debt),
essentially unchanged from year-end 1996.
At March 31, 1997, Ford had long-term contractually committed global
credit agreements under which $8.4 billion is available from various
banks at least through June 30, 2001. 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. Ford also has
the ability to transfer on a nonguaranteed basis the entire $8.4 billion
in varying portions to Ford Credit and Ford Credit Europe. In
addition, at March 31, 1997, Ford Brasil Ltda. had $377 million of
contractually committed credit facilities with various banks ranging in
maturity from April 1997 to March 1998. These facilities were unused
at March 31, 1997.
Financial Services Operations
Financial Services cash and investments in securities totaled
$5 billion at March 31, 1997, down $982 million from December 31,
1996.
Net receivables and lease investments were $161.6 billion at March
31, 1997, down $291 million from December 31, 1996.
Total debt was $149.7 billion at March 31, 1997, down $536 million
from December 31, 1996.
Outstanding commercial paper at March 31, 1997 totaled $38.1 billion
at Ford Credit, $17.9 billion at The Associates, and $2.4 billion at
Hertz, with an average remaining maturity of 26 days, 22 days,
and 24 days, respectively.
At March 31, 1997, Financial Services had a total of $42 billion of
contractually committed support facilities (excluding the $8.4 billion
available under Ford's global credit agreements). Of these facilities,
$24.2 billion are contractually committed global credit agreements
under which $19.6 billion and $4.6 billion are available to Ford Credit
and Ford Credit Europe, respectively, from various banks; 62% and
76%, respectively, of such facilities are available through
June 30, 2001. The entire $19.6 billion may be used, at Ford Credit's
option, by any subsidiary of Ford Credit, and the entire $4.6 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, 1997, $76 million of the Ford Credit global facilities
were in use and $637 million of the Ford Credit Europe global
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<PAGE>
<PAGE 14>
facilities were in use. Other than the global credit agreements, the
remaining portion of the Financial Services support facilities at
March 31, 1997 consisted of $16 billion of contractually committed
support facilities available to various affiliates in the U.S. and $1.8
billion of contractually committed support facilities available to various
affiliates outside the U.S.; at March 31, 1997, approximately $1.1
billion of these facilities were in use. Furthermore, banks provide $1.6
billion of liquidity facilities to support the asset-backed commercial
paper program of a Ford Credit sponsored special purpose entity.
ACCOUNTING CHANGES
Statement of Financial Accounting Standards No. 128 ( SFAS 128 ),
"Earnings per Share", was issued by the Financial Accounting
Standards Board in February 1997. Adoption of SFAS 128, effective
for periods ending after December 15, 1997, is not expected to have
a material effect on reported earnings.
INITIAL PUBLIC OFFERING OF COMMON STOCK OF HERTZ
CORPORATION
In April 1997, Hertz completed an initial public offering of its common
stock representing an 18.5% interest in Hertz (the "IPO").
Substantially all of the net proceeds from the IPO was used to reduce
short-term indebtedness (commercial paper) of Hertz. Hertz had
increased its outstanding commercial paper to repay an intercompany
debt owed to Ford in the amount of $460 million. A gain from the IPO
will be reflected in Ford's second quarter results.
LEGAL PROCEEDINGS - FORD
In April 1997, Ford became the subject of an administrative
enforcement proceeding before a Department of Labor administrative
law judge challenging Ford's compliance with obligations imposed by
Executive Order 11246, as amended, in connection with Ford's
federal government contracts. Executive Order 11246 prohibits
employment discrimination by government contractors and
subcontractors. In this proceeding, the Office of Federal Contract
Compliance Programs ("OFCCP") claims that, during 1993, Ford's
Kentucky Truck Plant used a hiring process for entry-level laborer
positions that discriminated against female applicants. OFCCP further
claims that Ford failed to make available required records and
otherwise cooperate fully with the agency during a compliance review
that was begun in early 1993. OFCCP is seeking orders from the
court canceling Ford's contracts with the federal government and
debarring Ford from future federal government contract work, in
addition to an order awarding back pay to the "affected class of
women". If OFCCP prevails, Ford's results of operations could be
substantially adversely affected.
Also filed in April 1997 was a new purported class action lawsuit
involving the Bronco II. This lawsuit was filed in federal court in the
Southern District of West Virginia and purports to represent a class of
former plaintiffs in formerly pending Bronco II personal injury cases.
Plaintiffs allege that Ford and a Ford expert on the design history of
the Bronco II conspired to fraudulently conceal documents that would
establish (a) that Ford paid such expert to offer false testimony in
favor of Ford regarding the design of the Bronco II, and (b) that Ford
knew the design of the Bronco II rendered the vehicle unstable and
prone to rollover under normal driving conditions. Plaintiffs seek
compensatory and punitive damages, prejudgment interest, costs,
and attorneys' fees. If the plaintiffs were to prevail in this lawsuit,
Ford could be required to pay substantial damages.
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<PAGE 15>
Finally, two purported class actions relating to airbags were also filed
in April 1997. These lawsuits, which are in state courts in Louisiana
and Texas, allege that motor vehicle airbags are defective because
they cause injury to children and small adults. The actions are
brought on behalf of (a) all residents of Louisiana and Texas, who
purchased airbag-equipped automobiles and (b) purchasers
throughout the United States who purchased such vehicles in
Louisiana or Texas. These actions are brought against the following
defendants: Volvo of North America, Inc., General Motors
Corporation, Ford Motor Company, Chrysler Corporation, Spinato
Chrysler Plymouth, Inc. d/b/a Bergeron Volvo, other corporations
whose identities are unknown (e.g., all other automobile
manufacturers), and all unidentified automobile dealers throughout the
states of Louisiana and Texas. Plaintiffs' claims in both cases are
based on the anticipated action by the National Highway Traffic
Safety Administration ("NHTSA") to allow deactivation of airbags at
the owners' request. Plaintiffs claim that it will be necessary to have
the airbags deactivated pursuant to the guidelines established by
NHTSA to ensure occupant safety, and that they will have been
deprived of a purported safety device for which they paid. Plaintiffs
seek damages including recovery of the cost of the airbags. Were
plaintiffs to prevail in these lawsuits, Ford could be required to pay
substantial damages.
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<PAGE>
<PAGE 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, 1997:
<TABLE>
<CAPTION> FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- --------------------- ----------------
<S> <C> <C>
January 29, 1997 Item 5 - Other Events None.
February 12, 1997 Item 5 - Other Events 1996 Audit of 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 29, 1997
of Ford Motor Company and
Subsidiaries for the year
ended December 31, 1996 with
attachments.
February 19, 1997 Item 5 - Other Events None.
February 26, 1997 Item 5 - Other Events None.
</TABLE>
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/ J. B. Smith III
May 9, 1997 --------------------------
J. B. Smith III
Vice President - Finance
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<PAGE>
<Page 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, 1997 and 1996, 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, 1997. 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, 1996 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 27, 1997, 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, 1996 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 15, 1997
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<PAGE>
<Page 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 9, 1997,
regarding unaudited
interim financial infor-
mation.
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<PAGE>
<PAGE 19>
Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(dollar amounts in millions)
<TABLE>
<CAPTION>
March 31 For the Years Ended December 31
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense $ 1,626.6 $ 1,545.9 $ 6,235.7 $ 5,987.8 $ 4,226.3 $ 3,699.9 $ 4,184.3
Rents 6.8 5.0 22.2 19.5 16.9 13.0 10.8
--------- --------- --------- --------- --------- --------- ---------
Total fixed
charges 1,633.4 1,550.9 6,257.9 6,007.3 4,243.2 3,712.9 4,195.1
Earnings
Income before income
taxes and cumulative
effects of changes in
accounting principles 473.8 527.7 2,240.2 2,327.8 2,335.5 2,147.5 1,585.8
Less equity income from
affiliated companies 0.7 48.8 55.3 255.4 232.5 198.0 155.0
Less minority interest
in net income of
subsidiaries 15.1 17.9 68.0 65.5 59.3 44.6 42.3
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed
charges $ 2,091.4 $ 2,011.9 $ 8,374.8 $ 8,014.2 $ 6,286.9 $ 5,617.8 $ 5,583.6
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to
fixed charges 1.3 1.3 1.3 1.3 1.5 1.5 1.3
========= ========= ========= ========= ========= ========= =========
<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 includes 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, (there are no cumulative dividend requirements
on subsidiary preferred stock) amortization of debt discount, premium, and insurance expense, and
one-third of all rental expense (the proportion deemed representative of the interest factor).
</TABLE>
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<PAGE>
<PAGE 20>
<TABLE>
<CAPTION>
Exhibit 12-B
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(in millions)
First
Quarter For the Years Ended December 31
-------------------------------
1997 1996 1995 1994 1993 1992
------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings
Income/(loss) before income taxes and
cumulative effects of changes in
accounting principles $2,426 $ 6,793 $ 6,705 $ 8,789 $ 4,003 $ (127)
Equity in net loss/(income) of affiliates
plus dividends from affiliates 155 36 179 (182) (98) 26
Adjusted fixed charges a/ 2,651 10,801 10,556 8,122 7,648 8,113
------ ------- ------- ------- ------- ------
Earnings $5,232 $17,630 $17,440 $16,729 $11,553 $8,012
====== ======= ======= ======= ======= ======
Combined Fixed Charges and
Preferred Stock Dividends
Interest expense b/ $2,564 $10,464 $10,121 $ 7,787 $ 7,351 $7,987
Interest portion of rental expense c/ 75 300 396 265 266 185
Preferred stock dividend requirements of
majority owned subsidiaries and trusts d/ 14 55 199 160 115 77
------ ------- ------- ------- ------- ------
Fixed charges 2,653 10,819 10,716 8,212 7,732 8,249
Ford preferred stock dividend requirements e/ 22 95 459 472 442 317
------ ------- ------- ------- ------ ------
Total combined fixed charges
and preferred stock dividends $2,675 $10,914 $11,175 $ 8,684 $ 8,174 $8,566
====== ======= ======= ======= ======= ======
Ratios
Ratio of earnings to fixed charges 2.0 1.6 1.6 2.0 1.5 f/
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.0 1.6 1.6 1.9 1.4 g/
</TABLE>
- - - - - -
a/ Fixed charges, as shown below, adjusted to exclude the amount of interest
capitalized during the period and preferred stock dividend requirements
of majority owned subsidiaries and trusts.
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. (applicable
for 1992 through 1995) 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. Beginning in Fourth
Quarter 1995, includes requirements related to Company-obligated
mandatorily redeemable preferred securities of a subsidiary trust.
e/ Preferred stock dividend requirements of Ford Motor Company 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 inadequate to cover fixed charges by $237 million.
g/ Earnings inadequate to cover combined fixed charges and preferred stock
dividends by $554 million.
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<PAGE>
<PAGE 21>
EXHIBIT 15
Ford Motor Credit Company
The American Road
Dearborn, Michigan
Re: Ford Motor Credit Company Registration Statement Nos. 33-62973,
33-24928, 33-64237 and 33-64263 on Form S-3
We are aware that our report dated April 15, 1997 accompanying the
unaudited interim financial information of Ford Motor Credit Company and
subsidiaries for the periods ended March 31, 1997 and 1996 and included
in the Ford Motor Credit Company Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 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.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
May 9, 1997
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